Debt relief and debtor outcomes: Measuring the effects of consumer bankruptcy protection. Unpublished working paper

“The Bankruptcy Act is... of public as well as private interest, in that it gives to the honest but unfortunate debtor... a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of pre-existing debt. ” (Local Loan Co. v. Hunt, 292 U.S. 234 [1934]) In 2010, 1.5 million Americans filed for over $450 bil-lion in debt relief through the consumer bankruptcy system. U.S. households receive more resources through the bank-ruptcy system than through Temporary Assistance for Needy Families and all state unemployment insurance programs combined (Lefgren, McIntyre, and Miller 2010), with nearly 1 in 10 American households having filed for bankruptcy at some point (Stavins 2000). The U.S. bankruptcy system is also among the most generous in the world, allowing debtors to choose between Chapter 7, which provides debt relief an