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Finance and Economics Discussion Series
The Finance and Economics Discussion Series logo links to FEDS home page Bankruptcy Exemptions and the Market for Mortgage Loans
Richard M. Hynes and Jeremy Berkowitz

Abstract: The recent explosion in personal bankruptcy filings has motivated research into whether credit markets are being adversely afected by generous legal provisions. Empirically, this question is examined by comparing credit conditions and bankruptcy exemptions across states. We note that the literature has focused on aggregate household credit, making no distinction between secured and unsecured credit. We argue that such aggregation obscures important differences in forms of credit. Most significantly, property exemptions do not prevent the home mortgage lender from foreclosing on the home if not fully repaid.

Keywords: Bankruptcy, mortgages, secured credit

Full paper (485 KB PDF) | Full paper (691 KB Postscript)

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Last update: March 2, 1998