But is payday lending a cause of increased bankruptcy filings? In a paper from last September, Professors Paige Skiba (Vanderbilt Univ. Law School) and Jeremy Tobacman (Univ. of Pennsylvania), say yes for Chapter 13 reorganizations, by about 2.5%. They also found that for payday loan customers filing Chapter 13 bankruptcies, a whopping 11% of their debt burden was from payday loans.
The study found no correlation between payday loans and Chapter 7 (no asset) bankruptcies, however: “There are no statistically signifi?cant effects of access to payday loans on Chapter 7 bankruptcy fi?llings.”
I find the results interesting not for the correlation Professors Skiba and Tobacman did find, but for the correlation they did not find. I suspect, though I have no data to prove, that payday loan customers who do file bankruptcy are more likely to to so under Chapter 7 than Chapter 13, since the former is the most popular form of bankruptcy in the U.S.
Nevertheless, the study does indicate that, for a statistically significant portion of the population, the burden of payday loans is enough to push consumers over the edge into Chapter 13 bankruptcy.
Do Payday Loans Cause Bankruptcy? | SSRN (via Consumer Law & Policy Blog)
(photo: taberandrew)
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