Many people, usually in the banking industry, regularly assert that better financial literacy will keep people out of New York bankruptcy. The empirical evidence for this isn’t remarkably great. Researchers have found that the Bankruptcy Code’s pre-filing financial education requirement doesn’t deter unnecessary bankruptcies, and many debtors have said the pre-discharge financial management course was helpful but its lessons wouldn’t have prevented their bankruptcies. Nevertheless, some amount of financial literacy can help debtors develop good money habits. Enter the FINRA Investor Education Foundation’s “national financial capability” survey.
The foundation defines “financial capability” as “a multi-dimensional concept that encompasses a combination of knowledge, resources, access, and habits.” So beyond financial literacy it also tracks consumers’ use of debt. The foundation’s survey explores financial capability nationally as well as on a state-by-state basis using 25,000 online surveys. New York fares well on most dimensions of financial capability compared to the country as a whole. Here are a few observations.
- About 42 percent of New Yorkers save more than they spend—compared to 40 percent nationally—but the dissaving rate was 18 percent for both. The study doesn’t distinguish between people who are dissaving because they are borrowing money to cover low incomes or are retired and spending down their savings.
- There’s good news for New Yorkers on health care spending: Fewer New Yorkers have past-due medical bills (17 percent) than the national average (21 percent) and that amount has declined since 2012 (22 percent). Medical debt is a problem for Americans, despite the Affordable Care Act, so it can still lead to bankruptcies.
- Half of New Yorkers now have rainy day funds. Nationally the average has grown from 35 percent to 46 percent since 2009, indicating stronger saving overall.
- Surprisingly, nearly one quarter of New Yorkers use non-bank borrowing, which includes payday loans, auto title loans, pawnshop transactions, and rent-to-own agreements. Given that payday loans will likely come under increasing regulation in the near future, hopefully these statistics will decline.
- Finally, the one trend that New York is not doing so well on is underwater mortgages. Here, 13 percent of homeowners are underwater, down from 16 percent in 2012, but nationally the rate has fallen to 9 percent from 14 percent in the same period.
The complete report essentially says that Americans’ financial capability is improving, which should be expected given that the survey was first conducted in 2009. Still, it does indicate that New Yorkers tend to do better than the national average in many fields, but the elevated underwater mortgage rate suggests many households are still struggling.
The survey’s Web site is here.
If you have significant debts or even an underwater home, then consulting with an experienced New York bankruptcy lawyer can help you assess your options.
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.
