Pathways into Bankruptcy: Accumulating Disadvantage and the Consequences of Adverse Life Events

This study combines theories of accumulating disadvantage and economic insecurity using the event of bankruptcy to investigate how certain adverse life events jointly affect inequality. I analyze National Longitudinal Survey of Youth data from 1985 through 2008 to highlight the complexities of financial hardship in the path to bankruptcy. By applying hybrid mixed effects models to parse out within‐ and between‐person variation, I show that, in the case of bankruptcy, financial hardship unfolds over a specific series of events, which can lead to the accumulation of disadvantage connected to changes in employment, marital, and health statuses. I find that bankruptcy results from people's recent experiences of illness and marital dissolution, but not always directly from employment disruption. The effects of job loss on bankruptcy become more apparent as these events accumulate over time and limit wealth creation. The timing of events and their relationship with net worth also influence when a person will file for bankruptcy. As a whole, my findings demonstrate how adverse events and financial hardship lead to bankruptcy through multiple pathways.     

Till Debt do us Part: A Model of Divorce and Personal Bankruptcy

The number of personal bankruptcies has increased dramatically since 1990, and a growing number of filers are divorced. While previous research shows that divorce significantly increases the probability of bankruptcy, these studies assume divorce is exogenous. This study uses the Panel Study of Income Dynamics to investigate the relationship between divorce and bankruptcy. Single-equation probit results show that divorce significantly increases the probability of bankruptcy and bankruptcy significantly increases the probability of divorce. However, after controlling for endogeneity, the effect of divorce on bankruptcy and the effect of bankruptcy on divorce both fall by a significant amount and are statistically insignificant. The findings suggest that future research needs to more carefully model the role that financial distress plays within a marriage.

Giving Unto Others: Private Financial Transfers and Hardship Among Families With Children

Prior research shows that financial assistance from family and friends is an important source of support for families with children. Research on financial transfers has largely focused on the recipients of transfers, however. In this study, using longitudinal data from the Fragile Families and Child Wellbeing Study (n ～ 16,000 person‐waves), the authors examine the association between the provision of financial assistance to family and friends and material hardship. The results from pooled regression and fixed effects models indicate that providing financial transfers is associated with an increased risk of hardship. The most economically disadvantaged groups, single mothers, those in the bottom income tertile, and Black mothers are the most likely to experience hardship after giving a transfer. These findings have important implications for understanding why families may have difficulty meeting basic and essential needs and how social networks may exacerbate the challenges of escaping poverty and establishing economic self‐sufficiency.     

Graying of U.S. Bankruptcy: Fallout from Life in a Risk Society

As neoliberal ideology and policies gained a foothold in the early 1980s, the social safety net for older Americans contracted. Responsibility for the risks associated with aging, namely retirement income and healthcare costs, was increasingly transferred from the state to the individual. Using data from the Consumer Bankruptcy Project, we report that since 1991, there has been more than a twofold increase in the rate at which older Americans (age 65 and over) file for consumer bankruptcy and an almost fivefold increase in the percentage of older persons in the U.S. bankruptcy system. This magnitude of growth is so large that the broader trend of an aging U.S. population can explain only a small portion of the effect. Respondents report that inadequate income and unmanageable healthcare costs are the chief reasons for their bankruptcies. Our findings suggest that neoliberal policies that offload healthcare costs and retirement savings onto older Americans may facilitate their bankruptcy filings.     

Marriage,Money, and African American Mothers’ Self‐Esteem

This study examined the effects of marital status and family income on the self‐esteem of 292 African American mothers. Counter to previous studies with European American mothers, family income moderated the effects of marital status. Those mothers with higher family income had higher self‐esteem, regardless of their marital status. For those with less family income, married mothers had much higher self‐esteem than unmarried mothers. Low‐income married mothers had the same levels of self‐esteem as high income mothers. It was concluded that financial resources can buffer the effects of being single, and being married can buffer the effects of being low income. Policy initiatives that focus on reducing the financial hardship on single mothers and increasing the marriage rate among lower income parents were also discussed.     

