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Bargaining Around Bankruptcy: Small Business Workouts And State Law, Edward R. Morrison
Bargaining Around Bankruptcy: Small Business Workouts And State Law, Edward R. Morrison
Faculty Scholarship
Federal bankruptcy law is rarely used by distressed small businesses. For every 100 that suspend operations, at most 20 file for bankruptcy. The rest use state law procedures to liquidate or reorganize. This paper documents the importance of these procedures and the conditions under which they are chosen using firm-level data on Chicago-area small businesses. I show that business owners bargain with senior lenders over the resolution of financial distress. Federal bankruptcy law is invoked only when bargaining fails. This tends to occur when there is more than one senior lender or when the debtor has defaulted on senior debt …
Debt, Bankruptcy, And The Life Course, Allison Mann, Ronald J. Mann, Sophie Staples
Debt, Bankruptcy, And The Life Course, Allison Mann, Ronald J. Mann, Sophie Staples
Faculty Scholarship
This Essay considers the significance of credit markets and bankruptcy for life course mobility. Comparing parallel data from the 2007 Survey of Consumer Finances (SCF) and the 2007 Consumer Bankruptcy Project (CBP), it analyzes use of the bankruptcy process as a function of the distribution of unplanned events, the ability of households to use credit markets to limit the adverse effects of such events, and barriers in access to the bankruptcy system. Our findings suggest two things. One, although the financial characteristics of filers vary markedly by age and race, bankrupt households generally come from the bottom quartiles of the …