Our paper explores a comprehensive sample of small and large corporate bankruptcies in Arizona and New York from 1995 to 2001. Bankruptcy costs are very heterogeneous and sensitive to the measurement ...method used. We find that Chapter 7 liquidations appear to be no faster or cheaper (in terms of direct expense) than Chapter 11 reorganizations. However, Chapter 11 seems to preserve assets better, thereby allowing creditors to recover relatively more. Our paper also provides a large number of further empirical regularities.
Much has been written about the relationship between high medical expenses and the likelihood of filing for bankruptcy, but the relationship between receiving a cancer diagnosis and filing for ...bankruptcy is less well understood. We estimated the incidence and relative risk of bankruptcy for people age twenty-one or older diagnosed with cancer compared to people the same age without cancer by conducting a retrospective cohort analysis that used a variety of medical, personal, legal, and bankruptcy sources covering the Western District of Washington State in US Bankruptcy Court for the period 1995-2009. We found that cancer patients were 2.65 times more likely to go bankrupt than people without cancer. Younger cancer patients had 2-5 times higher rates of bankruptcy than cancer patients age sixty-five or older, which indicates that Medicare and Social Security may mitigate bankruptcy risk for the older group. The findings suggest that employers and governments may have a policy role to play in creating programs and incentives that could help people cover expenses in the first year following a cancer diagnosis.
The liability of the insolvency administrator pursuant to sec. 60 InsO is a continuous subject of legal discourse. There are repeated calls for a limitation of the liability risk. This work pursues a ...new approach: the fundamentals and function of the insolvency administrator's liability are examined and, for the first time, compared with the liability of the bankruptcy trustee under U.S. bankruptcy law. Among other things, it is revealed that the bankruptcy trustee is subject to far greater court and creditor control than his German counterpart and that the principle of "concurrence of control and liability," which is essential for the comparatively strict liability under sec. 60 InsO, is not universally implemented.
Bankruptcy law and bank financing Rodano, Giacomo; Serrano-Velarde, Nicolas; Tarantino, Emanuele
Journal of financial economics,
05/2016, Volume:
120, Issue:
2
Journal Article
Peer reviewed
Open access
Exploiting the timing of the 2005–2006 Italian bankruptcy law reforms, we disentangle the effects of reorganization and liquidation in bankruptcy on bank financing and firm investment. A 2005 reform ...introduces reorganization procedures facilitating loan renegotiation. The 2006 reform subsequently strengthens creditor rights in liquidation. The first reform increases interest rates and reduces investment. The second reform reduces interest rates and spurs investment. Our results highlight the importance of identifying the distinct effects of liquidation and reorganization, as these procedures differently address the tension in bankruptcy law between the continuation of viable businesses and the preservation of repayment incentives.
We exploit state-level changes in the amount of personal wealth individuals can protect under Chapter 7 to analyze the effect of debtor protection on the financing structure and performance of a ...representative panel of U.S. startups. The effect of increasing debtor protection depends on the entrepreneur's level of wealth. Firms owned by mid-wealth entrepreneurs whose assets become fully protected suffer a reduction in credit availability, employment, operating efficiency, and survival rates. We find no such negative effects for low-wealth and high-wealth owners. Our results are consistent with theories that predict that asset protection in bankruptcy leads to a redistribution of credit.
Bankruptcy Reform and Credit Cards White, Michelle J.
The Journal of economic perspectives,
10/2007, Volume:
21, Issue:
4
Journal Article
Peer reviewed
Open access
From 1980 to 2004, the number of personal bankruptcy filings in the United States increased more than five-fold, from 288,000 to 1.5 million per year. By 2004, more Americans were filing for ...bankruptcy each year than were graduating from college, getting divorced, or being diagnosed with cancer. In 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) became law. It made bankruptcy law much less debtor-friendly. Personal bankruptcy filings fell to 600,000 in 2006. This paper explores why personal bankruptcy rates rose, and will argue that the main reason is the growth of “revolving debt”—mainly credit card debt. It explains how the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005 altered the conditions of bankruptcy. Finally, this essay considers the balances that need to be struck in a bankruptcy system and how the U.S. bankruptcy system strikes these balances in comparison with other countries. I argue that a less debtor-friendly bankruptcy policy should be accompanied by changes in bank regulation and truth-in-lending rules, so that lenders have a greater chance of facing losses when they supply too much credit or charge excessively high interest rates and fees.
Social context of bankruptcy - public attitudes towards bankruptcy and the prevalence of bankruptcy stigma in Australia - results of an online survey - association of bankruptcy with poor financial ...management, extravagance, and greed - stereotype of the dishonest, 'high-flying' businessman - differences between Australia and the United States.
Firms’ innovative activities can be sensitive to public policies that affect the availability of capital. In this paper, we investigate the effects of regional and temporal variation in U.S. personal ...bankruptcy laws on firms’ innovative activities. We find that bankruptcy laws that provide stronger debtor protection decrease the number of patents produced by small firms. Stronger debtor protection also decreases the average quality, and variance in quality, of firms’ patents. We find evidence that the negative effect of stronger debtor protection on experimentation and innovation may be due to the decreased availability of external financing in response to stronger debtor rights, an effect amplified in industries with a high dependence on external financing. Hence, while it is typically assumed that stronger debtor protection encourages innovation by reducing the cost of failure for innovators, we show that it can instead dampen innovative activities by tightening the availability of external financing to innovative firms.
This paper was accepted by David Hsu, entrepreneurship and innovation
.
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