The Anatomy of U . S . Personal Bankruptcy under Chapter 13

By compiling a novel dataset from bankruptcy court dockets recorded in Delaware between 2001 and 2002, we build and estimate a structural model of Chapter 13 bankruptcy. This allows us to quantify how key debtor characteristics, including whether they are experiencing bankruptcy for the …rst time, their past due secured debt at the time of …ling, and income in excess of that required for basic maintenance, a¤ect the distribution of creditor recovery rates. The analysis further reveals that changes in debtors’conditions during bankruptcy play a nontrivial role in governing Chapter 13 outcomes, including their ability to obtain a …nancial fresh start. Our model then predicts that the more stringent provisions of Chapter 13 recently adopted, in particular those that force subsets of debtors to …le for long-term plans, do not materially raise creditor recovery rates but make discharge less likely for that subset of debtors. This …nding also arises in the context of alternative policy experiments that require bankruptcy plans to meet stricter standards in order to be con…rmed by the court. JEL Classi…cations: J22, K35, D14