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Chicago, Ill. – Changes in federal bankruptcy laws enacted in 2005 prevented many low-income households from taking advantage of the fresh start bankruptcy could have offered during the worst financial crisis since the Great Depression, according to new research by the UNC Center for Community Capital.

Center research director Mark Lindblad will report two key findings on the impact of bankruptcy reform on low-income homeowners today (Jan. 6) at the American Economic Association/Allied Social Science Associations annual meeting.

“The first major finding is that the federal bankruptcy reform of 2005, called the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), combined with local filing patterns to exert a strong, negative impact on the likelihood that lower-income households would file for personal bankruptcy,” Lindblad said.

“Specifically, our analysis shows that if the BAPCPA had never been enacted, the bankruptcy filing rate of lower-income homeowners in our study would have been 45 percent higher,” he said. “In contrast to the official intent of the law, bankruptcy reform appears to have discouraged many lower-income households from taking advantage of the fresh start that bankruptcy provides.”

Meanwhile, Lindblad and center researchers also found that low-income homeowners file bankruptcy primarily due to adverse life events beyond their control, such as unemployment, unexpected expenses and medical bills. Their experiences and motivations are relevant as policymakers debate strategies to restore stability to the U.S. housing market and promote economic growth.

Lindblad’s presentation, “Personal Bankruptcy Decisions Before and After Bankruptcy Reform,”is available at

The UNC Center for Community Capital is the leading center for research and policy analysis on the transformative power of capital on households and communities in the United States. Part of the College of Arts and Sciences at the University of North Carolina at Chapel Hill, the center offers data and analysis that helps policymakers, advocates and the private sector find sustainable ways to expand economic opportunity to more people more effectively. For more information, visit or call (919) 843-2140.

Topics(s): Affordable Homeownership, Housing Policy, Mortgage Finance
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