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...

This paper introduces an explicit institution of bankruptcy into a general equilibrium model of endogenous ̄nancial markets with asymmetric information. The institution of bankruptcy is modelled as a set of rules that determine if an agent is eligible to have his debts discharged. Those rules are called a bankruptcy code. Given a bankruptcy code, we allow free entry of intermediaries o®ering al...

Existing quantitative-theoretic models of bankruptcy do not make a distinction between bankruptcy and default. In reality, default occurs first and is generally – but not always (and perhaps not even typically) – followed by a bankruptcy filing months later. While we possess reasonably sophisticated models of household default, we do not possess a comparably sophisticated model about the timing...

The primary means for patients in the United States to gain redress for grievances against hospitals and physicians is the tort system. Largely through rulings from state and federal courts, we rely on the tort system to incentivize individuals and firms to take appropriate care of those in their charge, compensate those who are harmed by their actions, manage risk, and punish those who fail to...

This paper discusses four bankruptcy-related policy issues. First, what is the economic rationale for having a bankruptcy procedure at all and what defines an economically efficient bankruptcy procedure? Second, why did the number of U.S. bankruptcy filings increase so dramatically between 1980 and 2005? Third, a major bankruptcy reform went into effect in the U.S. in 2005—what did it do and ho...

This paper uses a principal/agent framework to analyze consumer bankruptcy. The bankruptcy discharge partly insures risk-averse borrowers against bad income realizations but also reduces the borrower’s incentive to avoid insolvency. Among our results are the following: (a) high bankruptcy exemptions increase bankruptcy insurance but at the cost of reducing the borrower’s incentives to stay solv...

Models of capital investment in industrial organization typically treat bankruptcy as an involuntary and final outcome, yet firms that file under Chapter 11 of the U.S. Bankruptcy Code typically do so voluntarily and with the expectation that they will eventually emerge. Moreover, Chapter 11 permits cancellation or renegotiation of longterm contracts for labor and capital, effectively providing...

INTRODUCTION The hidden cost of defensive medicine has been cited by policymakers as a significant driving force in the increase of our nation's health-care costs. If this hypothesis is correct, one would expect that states with higher levels of tort reform will have a decrease in Medicare utilization and that medical utilization will decrease after tort reform is enacted. METHODS State-level...

This article examines Stapleton's view that insurance has lacked influence and been no more than a 'makeweight' argument in the development of tort liability. Looking at the wider context, the article describes the overwhelming importance of insurers to the litigation system and argues that all cases are affected by insurance practice. It distinguishes the effect of insurance upon judicial fact...