NY Fed Reserve Staff Paper: Prior Bankruptcy Reform Shifted Risk from Unsecured Card Holders to Secured Lenders.

Paper, Seismic Effects of the Bankruptcy Reform, is HERE :

Main thesis:

"Our specific argument is that [2005 Bankruptcy Reform Act] BAR contributed to the surge in subprime foreclosures by shifting risk from unsecured credit card lenders to secured mortgage lenders. Before BAR, any household could file Ch. 7 bankruptcy and have credit cards and other unsecured debts discharged. Sidestepping unsecured debts left more income to pay the mortgage. BAR blocked that maneuver by way of a means test that forces better-off households who demand bankruptcy to file Ch. 13, where they must continue paying unsecured lenders. When the means test binds, cash constrained mortgagors who might have saved their home by filing Ch. 7 are more likely to face foreclosure or to have to sell their home."

Later in the paper the authors state:
"The estimated impact of BAR on subprime foreclosures is substantial. For a state with average home equity exemption, the average subprime foreclosure rate over the seven quarters after BAR was 12.6 percent higher than the average subprime foreclosure rate over all states over the period before BAR. This translates to just over 32,000 more subprime foreclosures nationwide per quarter due to BAR"