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Household Borrowing after Personal Bankruptcy


  • The views expressed herein are those of the authors and do not necessarily reflect the views of the Federal Reserve Board or its staff. For their helpful comments, we thank two anonymous referees, Sumit Agarwal, Karen Dynan, Jonathan Fisher, Christopher Karlsten, Sophie Lu, Michael Palumbo, Katherine Porter, and seminar participants at the Federal Reserve Board, the 45th Annual Conference on Bank Structure and Competition, the Federal Reserve System Applied Microeconomics Meeting, and the NBER Summer Institute.


A large body of literature has examined factors leading to filing for personal bankruptcy, but little is known about household borrowing after bankruptcy. This paper augments the existing literature with a comprehensive analysis of postbankruptcy borrowing using data from the Survey of Consumer Finances. We find that filers generally have more limited access to unsecured credit, but borrow more secured debt after bankruptcy, than comparable households that have never filed for bankruptcy. Filers also pay higher interest rates on all types of debt. In addition, as more time passes after filing, credit access and borrowing costs improve. However, filers remain more prone than comparable nonfilers to experience financial distress, accumulate less wealth, and use expensive credit sources like payday loans, even more than 10 years after filing.