Changes in Personal Bankruptcy Protection Laws: The Impact on Bank Lending to Small Businesses

57 Pages Posted: 6 Oct 2018 Last revised: 28 Mar 2021

See all articles by Jason Damm

Jason Damm

Florida Atlantic University

Masim Suleymanov

Florida Atlantic University

Rebel A. Cole

Florida Atlantic University

Date Written: December 14, 2020

Abstract


In the U.S., individuals who file for bankruptcy can protect certain property from creditor liquidation during the debt settlement process. We find that additional property protection, brought about by changes to personal bankruptcy laws, reduces credit availability for small businesses. Particularly in the sample of large loans greater than $100,000, which are the most at risk of loss in case of default. This impact is more severe during times of financial crisis when bankruptcy rates rise. Changes to bankruptcy protection laws also have real economic consequences for small business activity, leading to lower wages and fewer establishments per capita.

Keywords: Bank lending; Bankruptcy exemption laws; Debtor protection; Credit availability; Small-business lending

JEL Classification: G32, G33, K35, M10

Suggested Citation

Damm, Jason and Suleymanov, Masim and Cole, Rebel A., Changes in Personal Bankruptcy Protection Laws: The Impact on Bank Lending to Small Businesses (December 14, 2020). Available at SSRN: https://ssrn.com/abstract=3247930 or http://dx.doi.org/10.2139/ssrn.3247930

Jason Damm (Contact Author)

Florida Atlantic University ( email )

777 Glades Rd
Boca Raton, FL 33431
United States
(941) 587-9425 (Phone)

Masim Suleymanov

Florida Atlantic University ( email )

777 Glades Rd
Boca Raton, FL 33431
United States

Rebel A. Cole

Florida Atlantic University ( email )

College of Business
777 Glades Road
Boca Raton, FL 33431
United States
1-561-297-4969 (Phone)

HOME PAGE: http://rebelcole.com

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