Bankruptcy lawyers and credit recovery

Abstract

I study how bankruptcy law firm advertisements affect household credit, exploiting the borders of local TV advertisement media markets. I document a significant advertising effect on filing rates and subsequently show that ad exposure is associated with better financial outcomes. I then characterize how ad-induced filers are different from existing filers in terms of case, financial, and credit variables. I find that ad-induced filers are more likely to receive a discharge, file with lawyer representation, and be first-time filers. I interpret these findings as evidence that bankruptcy law firm advertisements help mitigate frictions in the bankruptcy decision.