The fragile middle class: Americans in debt

Abstract

In 1989, these authors published As We Forgive OurDebtors: Bankruptcy and Consumer Credit in America,a study of bankruptcy filers in 1981. That project becameknown as the Consumer Bankruptcy Project. This book,informally known as Consumer Bankruptcy Project II,reports on research conducted in 1991. For this study, theauthors added a questionnaire to collect demographicdata as well as information about why the respondentsfiled for bankruptcy. Adding the questionnaire enabledthe researchers to compare the debtors with the generalpopulation. The book consists of eight chapters and twoappendices. The first appendix describes the studydesign, data collection, and data analysis. The secondappendix provides informati on about other recent studiesof bankruptcy. In addition, there are extensive referencesnotes for each chapter.In Phase II, the authors expanded the study to cases filedin 1991 in sixteen districts across five states: all of thedistricts in Illinois, Pennsylvania, Texas, and Californiaand two of the three districts in Tennessee. Thus, theystudied the same ten districts profiled in Phase I andadded six districts in two states. With the permission ofbankruptcy judges, court clerks or trustees distributedquestionnaires to debtors who filed for bankruptcy duringthe first two quarters of calendar year 1991. Thequestionnaire was provided in both English and Spanish.The authors received about 59,000 questionnaires. Basedon an estimated 118,040 nonbusiness filings in thesedistricts, their overall response rate was about 49.9%.The five states in the study accounted for 31% of allbankruptcies in the United States in 1991. To have areasonable number of cases for analysis, the authorsrandomly selected 150 cases fro m each district to analyzein their final sample. With 150 case in each district, theyhad a sample of about 2,400 cases.Questions in the survey were similar to questions used bythe Census Bureau. They included: gender, age, maritalstatus, change in marital status, education, citizenship,disruption in work history, and ethnicity. A final questionwas open-ended and asked debtors to explain why theyhad filed for bankruptcy. The responses ranged fromterse replies such as much debt, too little tocomplex stories. Although each chapter in the book is anin-depth discussion of a type of problem faced by filers,the authors believe that overall the bankruptcy filers were(1) in desperate financial shape, and (2) repeatedlyidentified similar problems to explain theircircumstances. The problems were related to one or moreof these topics: job and income loss, sickness and injury,divorce, homeownership, and too much credit. As one can assume from the title, the authors have abasic tenet: that the American middle class is in troubleand that the increase in consumer debt is a prominentcause. Chapter Four on Credit Cards and Chapter 8 onThe Middle Class in Debt are must chapters for allfinancial educators and counselors. Is the proposedbankruptcy legislation a solution? The authors don't thinkso pointing out that bankruptcy is the treatment, not thedisease. The authors conclude by saying that there is noeasy fix, but I believe their book is an importantcontribution to understanding the problem. I highlyrecommend the book to educators, counselors,researchers, and policy makers. If you have already read