Dealing withconsumerdefault:Bankruptcy vs garnishment

What arethepositiveandnormativeimplicationsofeliminatingbankruptcyprotection for indebtedindividuals?Withoutbankruptcyprotection,creditorscancollecton defaulteddebttotheextentpermittedbywagegarnishmentlaws.Theelimination lowers thedefaultpremiumonunsecureddebtandpermitslow-net-worthindividuals sufferingbadearningsshockstosmoothconsumptionbyborrowing.Thereisalarge increaseinconsumerdebtfinancedessentiallybysuper-wealthyindividuals,amodest drop incapitalperworker,andahigherfrequencyofconsumerdefault.Averagewelfare rises by1%ofconsumptioninperpetuity,withabout90%ofhouseholdsfavoringthe change.