Personal Bankruptcy and the Accumulation of Shadow Debt

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Abstract/Contents

Abstract: Compiling new liability-level data from the balance sheets of personal bankruptcy filers, we document that a sizable share of reported liabilities are “shadow debt,” debt not reported to credit bureaus that often arises from the non-payment of goods and services. We use this new data to evaluate how debtor cash flows affect when consumers file for bankruptcy and how much debt they have at bankruptcy. We find that filers respond to a quasi-exogenous $100 increase in monthly cash flows by delaying filing by an average of one month and by increasing unsecured indebtedness by $4,000 in the months preceding filing. Essentially all of the additional debt incurred by delaying filers is shadow debt, and is incurred in the six months prior to bankruptcy.

Type of resource	text
Date created	August 25, 2021

DOI	https://doi.org/10.25740/pc403fx4822
Location	https://purl.stanford.edu/pc403fx4822

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License: This work is licensed under a Creative Commons Attribution 4.0 International license (CC BY).

Preferred citation: Argyle, B., Iverson, B., Nadauld, T., and Palmer, C. (2022). Personal Bankruptcy and the Accumulation of Shadow Debt. Stanford Digital Repository. Available at https://purl.stanford.edu/pc403fx4822

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