The Mormon Bankrupt

February 25, 2006 | 76 comments
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Utah has a very high rate of bankruptcy. In 2000 it hovered at around 7 filings per thousand people– twice the national average. This lonely fact has launched a thousand explanations for why Mormons have such a problem with defaulting on their creditors. Clearly, the thinking seems to be, this shows some of the rot in the Kingdom. Just as clearly, this view has very little support in the data.

I agree wholeheartedly that there is way too much bankruptcy in Utah, Mormondom, and the U.S. generally. But I admit to a hearty skepticism about whether mormons are more likely to over-consume or bilk creditors compared to other Americans. I think there is a strong, and poorly grounded, desire to lay everything about Utah at the feet of Mormonism.

Consider, then, some evidence drawn from a recent paper I wrote on bankruptcy*. We have bankruptcies per thousand by zip code averaged over 1999-2001. We have 2000 Census demographic info by zip code. Lastly we have the percentage of the population that is LDS by county (this last from the Glenmary survey in 1990). In the raw data, LDS population is correlated to a higher bankruptcy rate, no question. This is largely because Utah has tons of Mormons and it has lots of bankruptcy. But suppose one fears that this is due to the fact that Mormons live in the west, and even more specifically, they happen to live in Utah. Is there any way to sperate the Utah legal environment from the Mormon cultural propensity? Well the statistical wizards here at T&S have mystical ways of dealing with such things. So, one can look at bankruptcies by zip code solely within Utah. At that point, we can see if, given the Utah environment, Mormon counties are more or less likely to file bankruptcy. And here the relationship is strongly negative. In other words, more mormons in the county within Utah means far less bankruptcy than Utah counties with lots of Gentiles. In fact, one can do this “within” comparison across all states and get the same thing– more mormons within a county (compared to the state average) indicates noticeably less bankruptcy (also compared to the state average).

Of course, there are also lots of “controls” one might wish to put in. Perhaps mormons just tend to be populating high income cities, for example. So unload the kitchen sink of demographic and household characterstics into the regression to control for these differences and you find that mormon-ness is unrelated to bankruptcy in Utah, and still negatively related outside of Utah when, once again, you only look at differences within each state, not across states.

None of this changes the fact that Utah has a high bankruptcy rate. But it turns out that bankruptcy rates are largely different across states due to institutional and legal features of credit default in the particular state. And those features don’t have much to do with mormon-ness at all. Tennessee, for example, has a similar bankruptcy rate to Utah because it has a similar legal setup for dealing with bankruptcy. Suffice it to say that there is no evidence in this data that mormon-ness leads to higher bankruptcy. So the next time somebody pulls out a statistic about Utah and then wishes to foist it upon the Church or the effect of Mormon culture, I’d suggest a certain cheery skepticism.

*The paper had nothing to do with Mormons, and when it gets accepted I’ll be happy to share those results, but for now here’s the Mormon angle.

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76 Responses to The Mormon Bankrupt

  1. Norm on February 25, 2006 at 7:12 pm

    where is the paper you wrote? is it published somewhere? thanks for the tip on your findings.

  2. Jay S on February 25, 2006 at 7:15 pm

    Where did you obtain the data set for bankruptcies by zip code?

    I would be interested to see if the Mormonness effect continues out of Utah, and to what extent it is changed. The other problem is to evaluate the extent of religiosity, which I would think might have a different relationship to bankruptcy.

  3. Edje on February 25, 2006 at 7:30 pm

    Three cheers for cheery skepticism of inadequately substantiated correlations! Thanks for the overview.

  4. Matt Evans on February 25, 2006 at 7:47 pm

    Nice work, Frank. Please post the paper so we can read the real thing! This was presumably included in your kitchen-sink worth of controls, but doesn’t Utah’s bankruptcy rate look artificially low because the unit of measurement is people, rather than adults or households? Because juveniles seldom declare bankruptcy, they would drive the bankruptcy rate down in a kid-heavy state like Utah, and artificially depress the percentage of adults or households declaring bankruptcy.

  5. Bookslinger on February 25, 2006 at 9:25 pm

    John Mansfield has a similar article at M* here about bankruptcies in Utah.

    “About 13 percent of Utah bankruptcy filers reported tithing in the year prior to going broke, …”

    So 87% of bankruptcy filers are NOT tithe-payers. Hmmm.

  6. queuno on February 25, 2006 at 9:47 pm

    I think that it’s also important to note that there are different degrees of “bankruptcy”. Is Chapter-13 considered? I have good friends who were forced into Chapter-13 because of a bad debt — but they paid it all off in 3 years and reemerged. Are we rolling them into the folks who file and skip out on the debt?

