Payday bankruptcy.

Payday loans are short term small dollar amount loans that are easy to acquire. Using 1997-2015 U.S. Courts data from all 50 states and Washington D.C., I analyze the effect of payday lending bans on non-business personal bankruptcy filings with a differences-in-differences approach. I find that a ban on payday loans has a significant effect on the number of non-business personal bankruptcy filings per 100,000 people. A ban on payday lending decreases the personal bankruptcy rate by 45.96 to 59.58 filings per 100,000 people per year, a 12.02 to 15.58% decrease from the 1997-2015 national average of 382.31. If payday loans are made to financially distressed individuals, a ban on payday loans should either increase or not change the number of bankruptcy filings. Instead, I find a decrease in personal bankruptcy filings which suggests that the restriction of credit in the form of a ban on payday lending enhances welfare.