A New Perspective
on Rising Nonbusiness
Bankruptcy Filing Rates:
Analyzing the Regional Factors
By Kelly D. Edmiston
Nonbusiness bankruptcy filing rates have increased almost five-
fold since 1980. This alarming growth was largely the impetus
for the Bankruptcy Abuse Prevention and Consumer Protec-
tion Act of 2005. The intent of the new law, which went into effect in
October 2005, was to eliminate alleged abuses of the bankruptcy system
and to reduce filing rates.
In deliberations on the new law, Congress expressed concern about
the underlying causes of bankruptcy. The tools currently available for
analysis leave serious gaps in understanding bankruptcy behavior. While
many studies have sought to discover the causes of the rising filing rates,
they have largely focused on aggregated data over time. This approach is
logical—but ignores the considerable variation in filing rates across
regions. Only by examining the regional differences in rates can we gain
meaningful insight into their causes.
This article describes a new model of county bankruptcy filing rates.
The model contributes to the current understanding by improving on
some of the approaches already used in other studies and by including a
number of determinants not previously considered.
Kelly Edmiston is a senior economist in the Community Affairs Department at the
Federal Reserve Bank of Kansas City. This article is on the bank’s website at
www.KansasCityFed.org. The author would like to thank Kate Fisher for valuable
assistance in the preparation of this article.
The first section of the article describes the findings of earlier
studies that looked at rising nonbusiness bankruptcy filing rates. The
second section uses the new model to reveal a number of regional varia-
tions in the underlying factors of the rising filing rates. The article
concludes that homestead exemptions and wage garnishments can be
effective policy levers in managing rising bankruptcy filing rates. It also
finds that social issues—stigma, gambling, and health insurance,