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Personal Bankruptcy Determinants Among U.S. Households During the Peak of the Great Recession

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  • Jonathan Bauchet

    (Purdue University)

  • David Evans

    (Purdue University)

Abstract

We exploit the longitudinal nature of the 2007–2009 Survey of Consumer Finances to examine whether determinants of bankruptcy identified in the existing literature are applicable to a period marked by a large downturn in the U.S. economy. We develop a framework to organize the literature on the main causes of filing for personal bankruptcy, then test whether these factors held during the 2007–2009 recession by comparing pre-filing characteristics of households who later file for bankruptcy and households who do not file. We find that, when controlling for a large number of individual and household characteristics, relatively few factors were statistically significant when correlated with filing for bankruptcy during the Great Recession. Age and credit card debt were positively associated with filing for bankruptcy. Changes in households’ circumstances (loss of income, retirement, new child in the household) were also statistically significantly associated with filing for bankruptcy. Notably, factors identified in the literature as related to bankruptcy filing were not significant, including income level and negative medical events. The findings help to better understand the complexity of the bankruptcy filing decision, and how to tailor programs and policies to help households deal with financial issues.

Suggested Citation

  • Jonathan Bauchet & David Evans, 2019. "Personal Bankruptcy Determinants Among U.S. Households During the Peak of the Great Recession," Journal of Family and Economic Issues, Springer, vol. 40(4), pages 577-591, December.
    • Handle: RePEc:kap:jfamec:v:40:y:2019:i:4:d:10.1007_s10834-019-09627-1
    DOI: 10.1007/s10834-019-09627-1
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    Cited by:

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    3. Tomasz Korol, 2024. "Multi-factor fuzzy sets decision system forecasting consumer insolvency risk," DECISION: Official Journal of the Indian Institute of Management Calcutta, Springer;Indian Institute of Management Calcutta, vol. 51(3), pages 279-302, September.
    4. Stephanie Moulton & Donald Haurin & Samuel Dodini & Maximilian D. Schmeiser, 2020. "How federally insured reverse mortgages affect the credit outcomes of older adults," Journal of Consumer Affairs, Wiley Blackwell, vol. 54(4), pages 1298-1327, December.

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