  7. Giasen on February 25, 2006 at 10:46 pm

    I think it is because they pay their tithing first. Haha…

    I’d like the source on the bankruptcy by zip code too though. That sounds like fun data.

  8. Jay S on February 25, 2006 at 10:48 pm

    Queno

    Chapter 13 is bankruptcy. Your comment does indicate the loaded baggage that many people have mentally with the word bankruptcy. While I in no way encourage the theft or free loading, bankruptcy has a legitimate purpose. It is also balanced in such a way as not to be significantly pro-consumer or pro-business overall (though the pendulum has swung quite a ways with the recent changes in the bankruptcy code). Without trying to sound heretical, bankruptcy is a balance between justice (Repayment of debts) and mercy (letting someone get a new beginning), and like atonement plays a valuable part.

    Certainly debtor’s prisons aren’t the answer, and businesses often factor in the bankruptcy matter in setting their rates and business practices. The bankruptcy laws should reflect the balance that we believe society should reflect.

    The interesting thing about Chapter 13 is that many people enter into it, thinking it is the “better way”, which, for some, it is. But it also puts people in a stressful financial situation, that later forces them into a second, now chapter 7, bankruptcy which is worse for them and worse for the creditors.

  9. S. on February 25, 2006 at 11:04 pm

    “But it turns out that bankruptcy rates are largely different across states due to institutional and legal features of credit default in the particular state. And those features don’t have much to do with mormon-ness at all.”

    Frank, can you elaborate on this? What is it about Utah credit default features that make so many people declare banktruptcy?

    I’ve heard Utah’s high bankruptcy rate speculatively explained by

    1. Lower than national average incomes
    2. Large familes
    3. Young marriages
    4. Certain poor subpopulations (migrant workers, central Utah polygamists, etc.)
    5. Low rates of health insurance and aggressive pursuit of claims by IHC.

    Now you’re telling me I should reject these common explanations in favor of “institutional and legal features of credit default.” What are these features? Are they pretty deep and fundamental? Do you suppose that if we changed a few legal technicalities in both places, the bankruptcy rates of Utah and Massachussetts would be reversed?

    I am cheerily skeptical. :)

    By the way, do you have any explanation for the negative correlation in the county regression outside of Utah? This seems to tell you that, “People who identify as Mormons, within a given state, are more likely to live in counties with fewer bankruptcies.” But if Mormonness really were causing people to default more often, it’s not clear that the outside-of-Utah numbers would reflect that (because Mormons are a small percentage of the population of most counties). For example, a critic could give the following:

    Hypothesis A: Non-Utah Mormons are the kind of people who try to settle down and get married and buy nice houses and live on one income in nice areas where bankruptcy rates are low. However, once there, they are disproportionately overwhelmed by expenses and tend to declare bankruptcy much more often than their neighbors (just not enough to swing the overall rates of the counties they settle in).

    Your data doesn’t really refute A, does it?

    Incidentally, if household and demographic characteristics (married young, single income, lots of kids, large house, etc.) are partially caused by church culture, it doesn’t really make sense to “control” for them, does it?

    Do you know whether anyone (e.g., you) has done a serious study on what demographics of
    Utahns are declaring bankruptcy and why?

    Do you know whether anyone has done a direct measurement of what fraction of Utah bankrupcty filers identify as LDS (and what the typical demographics are of these filers)?

    S.

  10. ed on February 25, 2006 at 11:09 pm

    Frank, have you read this research report on the topic by the “Utah Foundation?” They conclude that the high Utah rate is still a mystery, but that the local legal culture is likely an important factor. They note that people in Utah are more likely to file chapter 13, which is more like a debt repayment plan than a full on bankruptcy, and they speculate that many of these people might file a second time later when the repayment plan fails, thus driving up the total rates. However, it seems to me this would only account for a minor part of the anomalously high Utah rate.

    On the issue of whether tithing is a factor, the report contains this interesting tidbit:

    It is interesting to note that seven of the top 10 most generous states are also states [in terms of charitable giving] that have historically high bankruptcy rates.

  11. Edward A. Erdtsieck on February 26, 2006 at 9:12 am

    Count me a skeptic!
    What is “MORMONNESS?” How is that measured? It all sounds meretricious.

  12. annegb on February 26, 2006 at 10:17 am

    Utah also has the highest suicide rate for young men in the country.

    Couple that with the highest number of women on Prozac, and I would have to conclude there is a systemic problem. Should be looked into, in my opinion. We’re all on the verge of madness. Those of us who live in Utah.

