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...

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....

We present a dynamic structural model of subprime adjustable-rate mortgage (ARM) borrowers making payment decisions taking into account possible consequences of different degrees of delinquency from their lenders. We empirically implement the model using unique data sets that contain information...

We assess the credit market impact of allowing mortgage "strip-down"--that is, reducing the principal of underwater residential mortgages to the current market value of the property for homeowners in Chapter 13 bankruptcy. Our identification is provided by a series of U.S. Circuit Court of...