Charlotte Bankruptcy Lawyer Bryan W. Stone of Arnold & Smith, PLLC answers the question “What is Chapter 13 bankruptcy?”
Changes to the United States Bankruptcy Code enacted a decade ago were designed to lower the number of bankruptcy filings in the United States. Last year, bankruptcy filings were down about half from a decade ago, but bankruptcy experts wonder if the reforms “have done more harm than good,” according to The Economist.
As a recent paper published by Stefania Albanesi of the New York Federal Reserve and Jaromir Nosal of Columbia University confirms, the decade-old bankruptcy reforms have “led to a permanent drop in the bankruptcy rate.”
However, Princeton assistant professor of Economics Will Dobbie and Jae Song of the Social Security Administration say that tightening bankruptcy rules may suppress the “good microeconomic effects” that easier bankruptcy rules produce. A bankrupt person has more incentive to work, for instance, if large chunks of one’s salary are not seized by creditors.
According to Dobbie and Song, people who were able to avail themselves of bankruptcy protection earned over $6,000 more in average income the year after declaring bankruptcy than those whose petitions were denied. Those whose petitions were denied, Dobbie and Song theorized, were more likely to “slip out of town, change [one’s] job and close down [one’s] bank account.”