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Consumer Bankruptcy Pathologies

Author

Listed:
  • Edward R. Morrison
  • Antoine Uettwiller

Abstract

This paper questions several long-standing descriptions of consumer bankruptcy in the United States. We focus on Chapter 13, which discharges debts after consumers pay disposable income to creditors for up to five years. Many studies document pathologies, including high failure rates, racial disparities, low creditor recoveries, and attorney biases. We observe the same patterns in new data drawn from Cook County, Illinois, but show that these pathologies are central tendencies that ignore substantial heterogeneity across consumers. Several pathologies are driven by subsets of consumers; some disappear once we take account of consumer heterogeneity. We present new evidence that some pathologies reflect biases in nonbankruptcy law, not in the bankruptcy process itself.

Suggested Citation

  • Edward R. Morrison & Antoine Uettwiller, 2017. "Consumer Bankruptcy Pathologies," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 173(1), pages 174-196, March.
    • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(201703)173:1_174:cbp_2.0.tx_2-h
    DOI: 10.1628/093245616X14785139251585
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    Citations

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    Cited by:

    1. Pattison, Nathaniel & Millimet, Daniel L., 2023. "A Tale of Two Bankruptcies: Geographic Differences in Bankruptcy Chapter Choice," IZA Discussion Papers 16105, Institute of Labor Economics (IZA).
    2. Pattison, Nathaniel, 2020. "Consumption smoothing and debtor protections," Journal of Public Economics, Elsevier, vol. 192(C).

    More about this item

    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • K35 - Law and Economics - - Other Substantive Areas of Law - - - Personal Bankruptcy Law
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance

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