AGeneral Equilibrium Analysis of Personal Bankruptcy Law
نویسنده
چکیده
We analyse an economy where principals and agents match and contract subject to moral hazard. Bankruptcy law defines the limited liability constraint in these contracts. We analyse Walrasian allocations to generate the following predictions: (i) weakening bankruptcy law causes redistribution of debt and welfare from poor agents and principals to rich agents; (ii) exemption limits Pareto-dominate other bankruptcy laws if project size is fixed; (iii) means-testing (as in recent US personal bankruptcy law) that is ex post pro-poor in intent makes the poor worse off ex ante.
منابع مشابه
Economic Factors Associated with Personal Bankruptcy
An understanding of factors related to trends in the incidence of personal nonbusiness bankruptcy is important to credit managers as well as to economists. This study updates and extends to 1982 an earlier study of economic factors associated with the incidence of bankruptcy from 1950 to 1970. This study shows that the incidence of personal bankruptcy follows movements in a measure of the aggre...
متن کاملPersonal Bankruptcy and the Level of Entrepreneurial Activity
The U.S. personal bankruptcy system functions as a bankruptcy system for small businesses as well as consumers, because debts of noncorporate firms are personal liabilities of the firms’ owners. If the firm fails, the owner has an incentive to file for bankruptcy, since both business debts and the owner’s personal debts will be discharged. In bankruptcy, the owner must give up assets above a fi...
متن کاملAn Optimal Personal Bankruptcy Procedure and Proposed Reforms
We investigate a proposed reform of U.S. personal bankruptcy law which combines Chapters 7 and 13. The proposed reform obliges debtors in bankruptcy to use part of both their wealth and their future earnings to repay debt and therefore bases the obligation to repay in bankruptcy on debtors' ability-to-pay. An important function of personal bankruptcy is to provide partial wealth insurance for r...
متن کاملBankruptcy and Small Firms' Access to Credit Bankruptcy and Small Firms' Access to Credit
In this paper, we investigate whether and how personal bankruptcy law a ects small rms' access to credit. When a rm is unincorporated, its debts are personal liabilities of the rm's owner, so that lending to the rm is equivalent to lending to its owner. If the rm fails, the owner has an incentive to le for personal bankruptcy in order to obtain discharge of the rm's debts. While bankruptcy law ...
متن کاملBankruptcy and small firms’ access to credit
We investigate how personal bankruptcy law affects small firms’ access to credit. When a firm is unincorporated, its debts are personal liabilities of the firm’s owner, so that lending to the firm is legally equivalent to lending to its owner. If the firm fails, the owner has an incentive to file for personal bankruptcy, since the firm’s debts will be discharged. The higher the exemption level,...
متن کامل