How Consumer Bankruptcy Reflects Larger Economic Trends

Do consumer bankruptcy trends reflect larger economic trends in the U.S. at any given point in time? According to a recent news release from the University of Illinois, a new paper co-written by law professor Robert M. Lawless suggests that, over the last 30 years, we can learn about larger economic issues by looking into consumer bankruptcy data. Ultimately, the paper suggests that we can understand specific “economic stressors faced by U.S. debtors” by examining information about consumer bankruptcies from the last three decades, and that we may be able to rely on that information for the good of consumers in the present and future. Indeed, Lawless’s research could “afford policymakers a rough blueprint of how to make the current bankruptcy system more efficient and effective.”

Details of the Consumer Bankruptcy Research

The paper is the work of Lawless and two co-authors, including Pamela Fooehy at Benjamin N. Cardozo Law School and Deborah Thorne of the University of Idaho. In conducting research into bankruptcy data from the last three decades, the three co-authors used “principal component analysis,” which the news release defines as “a statistical technique that exposes strong patterns in a dataset.”

The researchers looked at 5,600 bankruptcy cases since the early 1990s in order to gain a big-picture understanding of the types of debt issues that most commonly impact households and lead to bankruptcy filings.

Findings from the Bankruptcy Data Analysis

In analyzing the randomly selected data from thousands of bankruptcy filings over the last 30 years, the co-authors of the paper identified nine different “groupings of financial and household situations” that could help them to extrapolate broader economic trends among bankruptcy filers. Those situations included the following:
  • Car owners;
  • Homeowners;
  • Black households;
  • Women
  • Black women;
  • Single mothers;
  • Self-employed;
  • Property owners; and
  • Long-term debt struggles.
These nine categories often overlapped in the research, especially concerning issues of race, gender, and marital status. Overall, the data showed that cars and homes were the biggest factors in Chapter 13 bankruptcy filings, and with reason. As Lawless explains, those “two big-ticket items that consumers buy” often play a role in the decision to file for bankruptcy, which is not surprising. To be sure, “the idea of filing for bankruptcy for those items is so you do not lose them — so you are not homeless or are unable to get to work.” In this way, consumer bankruptcy can be a powerful tool.

At the same time, the analysis suggested that bankruptcy filers grapple with many different types of debt, and many cases could have benefitted from a more flexible bankruptcy system. Indeed, as Lawless clarifies, “an improved consumer bankruptcy system would offer people the ability to tailor their cases to their primary debt-relief needs, which is what the Consumer Bankruptcy Reform Act of 2020 would allow filers to do.”

Contact a Bankruptcy Attorney in Oak Park

Whether you have questions about filing for consumer bankruptcy or inquiries about specific personal bankruptcy issues, one of our Oak Park consumer bankruptcy lawyers can speak with you today. Contact the Emerson Law Firm to learn more.


See Related Blog Posts:

How to Get a Loan After Consumer Bankruptcy

Understanding Bankruptcy Chapters for Individuals

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