Working Paper: NBER ID: w20520
Authors: Will Dobbie; Jae Song
Abstract: Consumer bankruptcy is one of the largest social insurance programs in the United States, but little is known about its impact on debtors. We use 500,000 bankruptcy filings matched to administrative tax and foreclosure data to estimate the impact of Chapter 13 bankruptcy protection on subsequent outcomes. Exploiting the random assignment of bankruptcy filings to judges, we find that Chapter 13 protection increases annual earnings by $5,562, decreases five-year mortality by 1.2 percentage points, and decreases five-year foreclosure rates by 19.1 percentage points. These results come primarily from the deterioration of outcomes among dismissed filers, not gains by granted filers.
Keywords: Consumer Bankruptcy; Debt Relief; Debtor Outcomes; Chapter 13; Bankruptcy Protection
JEL Codes: J22; K35
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Chapter 13 bankruptcy protection (K35) | annual earnings (J31) |
| Chapter 13 bankruptcy protection (K35) | five-year mortality rates (J17) |
| Chapter 13 bankruptcy protection (K35) | five-year foreclosure rates (G21) |
| Chapter 13 bankruptcy protection (K35) | incentive to work (J33) |
| Chapter 13 bankruptcy protection (K35) | economic stability (E63) |