Financial Distress and Bankruptcy

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White 9617712 This project explores the economics of financial distress and the use by debtors and creditors of such procedures as bankruptcy, wage garnishment and debt renegotiation. Although more than one million individuals or households will file for bankruptcy in 1996 (a fourfold increase since 1983), researchers have devoted little attention to this phenomenon. This research will fill that void. This project has three parts. In the first, the new Panel Study of Income Dynamics will be used to estimate a model of debtors' decision to file for bankruptcy and to test whether a "bankruptcy stigma" exists. In the second part, a new data set on small firm financial distress focusing on small firms bankruptcy situations will be analyzed. The decisions small firms make and the interactions between these firms and their creditors will be the primary focus of this part. Finally, the project will explore reforms of U.S. consumer bankruptcy law. Theoretical modeling of features of current law and the features of optimal law will be examined. . %%% This project explores the economics of financial distress and the use by debtors and creditors of such procedures as bankruptcy, wage garnishment and debt renegotiation. Although more than one million individuals or households will file for bankruptcy in 1996 (a fourfold increase since 1983), researchers have devoted little attention to this phenomenon. This research will fill that void. This project has three parts. In the first, the new Panel Study of Income Dynamics will be used to estimate a model of debtors' decision to file for bankruptcy and to test whether a "bankruptcy stigma" exists. In the second part, a new data set on small firm financial distress focusing on small firms bankruptcy situations will be analyzed. The decisions small firms make and the interactions between these firms and their creditors will be the primary focus of this part. Finally, the project will explore reforms of U.S. consumer bankruptcy law. Theoretical modeling of features of current law and the features of optimal law will be examined. . ***