Can unpayable debts kill debtors? If so, how does debt stack up against other causes of death in America? It’s a pressing question because the more debt affects mortality, the more bankruptcy is a medicine for debt-related health problems. Economists from the Federal Reserve Bank of Atlanta addressed the question in a November 2016 working paper.
The economists sampled records of 170,000 individuals from the Fed’s Consumer Credit Panel (CCP), which itself is a random sample of 5 percent of all U.S. consumers. They focused on consumers with delinquent debt and their creditworthiness. At the same time, they did everything they could to eliminate the possibility of reverse-causation—when poor health leads to people taking out more debt rather than debt itself contributing to people’s mortality. One of the principal variables they use is geography: Some parts of the country were hit harder by the real-estate bust than others, and the researchers’ methodology eliminates the effects of healthy people emigrating from badly hit locations, leaving unhealthy people behind and worsening the appearance of the crash’s effects.
The authors of the paper found clear connections among debt, delinquency, creditworthiness and mortality. The mortality rates of debtors whose accounts become severely delinquent in a quarter rise by 5 percent, and a mere 100-point improvement in credit scores is associated with a 4.4 percent reduction in mortality rates. In fact, the relationship between credit scores and mortality is quite linear and not affected by consumers with very low or very high credit scores.
Naturally, changes in mortality rates aren’t the same as the levels of mortality rates. Fortunately, the likelihood of someone’s death being attributable to debt remains quite low. Usually it’s around one one-hundredth of one percent (0.01 percent). However, the United States has a population of about 325 million people, so small percentages can amount to large numbers of people. In a related blog post, the authors estimate that changes in debt due to the Great Recession killed 12,000 people. That may not sound high, but the additional 5.7 people per 100,000 is similar to the national homicide rate (5.0 per 100,000). The authors conclude by encouraging policymakers to treat debt as a public health problem.
The Atlanta Fed economists’ blog post and working paper are here.
Debt might not kill that many people, but it’s obvious that its adverse effects on people’s health mean worsening finances should not be ignored. Indeed, other research shows that people who file chapter 13 live longer. If you are going through severe financial hardship, then talking to an experienced New York bankruptcy lawyer can help—bankruptcy just might save your life.
For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced Brooklyn bankruptcy attorney Bruce Weiner for a free initial consultation.