Working Paper

Bankruptcy exemptions and the market for mortgage loans

Abstract: The recent explosion in personal bankruptcy filings has motivated research into whether credit markets are being adversely affected 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;

Bibliographic Information

Provider: Board of Governors of the Federal Reserve System (U.S.)

Part of Series: Finance and Economics Discussion Series

Publication Date: 1998

Number: 1998-07