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The Long-Run Effects of Individual Debt Relief

Author

Listed:
  • Bruze, Gustaf

    (Karolinska Institutet)

  • Hilsløv, Alexander Kjær

    (Aarhus University)

  • Maibom, Jonas

    (Aarhus University)

Abstract

Individuals with extensive debt may be granted debt relief in court. We provide a comprehensive evaluation of the Danish debt relief program with data from court records linked to nationwide register data. Using event-study methods and quasi-random assignment of applicants to court trustees with varying admission rates, we show that debt relief leads to a large increase in earned income, employment, assets, real estate, secured debt, home ownership, and wealth that persists for more than 25 years after a court ruling. The net transition of workers into employment accounts for two thirds of the increase in earned income.

Suggested Citation

  • Bruze, Gustaf & Hilsløv, Alexander Kjær & Maibom, Jonas, 2024. "The Long-Run Effects of Individual Debt Relief," IZA Discussion Papers 17047, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp17047
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    Keywords

    debt relief; personal bankruptcy; household finance;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • K35 - Law and Economics - - Other Substantive Areas of Law - - - Personal Bankruptcy Law

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