Impact of State Exemption Laws on Small Business Bankruptcy Decision

Posted: 7 Dec 2004

See all articles by Sumit Agarwal

Sumit Agarwal

National University of Singapore

Souphala Chomsisengphet

Office of the Comptroller of the Currency (OCC)

Chunlin Liu

University of Nevada, Reno - College of Business

Lawrence Mielnicki

De Lage Landen Financial Services

Abstract

To provide some insights to the current debate on consumer bankruptcy laws, this article empirically assesses the importance of state bankruptcy exemption levels on the likelihood of small business owners filing for bankruptcy. We accomplish this with the help of a unique panel data set of over 43,000 small business credit card holders over a two-year period from May 2000 - May 2002. We estimate a proportional hazard model of small business bankruptcy and show that for every $10,000 increase in a state's homestead exemptions, the risk of small business bankruptcy increases by 8 percent. Moreover, our results also indicate that small business owners will increase the likelihood of filing for bankruptcy by 4 percent with a $1000 change in personal property exemption levels.

Keywords: Banks, Credit Cards, Small Business Bankruptcy, State Exemption Laws

JEL Classification: G21, G33, J41

Suggested Citation

Agarwal, Sumit and Chomsisengphet, Souphala and Liu, Chunlin and Mielnicki, Lawrence, Impact of State Exemption Laws on Small Business Bankruptcy Decision. Southern Economic Journal, Vol. 71, No. 3, pp. 620-635, 2005. Available at SSRN: https://ssrn.com/abstract=617310

Sumit Agarwal (Contact Author)

National University of Singapore ( email )

15 Kent Ridge Drive
Singapore, 117592
Singapore
8118 9025 (Phone)

HOME PAGE: http://www.ushakrisna.com

Souphala Chomsisengphet

Office of the Comptroller of the Currency (OCC) ( email )

400 7th Street, SW
Washington, DC 20219
United States
202-649-5533 (Phone)

Chunlin Liu

University of Nevada, Reno - College of Business ( email )

University of Nevada, Reno
Reno, NV 89557-0016
United States

Lawrence Mielnicki

De Lage Landen Financial Services ( email )

1111 Old Eagle School Road
Wayne, PA 19087
United States

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