"This paper examines how filing for bankruptcy under Chapter 13 helps financially distressed debtors save their homes … reduce the total amount owed. We develop a model of debtors' decisions to default on their mortgages and file for bankruptcy … and we evaluate it using a new dataset of debtors who filed for bankruptcy under Chapter 13 in 2006. We also examine the …

senior (secured) debt in order to shield assets from the tort victims in bankruptcy. Interestingly, senior debt serves the … victims priority over senior debtholders in bankruptcy prevents over-leveraging but leads to suboptimal incentives. Lender …