The recent explosion in personal bankruptcy filings has motivated research into whether credit markets are being adversely affected by generous legal provisions. Empirically, this question is examined by comparing credit conditions and bankruptcy exemptions across states. We note that the literature has focused on aggregate household credit, making no distinction between secured and unsecured credit. We argue that such aggregation obscures important differences in forms of credit. Most significantly, property exemptions do not prevent the home mortgage creditor from foreclosing on the home if not fully repaid. We argue that some property exemptions may in fact have some beneficial effects for home mortgage lenders. Using both household-level data and state-level data, we show that in the 1990's high exemption levels have tended to reduce mortgage rates and reduce the probability of being denied a mortgage.

This survey of the law and eco nomi cs of co ns umer financ e di sc usses economic mode ls of consum er lending and evaluates the major consumer finance laws in light of them, We focu s on usury laws; restrictions on creditor remedies, such as the ban on ex pansive security interests; bankruptcy law ; limitations on third-party defenses, such as the holder-in-due-co urse doctrin e; information disclosure rules, including the Truth in Lending Act; and antidi sc rimination law, We also discuss the e mpirical literature,

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