Consumer Bankruptcy and Financial Health

57 Pages Posted: 23 Mar 2015

See all articles by Will Dobbie

Will Dobbie

Harvard University - Harvard Kennedy School (HKS)

Paul S. Goldsmith-Pinkham

Yale School of Management

Crystal Yang

Harvard Law School

Date Written: March 2015

Abstract

This paper estimates the effect of Chapter 13 bankruptcy protection on post-filing financial outcomes using a new dataset linking bankruptcy filings to credit bureau records. Our empirical strategy uses the leniency of randomly-assigned judges as an instrument for Chapter 13 protection. Over the first five post-filing years, we find that Chapter 13 protection decreases an index measuring adverse financial events such as civil judgments and repossessions by 0.316 standard deviations, increases the probability of being a homeowner by 13.2 percentage points, and increases credit scores by 14.9 points. Chapter 13 protection has little impact on open unsecured debt, but decreases the amount of debt in collections by $1,315.

Suggested Citation

Dobbie, Will and Goldsmith-Pinkham, Paul S. and Yang, Crystal, Consumer Bankruptcy and Financial Health (March 2015). NBER Working Paper No. w21032. Available at SSRN: https://ssrn.com/abstract=2583581

Will Dobbie (Contact Author)

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States

Paul S. Goldsmith-Pinkham

Yale School of Management ( email )

NY
United States

HOME PAGE: http://paulgp.github.io

Crystal Yang

Harvard Law School ( email )

1575 Massachusetts
Hauser 406
Cambridge, MA 02138
United States

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