From Bail Bonds to Foreclosures: The Financial Consequences of Pretrial Detention

53 Pages Posted: 28 Oct 2022

See all articles by Pablo Slutzky

Pablo Slutzky

University of Maryland - Robert H. Smith School of Business

Sheng-Jun Xu

University of Alberta - School of Business

Date Written: October 24, 2022

Abstract

In the United States, a significant portion of inmates in local jails are detained awaiting trial. Given the direct and indirect costs associated with pretrial detention, detained individuals and members of their households may find it difficult to meet their financial obligations. Matching individual case-level data from the criminal justice system to household-level data on foreclosures, bankruptcies, and lien judgments, we examine how pretrial detention affects household solvency. Exploiting the quasi-random assignment of court commissioners to cases for identification, we find that pretrial release results in lower rates of household insolvency. This effect is driven by a reduction in the incidence of foreclosures during periods of decreasing house prices and by a reduction in the incidence of Chapter 7 bankruptcies. Subsample analyses show that the overall insolvency effects are more pronounced among younger defendants, suggesting spillovers to older household members. Lastly, we provide suggestive evidence that the insolvency effects are exacerbated when defendants borrow funds from commercial bail bondsmen.

Keywords: Pretrial detention, bankruptcy, solvency, foreclosures

JEL Classification: D14, K41, K42

Suggested Citation

Slutzky, Pablo and Xu, Sheng-Jun, From Bail Bonds to Foreclosures: The Financial Consequences of Pretrial Detention (October 24, 2022). Available at SSRN: https://ssrn.com/abstract=4256830 or http://dx.doi.org/10.2139/ssrn.4256830

Pablo Slutzky (Contact Author)

University of Maryland - Robert H. Smith School of Business ( email )

College Park, MD 20742-1815
United States

Sheng-Jun Xu

University of Alberta - School of Business ( email )

2-32D Business Building
Edmonton, Alberta T6G 2R6
Canada

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