Does Bankruptcy Protection Affect Asset Prices? Evidence from changes in Homestead Exemptions

27 Pages Posted: 6 Mar 2021

See all articles by Yildiray Yildirim

Yildiray Yildirim

Zicklin School of Business, Baruch College - The City University of New York

Albert A. Zevelev

City University of New York (CUNY) - Department of Real Estate; University of Pennsylvania - The Wharton School

Date Written: October 15, 2019

Abstract

Does the ability to protect an asset from unsecured creditors affect its price? This paper identifies the impact of bankruptcy protection on house prices using 139 changes in homestead exemptions. Large increases in the homestead exemption raised house prices 3% before 2005. Smaller exemption increases, to adjust for inflation, did not affect house prices. The effect disappeared after BAPCPA, a 2005 federal law designed to prevent bankruptcy abuse. The effect was bigger in inelastic locations.

Keywords: bankruptcy, house prices, consumer credit, BAPCPA

JEL Classification: G33, G5, D12, G21, K35

Suggested Citation

Yildirim, Yildiray and Zevelev, Albert A., Does Bankruptcy Protection Affect Asset Prices? Evidence from changes in Homestead Exemptions (October 15, 2019). Available at SSRN: https://ssrn.com/abstract=3763242 or http://dx.doi.org/10.2139/ssrn.3763242

Yildiray Yildirim

Zicklin School of Business, Baruch College - The City University of New York ( email )

55 Lexington Ave., Box B13-260
New York, NY 10010
United States

Albert A. Zevelev (Contact Author)

City University of New York (CUNY) - Department of Real Estate ( email )

United States

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

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