This dissertation examines the effect of government transfer programs and the bankruptcy laws on the number of personal bankruptcy filings. Both the transfer programs and bankruptcy provide income- and wealth-insurance for households. A primary contribution of this dissertation is the effect of these transfer program benefits and the exemptions on the filing rate. Previous bankruptcy research has ignored transfer programs. Personal bankruptcy research by economists has been minimal, yet personal bankruptcy is becoming more important. During the 1990s, the number of personal bankruptcy filings has more than doubled, with over 1.2 million households filing in 2000.; I develop a new theoretical approach to the individual's decision to file for bankruptcy. The individual has the choice to file for bankruptcy and/or receive transfer program benefits, such as Unemployment Insurance (UI), Aid to Families with Dependent Children (AFDC), and Medicaid. The theoretical model shows an individual is less likely to file for bankruptcy if he receives transfer program benefits. I also find that an increase in the bankruptcy exemption increases the probability the household files for bankruptcy.; Finally, I use two different data sets to test these hypotheses empirically. I use a state-level data set and a household-level data set, the Panel Study of Income Dynamics (PSID). Overall, I find that an 8 percent increase in the average weekly UI payments decreases the number of filings by at least 2 percent per year. Further, a 4 percent increase in the average monthly AFDC payments decreases the number of filings by approximately 2 percent. There is some mixed evidence that the bankruptcy exemptions affect the number of filings. In the state-level results, the dollar values of the homestead and non-homestead exemptions have a statistically insignificant impact on the number of filings. However, states with an unlimited homestead exemption do have a higher filing rate in the state-level results. In the household-level results, a {dollar}10,000 increase in the financial benefit to filing increases the number of filings by 1.7 percent.
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