TY  - JOUR
AU  - Gross,David B.
AU  - Souleles,Nicholas S.
TI  - An Empirical Analysis of Personal Bankruptcy and Delinquency
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 8409
PY  - 2001
Y2  - August 2001
UR  - http://www.nber.org/papers/w8409
L1  - http://www.nber.org/papers/w8409.pdf
N1  - Author contact info:
David Gross
Graduate School of Business
University of Chicago
1101 E. 58th Street
Chicago, IL  60637
Tel: 773-702-7372
E-Mail: DGROSS@LEXECON.COM

Nicholas S. Souleles
Finance Department
The Wharton School
2300 SH-DH
University of Pennsylvania
Philadelphia, PA  19104-6367
Tel: 215/898-9466
Fax: 215/898-6200
E-Mail: souleles@wharton.upenn.edu
AB  - This paper uses a new panel data set of credit card accounts to analyze credit card delinquency, personal bankruptcy, and the stability of credit risk models. We estimate duration models for default and assess the relative importance of different variables in predicting default. We investigate how the propensity to default has changed over time, disentangling the two leading explanations for the recent increase in default rates - a deterioration in the risk - composition of borrowers versus an increase in borrowers' willingness to default due to declines in default costs, including social, information, and legal costs. Even after controlling for risk-composition and other economic fundamentals, the propensity to default significantly increased between 1995 and 1997. By contrast, increases in credit limits and other changes in risk-composition explain only a small part of the change in default rates. Standard default models appear to have missed an important time-varying default factor, consistent with a decline in default costs.
ER  -