The Credit Market Consequences of Job Displacement

This paper studies the role of job displacement in the household bankruptcy decision. Using an event-study methodology, I find that NLSY respondents are over three times more likely to file for bankruptcy immediately following a job loss. Using county-level data, I find similar magnitudes in the aggregate, with significant effects lasting two to three years. The results suggest that unemployment spells can have significant long-term consequences on households’ credit market outcomes.