Social and Behavioral Sciences Commons^™

Bankruptcy And The Debt-Unemployment Relationship: Evidence From A Natural Experiment, Gina C.M. Jouaneh

Senior Honors Projects

This paper examines the effect of a change in bankruptcy law on the relationship between household debt and longer-run unemployment in the United States. In consumer bankruptcy cases, filers can be eligible for two different types of bankruptcies: Chapter 7 and Chapter 13. Chapter 7 frees filers from debt repayment by liquidating their assets and using those proceeds to pay creditors, while Chapter 13 allows filers to enter a debt repayment plan of three to five years rather than discharge debt altogether. In 2005, Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), which greatly increased the difficulty …