The Impact of Bankruptcy Reform on Insolvency Choice and Consumer Credit
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We examine the impact of the 2009 amendments to the Canadian Bankruptcy and Insolvency Act on insolvency decisions. Rule changes steered debtors out of division I proposals and into the more cost-effective division II proposals. This also led to a significant substitution out of bankruptcies and into proposals. Using credit bureau data on credit card limits we test, but do not find, any evidence that this substitution into more creditor-friendly insolvencies had any impact on average lending behavior, either immediately following the amendments or up to six years removed.