Factors Affecting Bankruptcy Rates in the US - Government Policy, Social Issues, Type of Agriculture - Research Paper Example

Unlike chapters 13 and 7 fillings, which showed an upward trend throughout the 80s and 90s, chapter 12 fillings had declining rates of fillings more so in the 90s. As much as it is limited to family farmers, chapter 12 is essentially a reorganization chapter that bears similarities with chapters 13 and 11. Varied studies have been made using econometric models in order to identify the factors influencing the filling rates of Chapter 12. Scholars who have studied the problem observe that the Bankruptcy Code revisions of 1984 strengthened the code thereby eliminating debtor opportunism brought about by chapters 13 and 7 yet the rate of fillings tripled between 1984 and 1992.

This led to the conclusion that the variations in the filling rates were not influenced by legal or economic factors but rather by modifications in social norms. Other scholars opine that economic factors would be crucial in explaining the differences in the rates of bankruptcy fillings. Many people may argue that farm policies aim at keeping farm operators from the financial quagmire. However, extremely few studies have been done, or modeling analysis carried out to explain the variations in the rates over time from state to state.

Having in mind that there is a high likelihood that chapter 12 will continue in a specific form, identifying the factors that affect its filling rates would be vital. The identification would allow the debtors and creditors to anticipate better the time in which the chapter will be put to use. In any case, the bankruptcy policy and agricultural policy are intertwined in that they aim at preserving farms in financially stressful times. While no studies identify determinants of variation in the rates of bankruptcy filings, two studies approximate models to make predictions on the filling rates for chapters 7 and 13 for the United States population in general.

Both studies opine that variations in rules pertaining to property exemptions could be influencing the filling rates. These studies acknowledged that the structure of agriculture practiced plays a crucial role in determining chapter 12 fillings. 

Conclusion Bankruptcy has been a key problem in many states. There are variations in the rates of fillings under different chapters. In essence, determining the factors that influence these rates would be vital in order to give debtors and creditors an idea as to when to best put chapter 12 into use. These factors include government policies, social issues, type of agriculture practiced and the structure of the agriculture carried out.