Who invests in home equity to exempt wealth from bankruptcy?

  • Homestead exemptions to personal bankruptcy allow households to retain their home equity up to a limit determined at the state level. Households that may experience bankruptcy thus have an incentive to bias their portfolios towards home equity. Using US household data from the Survey of Income and Program Participation for the period 1996-2006, we find that especially households with low net worth maintain a larger share of their wealth as home equity if a larger homestead exemption applies. This home equity bias is also more pronounced if the household head is in poor health, increasing the chance of bankruptcy on account of unpaid medical bills. The bias is further stronger for households with mortgage finance, shorter house tenures, and younger household heads, which taken together reflect households that face more financial uncertainty.

Download full text files

Export metadata

Additional Services

Share in Twitter Search Google Scholar
Metadaten
Author:Stefano Corradin, Reint GroppGND, Harry Huizinga, Luc Laeven
URN:urn:nbn:de:hebis:30:3-347718
URL:https://www.clevelandfed.org/research/conferences/2010/9-9-2010_household-finance/Corradin_Gropp_Huizinga_Laeven.pdf
Document Type:Report
Language:English
Year of Completion:2010
Year of first Publication:2010
Publishing Institution:Universit├Ątsbibliothek Johann Christian Senckenberg
Release Date:2014/08/14
Tag:Home; Homestead exemptions; Personal bankruptcy; Portfolio allocation
Issue:Draft August 2010
Page Number:50
HeBIS-PPN:347278523
Institutes:Wirtschaftswissenschaften / Wirtschaftswissenschaften
Wissenschaftliche Zentren und koordinierte Programme / House of Finance (HoF)
Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Wissenschaftliche Zentren und koordinierte Programme / Sustainable Architecture for Finance in Europe (SAFE)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Sammlungen:Universit├Ątspublikationen
Licence (German):License LogoDeutsches Urheberrecht