Impact of State Exemption Laws on Small Business Bankruptcy Decision
Posted: 7 Dec 2004
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
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