Mortgage cramdown enabled bankruptcy judges to discharge the underwater portion of a mortgage during Chapter 13 … bankruptcy before the Supreme Court disallowed this practice in 1993. We exploit the random assignment of cases to judges to … quantify the ex-post effects of Chapter 13 bankruptcy over the period from 1989 to 1993. We find that a successful Chapter 13 …

This paper argues that the U.S. bankruptcy reform of 2005 played an important role in the mortgage crisis and the … current recession. When debtors file for bankruptcy, credit card debt and other types of debt are discharged--thus loosening … debtors' budget constraints. Homeowners in financial distress can therefore use bankruptcy to avoid losing their homes, since …

In this paper we examine the relationship between homeowners' bankruptcy decisions and their mortgage default decisions … and the relationship between homeowners' bankruptcy decisions and lenders' decisions to foreclose. In theory, both … relationships could be either substitutes or complements. Bankruptcy and default tend to be substitutes because homeowners' budgets …

This paper examines how filing for bankruptcy under Chapter 13 helps financially distressed debtors save their homes …. We develop a model of debtors' decisions to default on their mortgages and file for bankruptcy under Chapter 13 and … evaluate the model using new data on Chapter 13 bankruptcy filers. We also examine the effect of allowing bankruptcy judges to …