The Regulation of Non-Judicial Debt Collection and the Consumer's Choice Among Repayment, Bankruptcy and Informal Bankruptcy

Hynes, Richard M.; Dawsey, Amanda E.; Ausubel, Lawrence M.

doi:10.2139/ssrn.1487649

Cited by 7 publications

(4 citation statements)

References 14 publications

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“…Second, bankruptcy protection may prevent economic instability. Creditors have a number of options to collect unpaid debts if a debtor has not filed for bankruptcy protection or after a case is dismissed, including the wage garnishment orders discussed above, collection letters or phone calls, in-person visits at home or work, and the seizing of assets through a court order (Hynes, Dawsey, and Ausubel 2009). Debtors can make these collection efforts more difficult by ignoring collection letters and calls, changing their telephone number, or moving without leaving a forwarding address.…”

Section: Potential Benefits Of Bankruptcy Protectionmentioning

confidence: 99%

“…In the simple setup described above, bankruptcy protection unambiguously decreases labor supply through both substitution and wealth effects. However, the assumption that agents fully repay their debts outside of the bankruptcy system is unlikely to hold in practice given that the majority of debt write-offs occur outside of the bankruptcy system (Hynes, Dawsey, and Ausubel 2009). We therefore make the more realistic assumption that agents who do not receive bankruptcy protection default on their debt and are subject to wage garnishment at rate α g .…”

Section: B Bankruptcy and Labor Supplymentioning

confidence: 99%

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Debt Relief and Debtor Outcomes: Measuring the Effects of Consumer Bankruptcy Protection

Dobbie

Song

2015

American Economic Review

257

120

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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 foreclo-sure rates by 19.1 percentage points. These results come primarily from the deterioration of outcomes among dismissed filers, not gains by granted filers. (JEL D14, I12, J22, J31, K35)

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Section: Potential Benefits Of Bankruptcy Protectionmentioning

confidence: 99%

Section: B Bankruptcy and Labor Supplymentioning

confidence: 99%

Debt Relief and Debtor Outcomes: Measuring the Effects of Consumer Bankruptcy Protection

Dobbie

Song

2015

American Economic Review

257

120

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“…Hynes, Dawsey, and Ausubel (2009) show that the regulation of debt collection at the state level can influence the decision to go bankrupt.21 We exclude from the sample the period 2005.Q1 to 2006.Q1 to exclude the effects of reform anticipation that simply shift the timing of bankruptcies.…”

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confidence: 99%

Insolvency After the 2005 Bankruptcy Reform

Albanesi

Nosal²

2018

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Using a comprehensive panel data set on U.S. households, we study the effects of the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), the most substantive reform of personal bankruptcy in the United States since the Bankruptcy Reform Act of 1978. The 2005 legislation introduced a means test based on income to establish eligibility for Chapter 7 bankruptcy and increased the administrative requirements to file, leading to a rise in the opportunity cost and, especially, the financial cost of filing for bankruptcy. We study the effects of the reform on bankruptcy, insolvency, and foreclosure. We find that the reform caused a permanent drop in the Chapter 7 bankruptcy rate relative to pre-reform levels, due to the rise in filing costs associated with the reform, which can be interpreted as resulting from liquidity constraints. We find that the decline in bankruptcy filings resulted in a rise in the rate and persistence of insolvency as well as an increase in the rate of foreclosure. We find no evidence of a link between the decline in bankruptcy and a rise in the number of individuals who are current on their debt. We document that these effects are concentrated at the bottom of the income distribution, suggesting that the income means tests introduced by BAPCPA did not serve as an effective screening device. We show that insolvency is associated with worse financial outcomes than bankruptcy, as insolvent individuals have less access to new lines of credit and display lower credit scores than individuals who file for bankruptcy. Since bankruptcy filings declined much more for low-income individuals, our findings suggest that, for this group, BAPCPA may have removed an important form of relief from financial distress.

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“…The act, which has been amended several times since its original passage, imposes certain restrictions on the activities of collectors and proscribes harassing and abusive collection practices. Though the Act exempts the creditors who originated the loan, applying only to debt collection agencies, about half of all states have statutes that grant consumers the right to act against these creditors (Hynes et al, 2009). Yet the laws protecting consumers from harassment and abusive debt-collection practices fall far short of addressing the problem.…”

Section: Neoliberalism and The Return Of Debtors’ Prisonsmentioning

confidence: 99%

Doing Borrowed Time: The State, the Law and the Coercive Governance of ‘Undeserving’ Debtors

Roberts

2014

Critical Sociology

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This paper documents the shift toward increasingly coercive means of collecting debt from working class and poor borrowers, with a specific focus on incarceration. Placing this trend within an historical trajectory, it is argued that the law has always been central to creating and securing the social relations of debt as class relations. While the abolition of debtors’ prisons in the 19th century helped to shift struggles between debtors and creditors out of public view and into the depoliticized realm of ‘the law’, a number of factors have led to its reappearance in the contemporary era. These include (1) changes to bankruptcy legislation that have given creditors greater power over debtors, (2) the emergence of the debt-buying industry and (3) the growing privatization, decentralization and commercialization of the state, which have transformed it into a creditor that relies on its power to punish to compel payment from some of the poorest debtors.

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The Regulation of Non-Judicial Debt Collection and the Consumer's Choice Among Repayment, Bankruptcy and Informal Bankruptcy

Cited by 7 publications

References 14 publications

Debt Relief and Debtor Outcomes: Measuring the Effects of Consumer Bankruptcy Protection

Debt Relief and Debtor Outcomes: Measuring the Effects of Consumer Bankruptcy Protection

Insolvency After the 2005 Bankruptcy Reform

Doing Borrowed Time: The State, the Law and the Coercive Governance of ‘Undeserving’ Debtors

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