Consumer bankruptcy: Decision, choice and access to credit afterwards

Atilla Gumus, Alper Kara, Ahmad Hassan Ahmad, Karligash Glass

Research output: Contribution to journalArticlepeer-review


We examine the effects of the bankruptcy benefit and adverse events on the consumer bankruptcy decision. Employing zero-inflated ordered probit models and a unique longitudinal survey of approximately 66,000 individuals in Great Britain, we find that consumers are more likely to enter into bankruptcy proceedings when the bankruptcy benefit increases and when they become unemployed. We find that the effects of adverse events differ across bankruptcy types. Individuals who experience the onset of health problems are more likely to choose reorganization of debts (i.e., income gleaning), whereas individuals who get divorced or separated are more likely to prefer the discharge of debts (i.e., fresh start). We also examine access to credit after bankruptcy. We find that individuals are excluded from the credit markets post-bankruptcy and the impact differs across bankruptcy types. Credit exclusion for fresh starters is dramatic, swift but short-lived, while for income gleaners, it is gradual, slow but lasts longer.

Original languageEnglish
Number of pages27
JournalInternational Journal of Finance and Economics
Early online date25 Jul 2023
Publication statusE-pub ahead of print - 25 Jul 2023

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