Testing Family Stress and Family Investment Explanations for Conduct Problems Among African American Adolescents

The recent U.S. recession has resulted in higher rates of unemployment, underemployment, and child poverty, with African Americans disproportionately represented among the financially disadvantaged. Although past research has established the relationship between family financial hardship and various child adjustment problems, African Americans remain an understudied group. In the current study the authors used longitudinal data from the Family and Community Health Study (n = 422), an all African American sample, to investigate the impact of economic distress on adolescent conduct problems. They examined the extent to which this relationship can be explained by 2 frequently employed models: (a) the family stress model and (b) the family investment model. The authors extend past research by assessing the relative contributions of each model while controlling for the paths proposed by the other model. The results suggest that the family processes identified by the family stress model provide a more accurate explanation for why economic hardship is associated with increased conduct problems among African American adolescents.     

Emergency Fund Adequacy of Asian Americans

This study examines the emergency fund adequacy of a sample of 222 Asian Americans, using the 1992–1993 Consumer Expenditure Survey. The emergency fund level is measured by two ratios: quick emergency fund divided by three months' after-tax income, and comprehensive emergency fund divided by three months' after-tax income. For both measures, more Asian Americans are prepared for financial emergencies than non-Hispanic whites, African Americans, and Hispanics. Less than one-third, however, met the level recommended by financial planners and counselors. Earned income, home ownership, multiple earners, and education are positively associated with the emergency fund levels of Asian Americans. Older Asian Americans were found to be less prepared for financial emergencies than the young and middle-aged.     

Understanding the diverse needs of the Medicare population: implications for Medicare reform

Meeting the health care needs of millions of elderly and disabled Americans is central to the debate over Medicare's future. Using data from a nationally representative survey of 3,309 beneficiaries, Medicare's most vulnerable beneficiaries were profiled, examining variations in coverage, satisfaction, access, and financial difficulties. A substantial portion of the Medicare population--two thirds--were found to have health problems or low incomes. The analysis found that about 40% of beneficiaries with incomes below the poverty level, in fair or poor health, or with ADL limitations, have difficulties paying their medical bills or getting needed health care. Medicare's disabled, under-65 beneficiaries are at even higher risk: nearly half (47%) have health care access problems or deal with financial hardship due to medical bills. The diverse needs and experiences of the Medicare population are underscored, providing new insights into the challenge of maintaining or improving protection for those with greatest need while assuring the long-term fiscal viability of the program.     

A vulnerability approach to the definition of the middle class

Measurement of the middle class has recently come to the center of policy debate in middle-income countries as they search for the potential engines of growth and good governance. This debate assumes, first, that there is a meaningful definition of class, and second, that the thresholds which define relatively homogeneous groups in terms of pre-determined sociological characteristics can be found empirically. This paper aims at proposing a view of the middle class based on vulnerability to poverty. Following this approach the paper exploits panel data to determine the amount of comparable income -associated with a low probability of falling into poverty— which could define the lower bound of the middle class. It looks at absolute thresholds, challenging the view that people just above the poverty line are actually part of the middle class. In an analogy with poverty measurement, there is a degree of arbitrariness in the definition of specific thresholds, but the concept behind them is clear and economically meaningful. The estimated lower-threshold is used in cross-section surveys to quantify the size and the evolution of middle classes in Chile, Mexico, and Peru over the past two decades. The evidence also shows that the middle class has increased significantly in all three countries. There is an important group of people, however, who cannot be defined as middle class from this perspective, but remain vulnerable to fall back into poverty.     

