Health Limitations and Additional Predictors of Personal Bankruptcy:  A Longitudinal Analysis

Authors: 

Paul D. Creswell, BA, University of Wisconsin – Madison

Whitney P. Witt, MPH, PhD, University of Wisconsin – Madison

Personal bankruptcy is an undesirable outcome for individuals and families but the number of bankruptcies in the United States continues to rise.  Evidence has pointed to health limitations as potential risk factors for personal bankruptcy, however the time dimension of bankruptcy has not been adequately considered.  Extant studies collect data post-bankruptcy, leading to challenges in teasing out causal associations. 

Using data from the National Longitudinal Survey of Youth (N=6,259), we computed Cox proportional hazards models to explore which covariates increased time-to-bankruptcy over a 20-year period (1984-2004).  The variables considered were theoretically derived from the existing literature on bankruptcy.   Analyses assessed both time-variant and static covariates.

During the period under analysis, 13% of the sample reported declaring bankruptcy.  Experiencing a health limitation or an unemployment spell were each independently associated with shorter times-to-bankruptcy (HR: 1.30; CI: 1.07-1.57 and HR: 1.33; CI: 1.07-1.65, respectively).  Being female, longer residency in the U.S., and having parents with lower levels of education were additional risk factors.  Compared to remaining unmarried, experiencing marriage or divorce also increased the hazard of bankruptcy (HR: 1.79; CI: 1.45-2.21 and HR: 2.26; 1.80-2.84, respectively).

This study assesses health limitations and other predictors of bankruptcy using longitudinal data on a representative sample of Americans.  The findings show that health limitations, unemployment, and life transitions (i.e. marriage and divorce) are important risk factors for personal bankruptcy.  The study adds to the literature by seeking to establish a temporal relationship between life events and bankruptcy in a national sample.  Policymakers seeking to reduce the incidence of bankruptcy should consider programs and policies directed at strengthening access to health care and helping individuals find or maintain gainful employment.  Such policies have the potential to both prevent bankruptcy and increase the financial stability of US families.