Working Paper

Bankruptcy Lawyers and Credit Recovery

Abstract: The author studies how bankruptcy law firm advertisements affect credit recovery of households in financial distress. Exploiting the border discontinuity strategy associated with the geographic unit in which local TV advertisements are sold, the author empirically uncovers bankruptcy filings and credit recovery related to exogenous variations in bankruptcy law firm advertisements. The author first documents a significant advertising effect on filing rates and shows that advertising-induced filers are similar to existing filers. The author then finds a positive effect of advertisements on credit outcomes including credit score, new homeownership, and foreclosure. The author interprets these findings as evidence that lawyers address information frictions in households’ assessment of the bankruptcy option.

Keywords: Personal bankruptcy; lawyers; intermediaries; advertising;

JEL Classification: G51; K35; M37;

https://doi.org/10.21799/frbp.wp.2024.10

Bibliographic Information

Provider: Federal Reserve Bank of Philadelphia

Part of Series: Working Papers

Publication Date: 2024-04-08

Number: 24-10