Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/300478 
Year of Publication: 
2024
Series/Report no.: 
Staff Report No. 1099
Publisher: 
Federal Reserve Bank of New York, New York, NY
Abstract: 
Increasing personal bankruptcy protection raises consumers' desire to borrow and lenders' cost of extending credit; the impact on equilibrium borrowing is ambiguous. Using bankruptcy protection changes between 1999 and 2005 across U.S. states, we find that borrowers respond to greater protection by increasing their unsecured debt. Border county estimates suggest that local economic conditions do not drive these results. Borrowers pay more for protection through higher interest rates, yet delinquency is unaffected. Remarkably, our results indicate that rising borrower demand outstripped decreasing supply. Increased protections did not reduce the aggregate level of household debt but affected the composition of borrowing.
Subjects: 
bankruptcy
debt
credit card
delinquency
JEL: 
D14
D18
H81
G33
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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