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Federal Reserve Bank of Kansas City
Economic Review
A new perspective on rising nonbusiness bankruptcy filing rates : analyzing the regional factors
Kelly D. Edmiston

Nonbusiness bankruptcy filing rates have increased almost five-fold since 1980. This alarming growth was largely the impetus for the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. The intent of the new law, which went into effect in October, 2005, was to eliminate alleged abuses of the bankruptcy system and to reduce filing rates. ; In deliberations on the new law, Congress expressed concern about the underlying causes of bankruptcy. The tools currently available for analysis leave serious gaps in understanding bankruptcy behavior. While many studies have sought to discover the causes of the rising filing rates, they have largely focused on aggregated data over time. This approach is logical—but ignores the considerable variation in filing rates across regions. Only by examining the regional differences in rates can we gain meaningful insight into their causes. ; Edmiston describes a new model of county bankruptcy filing rates. The model contributes to the current understanding by improving on some of the approaches already used in other studies and by including a number of determinants not previously considered. He concludes that homestead exemptions and wage garnishments can be effective policy levers in managing rising bankruptcy filing rates. He also finds that social issues—stigma, gambling, and health insurance, among others—are critical regional factors that may help explain the rising bankruptcy filing rates. Finally, he shows that higher levels of self-employment, another regional characteristic, are associated with lower bankruptcy filing rates.

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Kelly D. Edmiston, "A new perspective on rising nonbusiness bankruptcy filing rates : analyzing the regional factors" , Federal Reserve Bank of Kansas City, Economic Review, issue Q II, pages 55-83, 2006.
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