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Abstract
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Before
The consumer bankruptcy system provides significant benefits to high-debt individuals, yet fewer than 2% of US adults file each year. We propose a randomized control trial to answer two questions: (i) which factors are important deterrents to obtaining debt relief through bankruptcy, and (ii) how does bankruptcy impact financial outcomes? We hypothesize that bankruptcy improves financial outcomes and that key barriers include: (a) misperceptions about bankruptcy benefits and (b) fear of credit-score impacts. Testing these hypotheses, we will survey up to 30,000 high-debt individuals. We will elicit perceptions of facts about bankruptcy and provide information about bankruptcy to correct misperceptions. By exogenously shifting beliefs about bankruptcy along dimensions (a) and (b), we will estimate the effect of the information provided on participants’: (i) willingness to consider bankruptcy or pay for bankruptcy information; (ii) initiation of the process of filing for bankruptcy, as measured in a follow-up survey; and (iii) bankruptcy filings, measured by merging credit reports with survey responses. Finally, we measure how exogenous changes in bankruptcy attitudes or filings impact future financial outcomes, measured in merged credit reports.
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After
The consumer bankruptcy system provides significant benefits to high-debt individuals, yet fewer than 2% of US adults file each year. We propose a randomized control trial to answer two questions: (i) which factors are important deterrents to obtaining debt relief through bankruptcy, and (ii) how does bankruptcy impact financial outcomes? We hypothesize that bankruptcy improves financial outcomes and that key barriers include: (a) misperceptions about bankruptcy benefits and (b) fear of credit-score impacts. Testing these hypotheses, we will survey up to 10,000 high-debt individuals. We will elicit perceptions of facts about bankruptcy and provide information about bankruptcy to correct misperceptions. By exogenously shifting beliefs about bankruptcy along dimensions (a) and (b), we will estimate the effect of the information provided on participants’: (i) willingness to consider bankruptcy or pay for bankruptcy information; (ii) initiation of the process of filing for bankruptcy, as measured in a follow-up survey; and (iii) bankruptcy filings, measured by merging credit reports with survey responses. Finally, we measure how exogenous changes in bankruptcy attitudes or filings impact future financial outcomes, measured in merged credit reports.
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Last Published
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February 20, 2025 06:12 AM
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After
April 25, 2025 03:45 PM
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Experimental Design (Public)
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Before
A credit reporting bureau will provide a list of one million email addresses corresponding to high-debt adults in the US for whom knowledge of the bankruptcy system could be useful for their financial decision-making. To arrive at this sample, the credit reporting bureau applied a Chapter 7 bankruptcy prediction model to the entire US population that estimated the likelihood of filing based on six months of bankruptcy data. The model incorporated key credit report attributes including income, credit score, and credit utilization. Focusing on adults that have never filed for bankruptcy and that have an associated email address, the credit reporting bureau ranked adults by this propensity score. The top (i.e., highest propensity) one million never-bankruptcy adults with associated email addresses were selected.
We will invite these individuals to take our online survey until we have emailed all 1 million email addresses or until we have 30,000 respondents who consent to the study, complete the baseline survey, confirm in the survey that they do not own real estate, pass our two initial attention checks, and indicate in the survey that they do not expect to fully repay their debt. Our final sample includes only the individuals that meet these criteria. For outcomes only measured in the follow-up survey, we will additionally restrict the sample to those who complete the follow-up survey.
Our baseline survey is structured as follows. First, we ask respondents about their household finances, which helps us estimate the respondent’s vehicle equity and the amount of debt they might be able to discharge in Chapter 7 bankruptcy. Next, we ask participants to estimate the likelihood that they would file for bankruptcy if they had trouble paying debts. We then measure knowledge of bankruptcy and concerns with bankruptcy. Next, we randomize participants and provide the information intervention. Then, we measure the baseline survey outcomes. We conclude by measuring participant demographics, notifying lottery winners of their prize, and providing the Upsolve link to treatment group respondents.
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After
A credit reporting bureau will provide a list of one million email addresses corresponding to high-debt adults in the US for whom knowledge of the bankruptcy system could be useful for their financial decision-making. To arrive at this sample, the credit reporting bureau applied a Chapter 7 bankruptcy prediction model to the entire US population that estimated the likelihood of filing based on six months of bankruptcy data. The model incorporated key credit report attributes including income, credit score, and credit utilization. Focusing on adults that have never filed for bankruptcy and that have an associated email address, the credit reporting bureau ranked adults by this propensity score. The top (i.e., highest propensity) one million never-bankruptcy adults with associated email addresses were selected.
We will invite these individuals to take our online survey until we have emailed all 1 million email addresses or until we have 10,000 respondents who consent to the study, complete the baseline survey, confirm in the survey that they do not own real estate, pass our two initial attention checks, and indicate in the survey that they do not expect to fully repay their debt. Our final sample includes only the individuals that meet these criteria. For outcomes only measured in the follow-up survey, we will additionally restrict the sample to those who complete the follow-up survey.
Our baseline survey is structured as follows. First, we ask respondents about their household finances, which helps us estimate the respondent’s vehicle equity and the amount of debt they might be able to discharge in Chapter 7 bankruptcy. Next, we ask participants to estimate the likelihood that they would file for bankruptcy if they had trouble paying debts. We then measure knowledge of bankruptcy and concerns with bankruptcy. Next, we randomize participants and provide the information intervention. Then, we measure the baseline survey outcomes. We conclude by measuring participant demographics, notifying lottery winners of their prize, and providing the Upsolve link to treatment group respondents.
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Planned Number of Observations
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Up to 30,000 respondents. Our sample size will be smaller if we exhaust our list of email addresses without reaching 30,000 responses that meet the criteria described above.
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Up to 10,000 respondents. Our sample size will be smaller if we exhaust our list of email addresses without reaching 10,000 responses that meet the criteria described above.
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Sample size (or number of clusters) by treatment arms
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Up to 7,500 respondents per treatment arm. Our sample size will be smaller if we exhaust our list of email addresses without reaching 30,000 responses that meet the criteria described above.
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After
Up to 2,500 respondents per treatment arm. Our sample size will be smaller if we exhaust our list of email addresses without reaching 10,000 responses that meet the criteria described above.
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Power calculation: Minimum Detectable Effect Size for Main Outcomes
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Before
With the maximum sample size of 30,000, we are powered for a minimum detectable effect of 1.1 percentage points on our primary outcome of bankruptcy filing. This represents approximately 20% of our assumed sample mean based on our estimate that 5.7% of individuals with more than $40,000 in non-student, non-mortgage debt file for bankruptcy annually based on the Survey of Consumer Finances.
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After
With the maximum sample size of 10,000, we are powered for a minimum detectable effect of 1.9 percentage points on our primary outcome of bankruptcy filing. This represents approximately 33% of our assumed sample mean based on our estimate that 5.7% of individuals with more than $40,000 in non-student, non-mortgage debt file for bankruptcy annually based on the Survey of Consumer Finances.
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