TY  - JOUR
AU  - Albanesi, Stefania
AU  - Nosal, Jaromir
TI  - Insolvency After the 2005 Bankruptcy Reform
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 24934
PY  - 2018
Y2  - August 2018
DO  - 10.3386/w24934
UR  - http://www.nber.org/papers/w24934
L1  - http://www.nber.org/papers/w24934.pdf
N1  - Author contact info:
Stefania Albanesi
Department of Economics
University of Pittsburgh
4901 Wesley W. Posvar Hall
Pittsburgh, PA 15260
E-Mail: stefania.albanesi@gmail.com

Jaromir Nosal
Boston College
140 Commonwealth Avenue
322 Maloney Hall, Economics
Chestnut Hill, MA 02567
E-Mail: nosalj@bc.edu
M3  - presented at "Household Finance", November 21, 2014
AB  - The 2005 Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) is the most important reform of personal bankruptcy in the United States in recent years. This legislation overhauled eligibility requirements and increased monetary costs of filing for bankruptcy. Using administrative credit file data from a nationally representative panel, we quantify the effects of the reform on bankruptcy, insolvency, and foreclosure, we explore the mechanism generating these responses and examine the consequences for households. We find that the reform caused a 50% permanent drop in Chapter 7 filings, a 25% permanent rise in insolvency, but had no effect on Chapter 13 filings. Exploiting the cross-district variation in filing costs resulting from the reform, we show that these responses are driven by liquidity constraints associated with the higher monetary cost of filing for bankruptcy. We show that insolvency is associated with worse outcomes than bankruptcy, in terms of access to credit and credit scores, suggesting that BAPCPA may have removed an important form of relief for financially distressed borrowers.
ER  -