The Consumption Effects Associated with Filing for Personal Bankruptcy

Liquidity Constraints and Consumer Bankruptcy: Evidence from Tax Rebates

“…Our results suggest that many households used the rebates to file for bankruptcy. Moreover, households may increase consumption by a great deal after bankruptcy (Filer and Fisher, 2005;Zhu, 2011). Thus our results suggest that-for some households-the rebates may have increased short-run consumption by more than the amount of the rebates themselves.…”

Fresh Start or Head Start? The Effects of Filing for Personal Bankruptcy on Work Effort

“…For example, using PSID data, Filer and Fisher (2005) find that Chapter 7 filers increased their consumption in the year they filed and that the increases are larger for those who live in the states with more generous bankruptcy exemptions. However, they find no consumption growth among Chapter 13 filers and non-filers, suggesting that bankruptcy law does not help smooth consumption for those households.…”

“…First, this paper contributes to the growing interests in the impact of personal bankruptcy law on consumer behavior and the welfare of the economy. Existing empirical studies have looked into the effects of personal bankruptcy law on consumption (Filer and Fisher (2005) and Grant (2005)), the supply of and demand for credit (Gropp et al (1997) and ), mobility (Elul and Subramanian (2002)), and savings (Repetto (1998)). In addition, a growing number of theoretical studies use calibration and simulation exercises to evaluate the effects of changes in bankruptcy laws on the welfare of the economy in general equilibrium settings (e.g., Athreya (2002), Chatterjee et al (2002), Li and Sarte (2006), and Livshits et al (2006)).…”

An Anatomy of U.S. Personal Bankruptcy Under Chapter 13

“…It is well understood that personal bankruptcy laws affect credit markets and therefore the supply and demand for credit (Gropp et al., ; Lin and White, ), the ability of households to insure against labor income risk (Athreya et al., ), their consumption behavior (Grant, ; Filer and Fisher, ), labor supply (Han and Li, ), mobility (Elul and Subramanian, ), and entrepreneurial activity (Meh and Terajima, ; Mankart and Rodano, ).…”