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Fresh Approaches to Bankruptcy and Financial Distress – Volume I: Why Don’t More People Declare Bankruptcy?

This study is the first volume to be published from a joint colloquium around the topic of bankruptcy.

Executive Summary

This volume is based on a colloquium capturing presentations made by experts in the field of bankruptcy. The colloquium results will be published in several volumes, of which this is the first. This volume contains an overview of issues presented by Bill Hampel, Chief Economist for CUNA and Affiliates. In addition, this volume includes a summary of key research findings presented by Professor Michelle White, of the University of Michigan.

What is this research about?

Hampel's presentation at the colloquium provides an analysis of credit union data compared to overall national data, and brings out important implications for credit unions. Professor White is widely regarded in the academic world as a leading economic expert on bankruptcy, and her work has produced a number of surprising and important findings that have implications for credit unions. 

What are the credit union implications?

Even though credit unions as a whole have not been seriously harmed bu the increased rate of bankruptcies (i.e., total charge off rates are about the same), members have been harmed. When members become enmeshed in easy credit, bankruptcy is a less healthy outcome for them than working through a delinquent loan without receiving additional credit. In the latter case, financial recovery is much more likely.

This report is sponsors by the Center for Financial Innovation, McIntire School of Commerce Foundation at the University of Virginia and the Center for Credit Union Research, the School of Business at the University of Wisconsin-Madison.