Do Changes in Chapter 7 Asset Exemptions Fundamentally Alter Bankruptcy Outcomes? New Evidence From the State of Oregon

Abstract

Hackney, Friesner, and McPherson (2018) developed a methodology to identify the optimal distribution of discharged debts in Chapter 7 bankruptcy filings. In 2013, Oregon adopted debtor-choice status. Applying the methodology to data from Oregon immediately before, during, and after, the conversion to debtor choice status should facilitate an accurate assessment of the impact of debtor-choice status on the distribution of debt disbursements. The results suggest that the optimal proportion of assets retained by households through exemptions is between 3-4% of all disbursements, and that the legislation did not noticeably impact convergence to this optimum proportion.