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Abstract

Using PSID data, we estimate the extent to which consumer bankruptcy filings are induced by high levels of medical debt. Our results suggest that nearly 27 percent of filings are a consequence of primarily medical debt, while in approximately 36 percent of cases medical debts co-exist with primarily credit card debts. Studying the post-bankruptcy scenario, we find that filers are 19 percent less likely to own a home even several years after the filing, compared to non-filers. However, the consequences are less adverse for medical filers i.e those who filed due to high medical bills compared to other filers.

Aparna Mathur is a research fellow at AEI.