Doubling Up or Moving Out? The Effect of International Labor Migration on Household Size

We use household panel data from Tajikistan to explore the change in living arrangements as a response to income shifts related to international labour migration. In addition, we analyse the interaction between the effect of idiosyncratic income increase resulting from a completed migration episode, and the effect of an aggregate shock – the global financial crisis – and show how different households adjust their household size during times of financial hardship. The empirical evidence indicates that while current migration is associated with an increase in household size, a completed migration episode two years before the interview was followed by family members moving out. At the same time, our empirical analysis demonstrates that migrant families doubled up in response to a financial crisis to the same extent as non-migrant families, which suggests that labour migration in Tajikistan does not insure against economic shocks in the long run.     

STRATEGIC OR NONSTRATEGIC: THE ROLE OF FINANCIAL BENEFIT IN BANKRUPTCY

A partial test for strategic behavior in bankruptcy filing may be formulated by testing whether consumers manipulate their debt and filing decision jointly, or not: that is, testing for endogeneity of financial benefit and the bankruptcy filing decision. Using joint maximum likelihood estimation of an extended discrete choice model, test results are consistent with nonstrategic filing: financial benefit is exogenous to the filing decision. This result is confirmed in two different datasets (Panel Study of Income Dynamics and Survey of Consumer Finances). This result is consistent with an ex ante low net gain from a bankruptcy filing; a type of “rational inattention” to rare events such as bankruptcy. (JEL D12, D14)     

Economic Hardship and Psychological Distress in Custodial Mothers

The present research examined the relationship between economic hardship and post-divorce psychological distress of custodial mothers. Economic hardship was measured in terms of: (1)current income level; (2) drop in income; and (3) negative economic events. Drop in income was further subdivided into (a) actual amount of drop; (b) ratio of income post-to pre-separation; (c) per person ration of income; and (d) ratio of income per person corrected for reduced financial needs. The HSCL (Derogatis, 1974) measured psychological distress, while four items from the Divorce Events Schedule for Adults (Braver et al., 1987) measured negative economic events. The subjects were 77 custodial mothers, recently separated and either divorced or seeking a divorce. Results documented both an increase in psychological suffering relative to a random sampleand substantial economic declines (about 30%). Further, there were significant unique relationships between the HSCL and both drop in income and the experience of negative economic events (but not current income).     

The effects of perceived locus of control and perceived income adequacy on satisfaction with financial status of rural households

The purpose of this study is to examine the relationships among selected socioeconomic variables — perceived locus of control, perceived income adequacy, and satisfaction with financial status. Results of the study indicate that age, household income, household net worth, perceived locus of control, and perceived income adequacy are significantly related to satisfaction with financial status. Household income and household net worth have indirect effects on satisfaction through perceived locus of control and perceived income adequacy. Perceived locus of control also has an indirect effect on satisfaction through perceived income adequacy. These findings suggest that counselors and educators should emphasize the importance of perceptions of income adequacy and control over financial aspect in their courses and programs.Journal Paper No. J-14499 of the Iowa Agriculture and Home Economics Experiment Station, Ames, Iowa. Project No. 2809.His research interests include consumer credit and family resource management. He received his Ph.D. from Iowa State University in 1993.Her research interests include family financial management and consumer bankruptcy. She received her Ph.D. from the University of Missouri.     

Capabilities and employability of unwed mothers

In this paper we assess the economic capabilities of a sample of unwed mothers who gave birth in the spring of 1998 in hospitals that serve low-income residents in seven cities that are part of a national sampling frame. We show that recent unwed mothers who are not in a cohabiting relationship are especially vulnerable to economic hardship because they are more likely to encounter multiple barriers to employment than mothers who do cohabit with their newborn's father. However, analyses of earnings capacity suggest that most single-mother families would be poor even if the mothers worked 1500 hours per year, and near poor if they worked full-time, year round (2000 hours). Analyses of income portfolios indicate that low-income mothers are quite resourceful packaging cash and income transfers from multiple sources to meet the needs of their families. These results are discussed in the context of recent welfare reforms.     

