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Working Paper
Financial distress and the role of capital contributions by the owner manager
Venkataraman, Subu (1996)
This paper examines the implications of bankruptcy law for owner managed firms. These firms are typically (i) smaller, (ii) their value is closely tied to the skills of the owner manager, and (iii) the owner manager represents a feasible source of capital contributions if the firm is in financial distress. The terms of such capital infusions, codified as the new value exception (NVE) to the absolute priority rule (APR), has been the source of considerable controversy, both in terms of its existence, and the economic benefit, if any, that it provides. We show that when the owner manager cannot ...
Working Paper Series, Issues in Financial Regulation , Paper WP-96-22

Working Paper
The option value of consumer bankruptcy
Cohen-Cole, Ethan (2009)
This paper aims to contribute to the growing literature on the causes of consumer bankruptcy. It presents the consumer bankruptcy decision as an irreversible choice that has an embedded real option value. This allows the use of well known framework for the study of decision making under uncertainty. The principal empirical finding is that cross-sectional variances of economic factors, such as unemployment, are strong predictors of bankruptcy rates and are consistent with the implications of the real options model. This supports anecdotal evidence that individuals are facing increased economic ...
Supervisory Research and Analysis Working Papers , Paper QAU09-1

Newsletter
Personal bankruptcies in retrospect
Eugeni, Francesca (1991-12)
Chicago Fed Letter , Issue Dec

Working Paper
Credit, bankruptcy, and aggregate fluctuations
Nakajima, Makoto; Rios-Rull, Jose-Victor (2014-10-20)
We ask two questions related to how access to credit affects the nature of business cycles. First, does the standard theory of unsecured credit account for the high volatility and procyclicality of credit and the high volatility and countercyclicality of bankruptcy filings found in U.S. data? Yes, it does, but only if we explicitly model recessions as displaying countercyclical earnings risk (i.e., rather than having all households fare slightly worse than normal during recessions, we ensure that more households than normal fare very poorly). Second, does access to credit smooth aggregate ...
Working Papers , Paper 14-31

Working Paper
The role of warrants in corporate reorganizations
Longhofer, Stanley D. (1995)
An argument that informational asymmetries explain why the original shareholders of some firms emerge from Chapter 11 bankruptcy proceedings with stock in the reorganized company, while others receive warrants. By proposing a reorganization plan in which they receive warrants, the original stockholders of a firm with good future prospects can signal their superior information to the creditors in a way that firms with poor prospects will not wish to mimic.
Working Papers (Old Series) , Paper 9512

Journal Article
Shame and bankruptcy : the numbers of Americans filing for bankruptcy protection has surged fivefold in two decades. A Richmond Fed economist challenges the conventional wisdom that declining stigma is at the root of the increase
Campbell, Doug (2005-01)
Econ Focus , Volume 9 , Issue Win , Pages 28-31

Working Paper
Bankruptcy and delinquency in a model of unsecured debt
Young, Eric R.; Athreya, Kartik B.; Sanchez, Juan M.; Tam, Xuan S. (2012)
This paper documents and interprets two facts central to the dynamics of informal default or ?delinquency? on unsecured consumer debt. First, delinquency does not mean a persistent cessation of payment. In particular, we observe that for individuals 60 to 90 days late on payments, 85% make payments during the next quarter that allow them to avoid entering more severe delinquency. Second, many in delinquency (40%) have smaller debt obligations one quarter later. To understand these facts, we develop a theoretically and institutionally plausible model of debt delinquency and bankruptcy. Our ...
Working Papers , Paper 2012-042

Journal Article
The rise in personal bankruptcies: the Eighth Federal Reserve District and beyond
Garrett, Thomas A. (2007-01)
Personal bankruptcy filings in the United States increased, per capita, nearly 350 percent between 1980 and 2005. This paper first addresses the changes in economic and institutional factors that have occurred over the past 100 years, many of which have occurred in the past 30 years, which are likely contributors to the dramatic rise in personal bankruptcy filings seen across the country. These factors include a reduction in personal savings, an increase in consumer debt, the proliferation of revolving credit, changes to bankruptcy law, and a reduced social stigma associated with filing for ...
Review , Volume 89 , Issue Jan , Pages 15-38

Working Paper
Household Financial Distress and the Burden of ‘Aggregate’ Shocks
Athreya, Kartik B.; Sanchez, Juan M.; Mather, Ryan; Mustre-del-Rio, Jose (2020-10-05)
In this paper we show that household-level financial distress (FD) varies greatly and can increase vulnerability to economic shocks. To do this, we establish three facts: (i) regions in the United States vary significantly in their “FD-intensity,” measured either by how much additional credit households can access or how delinquent they are on debts, (ii) shocks that are typically viewed as “aggregate” in nature hit geographic areas quite differently, and (iii) FD is an economic “pre-existing condition”: the share of an aggregate shock borne by a region is positively correlated ...
Research Working Paper , Paper RWP 20-13

Working Paper
Bankruptcy in the life-cycle consumption model
Kowalewski, K. J. (1988)
An analysis assessing the sensitivity of consumption to income using a life-cycle model of consumption that incorporates the possibility of bankruptcy.
Working Papers (Old Series) , Paper 8815

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