"The Reacquisition of Credit Following Chapter 7 Personal
Bankruptcy"
BY: DAVID K. MUSTO
University of Pennsylvania, Wharton School
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Paper ID: Wharton Financial Institutions Center Working Paper
No. 99-22
Date: June 1999
Contact: DAVID K. MUSTO
Email: Mailto:musto at wharton.upenn.edu
Postal: University of Pennsylvania, Wharton School
2258 Steinberg Hall - Dietrich Hall
Philadelphia, PA 19104-6367 USA
Phone: (215)898-3609
Fax: (215)573-2207
Paper Requests:
Please Contact Edward Tatum Mailto:tatum at wharton.upenn.edu
Postal: The Wharton Financial Institutions Center 434 Vance
Hall, Philadelphia, PA 19104-6301. Phone:(215) 573-5838.
Fax:(215)573-8757. Please include Paper ID Number.
ABSTRACT:
Federal law allows credit bureaus to report past bankruptcies up
to ten years, so the financial implication of filing includes a
ten-year influence on new credit. I document this influence with
a large panel database of credit files which tracks many Chapter
7 filers past the moment when the filing disappears from
potential creditors' view, providing a tightly controlled test
of the filing's impact on credit access. The principal finding
is that the bankruptcy flag has a big effect on the access of
the more creditworthy past filers; when they lose their
bankruptcy flags, their credit scores jump substantially and
they open new credit relationships, high-limit bank cards in
particular, quickly. Subsequently, the score-increases mostly
reverse and delinquency is abnormally high.
JEL Classification: G21, G23