Financial Issues Associated with Having a Child with Autism

Data from the Family Experiences with Autism Survey are used to identify factors associated with financial problems in families that have a child with autism. Likelihood of financial problems was positively associated with use of medical interventions, having unreimbursed medical or therapy expenses, and having relatively lower income. Use of speech and language therapy was negatively associated with likelihood of financial problems. Many survey respondents forfeited future financial security and even experienced bankruptcy to provide needed therapy for a child with autism. Specific ways that financial advisors can help families that have a child with autism are outlined.

Extended Family Integration Among Euro and Mexican Americans: Ethnicity,Gender, and Class

This article compares the extended family integration of Euro and Mexican American women and men and assesses the importance of class and culture in explaining ethnic differences. Using National Survey of Families and Households II data (N = 7,929), we find that ethnic differences depend on the dimension of integration. Mexican Americans exhibit higher rates of kin coresidence and proximity, but lower rates of financial support than Euro Americans. Two additional differences exist only among women: Mexican American women are more likely than Euro American women to give household or child care help. As to the explanation for these differences, social class is the key factor; cultural variables have little effect. Our findings support a theoretical framework attending to intersections among ethnicity, gender, and class.     

Emergency Saving and Household Hardship

Households with limited income and wealth often struggle to access the financial liquidity needed to address unexpected expenses or income drops. Emergency savings can act as form of insurance against such economic shocks and reduce the risk of hardships that influence family wellbeing. Prior research has established that threshold amounts of liquid assets can reduce the risk of economic hardship. This study used a measure of self-reported emergency saving behavior to examine whether households who reported saving for emergencies were less likely to experience subsequent economic hardships in a longitudinal sample of households in disadvantaged neighborhoods from the Annie E. Casey Foundation’s Making Connections project. Results across a range of regression models suggest that households who saved for emergencies experienced slightly less overall hardship and were less likely to report several specific hardships, such as food insecurity and having a phone disconnected, three years later. This study supports the idea that small, unrestricted savings may play a protective role for low-income households.     

Consumer Debt Repayment Behavior as a Precursor to Bankruptcy

The passage of the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005 culminated years of debate over the escalating number of bankruptcy filings and whether or not consumers were abusing the bankruptcy system. Our study focuses on the extent to which households seek bankruptcy protection without first attempting to restructure their debt or experiencing indicators of financial distress. Through multivariate regression analyses of longitudinal data from the Panel Study of Income Dynamics (PSID), we find a significant relationship between having prior financial problems and filing for bankruptcy. Our results also indicate that households that obtained consolidation loans were equally likely to file for bankruptcy as those that did not. We conclude that early interventions with financially distressed consumers may provide opportunities to reduce bankruptcy filings.

What's the Matter with Kansas? Now It's the High White Death Rate

This article reports empirical tests for an explanation of the anomalous finding that Case and Deaton recently identified. They found that middle‐aged white people were dying at increased rates during the 1998–2013 years. By contrast, the Hispanic and African Americans enjoyed lower rates. The explanation proposed here for this deviant trend is that the middle‐aged whites are especially vulnerable to the stress of “white status loss” as measured by the decline in the county white population. Using data for the 105 Kansas counties, the analysis replicates the divergent mortality trends and shows that white population decline predicts the rising mortality rate for the middle‐aged segment of the population. This explanation opens the door to a new branch of public health, one based on social problems, not pathogens. 1     

Financial decision-making abilities and financial exploitation in older African Americans: Preliminary validity evidence for the Lichtenberg Financial Decision Rating Scale (LFDRS)

ABSTRACT

This study examines preliminary evidence for the Lichtenberg Financial Decision Rating Scale (LFDRS), a new person-centered approach to assessing capacity to make financial decisions, and its relationship to self-reported cases of financial exploitation in 69 older African Americans. More than one third of individuals reporting financial exploitation also had questionable decisional abilities. Overall, decisional ability score and current decision total were significantly associated with cognitive screening test and financial ability scores, demonstrating good criterion validity. Study findings suggest that impaired decisional abilities may render older adults more vulnerable to financial exploitation, and that the LFDRS is a valid tool.