Regulating the Risk of Debt: Exemption Laws and Economic Insecurity across U.S. States, 1986–2012

Abstract

Increasing indebtedness puts American households at risk of defaulting on loans and having their wages and property seized to repay delinquent debts. Although all U.S. states protect certain assets in the face of debt collection, protections vary significantly subnationally and across time. In this article, I construct an original data set of state exemption laws, analyzes the patterns and determinants of exemption variation across four decades, and assesses how protectiveness relates to state-level economic insecurity. Longitudinal analyses highlight how higher protections during recessionary periods are associated with lower rates of economic insecurity and how more privileged populations disproportionately benefit from such protections. These findings are important for helping distill how government policy protections condition debt and economic insecurity, with wide-ranging implications for populations nationwide.