TY  - JOUR
AU  - Gross,Tal
AU  - Notowidigdo,Matthew J.
AU  - Wang,Jialan
TI  - Liquidity Constraints and Consumer Bankruptcy: Evidence from Tax Rebates
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 17807
PY  - 2012
Y2  - February 2012
UR  - http://www.nber.org/papers/w17807
L1  - http://www.nber.org/papers/w17807.pdf
N1  - Author contact info:
Tal Gross
Department of Health Policy and Management
School of Public Health
Columbia University
600 West 168th Street, Sixth Floor
New York, NY 10032
Tel: 212/342-4521
Fax: 212/305-3405
E-Mail: tg2370@columbia.edu

Matthew J. Notowidigdo
University of Chicago
Booth School of Business
5807 South Woodlawn Avenue
Chicago, IL 60637
Tel: 773/702-9758
E-Mail: noto@chicagobooth.edu

Jialan Wang
Consumer Financial Protection Bureau
Office of Research
1700 G Street NW
Washington, DC  20552
E-Mail: jialan.wang@cfpb.gov
M2  - featured in NBER digest on 2012-06-01
AB  - This paper estimates the extent to which legal fees prevent liquidity-constrained households from declaring bankruptcy. To do so, it studies how the 2001 and 2008 tax rebates affected consumer bankruptcy filings. We exploit the randomized timing of the rebate checks and estimate that the rebates caused a significant, short-run increase in consumer bankruptcies in both years, with larger effects in 2008 when the rebates were more generous and more widely distributed. Using hand-collected data from individual bankruptcy petitions, we document that the rebates caused an increase in the average liabilities and the liabilities-to-income ratios of filers.
ER  -