It's not (only) personal, it's business: personal bankruptcy exemptions and business credit.

This article examines the impact of increases in state-level personal bankruptcy exemption limits—protections that allow individuals to shield a portion of their personal assets from creditors during bankruptcy—on the availability of business credit to small firms in the United States. Using detailed data from 2006 to 2018 and exploiting variation in exemption levels across state borders within metropolitan statistical areas, the study finds that higher exemptions reduce bank-originated small business loans by approximately 1–2 percent, with the strongest effects on the smallest and most financially constrained firms. The research shows that these reductions in credit are not offset by alternative financing sources such as Small Business Administration (SBA) loans or FinTech lending, nor by substitution to personal debt, leading to fewer small business establishments and lower employment, particularly in industries heavily reliant on external finance. The findings suggest that while personal bankruptcy exemptions aim to protect debtors, they have unintended negative spillover effects on small business credit markets and local economic outcomes.