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Essays on Personal Bankruptcy and Mortgage Foreclosure Open Access


Other title
income shocks
Type of item
Degree grantor
University of Alberta
Author or creator
Mikhed, Vyacheslav
Supervisor and department
McMillan, Melville (Economics)
Scholnick, Barry (School of Business)
Examining committee member and department
Galvani, Valentina (Economics)
Huang, Haifang (Economics)
Mehrotra, Vikas (School of Business)
West, Douglas (Economics)
Foerster, Stephen (Business, Western U.)
Department of Economics

Date accepted
Graduation date
Doctor of Philosophy
Degree level
This thesis consists of four chapters. Chapter 1 tests the hypothesis that income shocks cause bankruptcy. Using a difference-in-difference specification, we exploit an exogenous fiscal payment, paid to Albertans, and find that this payment causes a decrease in bankruptcies, as predicted by the income shock hypothesis. Using insolvent's balance sheet data, we find that the financial benefits of bankruptcy (liabilities discharged minus wealth forgone) are higher for those filers who received the payment. This is consistent with those potential filers, with smaller advantages from bankruptcy, being dissuaded from filing by the payment. Chapter 2 examines the effect of income inequality on debt and financial distress. Following the 2008 crisis, several authors have argued that growing inequality increases debts of the poor, who attempt to match the consumption of the rich; and that these debts lead to bankruptcy. We test this argument using a unique database of essentially every personal bankruptcy filing in Canada from 2005 to 2010. Our main finding is that increased income inequality is associated with higher levels of debt in bankruptcy; in particular, larger unsecured and credit card debt and increased risk of bankruptcy. Chapter 3 explores the impact of the distance between filers and bankruptcy professionals on bankruptcy filing costs. We test if longer distances between debtors and their closest bankruptcy professionals, implying higher transactions costs, lead to debtors demanding larger financial benefits from their bankruptcy to make the bankruptcy worthwhile. We show that distance related costs are particularly important in rural areas, where distances to the closest bankruptcy professionals are typically large. Chapter 4 examines the impact of government policies on US mortgage foreclosures. Before the 2008 financial crisis, the US government encouraged mortgage lending to low income borrowers designated as a special ‘under-served’ group by the Community Reinvestment Act. We explore whether this law influenced mortgage foreclosures in 2003-2010. We exploit the 80 percent threshold discontinuity embedded in the law to identify the causal effect of the law on foreclosures. We find that regions with relatively faster and less expensive non-judicial foreclosure process experienced an increase in foreclosures due to the Community Reinvestment Act.
Permission is hereby granted to the University of Alberta Libraries to reproduce single copies of this thesis and to lend or sell such copies for private, scholarly or scientific research purposes only. Where the thesis is converted to, or otherwise made available in digital form, the University of Alberta will advise potential users of the thesis of these terms. The author reserves all other publication and other rights in association with the copyright in the thesis and, except as herein before provided, neither the thesis nor any substantial portion thereof may be printed or otherwise reproduced in any material form whatsoever without the author's prior written permission.
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