  13. Seth R. on February 26, 2006 at 10:22 am

    Realize that entrepeneurial patterns can also influence bankruptcy figures. Entrepeneurship is generally risky, restaraunts are just one particularly risky example. The West has also had a patttern of boom-bust economics for most of the 20th century. The economies haven’t quite stabilized, he social support net isn’t quite so established, and a lot of people are on the hunt for new opportunities for profit.

    Sounds like a good recipe for insolvency to me.

    The Bankruptcy Code is one of the prices we pay for having a viable entrepeneurial tradition in the USA.

  14. Seth R. on February 26, 2006 at 10:23 am

    annegb,

    Maybe that’s why Moab has been trying to cecede to Colorado for the past 20 years.

    Park City too, but they really aren’t close enough to the border …

  15. Adam Greenwood on February 26, 2006 at 11:36 am

    Did any of the commenters read the post? Just asking.

  16. annegb on February 26, 2006 at 11:59 am

    I read the post, but got lost in the numbers. sorry for the threadjack, I think the topics are related.

    I think there’s a similar post on Millennial Star.

    But, funny question, Adam. I am so busted. Not this minute, but a lot ;)

  17. C S on February 26, 2006 at 1:13 pm

    This was explored in 2004-2005 and found that if you remove the bankruptcies because of health care costs, the utah rates fell within the middle of the national rates. It was mentioned in an earlier comment that IHC is very aggressive in pursuing payments for medical services – even for people with insurance, if you have a child born prematurely or with cancer, there will be plenty of out-of-pocket expenses that the insurance will not cover or a limit will be reached.

    My brother works at IHC and posted the article on the bulletin board – went over real well for sure.

  18. Adam Greenwood on February 26, 2006 at 1:18 pm

    By the way, I don’t think Utah’s suicide rates are the highest in the country, though they are pretty typical of the rates found in the Intermountain West, which are higher than the rest of the country’s. Also, like bankruptcy, the suicide rates among non-Mormons and less active Mormons may be a lot higher in Utah than among active Mormons:
    http://www.mercola.com/2002/mar/23/religion_suicide.htm

  19. queuno on February 26, 2006 at 3:06 pm

    Obviously, I understand that Chapter 13 is considered bankruptcy. I guess my point was that it would be more interesting to me if it split Chapter 13 from Chapter 7, etc., because Chapter 13 vs. Chapter 7 is largely a case of intent. And since Chapter 13’s can subsequently lead into Chapter 7s, for me that’s another reason to separate them.

    The combined statics are still pruriently interesting, but gloss over intent.

  20. Seth R. on February 26, 2006 at 3:19 pm

    Yeah Adam, I read it.

    I just decided to soapbox on something related, that’s all.

    But at least it was somewhat related right? Right?

  21. Juliann on February 26, 2006 at 3:33 pm

    The suicide connection is as questionable as the bankruptcy question. What remains constant is the eagerness with which some pounce on anything at all. (the link given for the article is no longer operable)
    ——————

    American Journal of Epidemiology – March 01, 2002
    Suicide Rate Above National Average

    Dateline: Utah http://conutah.com/viewdocument.php?docDocId=11
    Utah’s suicide rate has exceeded the national average for several decades in a row.
    The Internountain West has the highest suicide rate in the nation. Nevada has the highest rate of any state.
    Utah is at the lower end of the scale in the region, but the statistics are still grim. 14.3 percent of all violent deaths in Utah are from suicide compared with only 9.4 percent nationally. Suicide historically is the leading cause of death of 25 to 44 year old men in Utah and the second leading cause of death of 15 to 24 year old men.

    Why so many suicides in the Intermountain region? Health professionals and sociologists have debated the cause for decades. Is it the isolation of the West? The ethic of rugged individualism? The availability of firearms?
    The incidence of heavy drinking? No one has a persuasive answer.

    A popular theory among Utahns and observers of the state is that the LDS Church’s culture of excellence and the pressure of high expectations explains the relatively high suicide rate in Utah. That theory was conclusively debunked by a recently published study. Sterling C. Hilton, assistant professor of statistics at BYU, concluded “no evidence suggests that Church demands and pressures on its members account for the high suicide rate in Utah.” The study, published in the American Journal of Epidemiology, found that:
    – Active LDS men commit suicide seven times less frequently than their unchurched peers.
    – Activity in any religion reduces the liklihood of a young man committing suicide, but activity in the LDS Church reduces that liklihood dramatically, largely because it reduces the risk factor of alcoholism. Alcohol abuse has a high positive correlation with suicide.

    The Hilton study reaches the same conclusion as Dan Judd in his book, “Religion, Mental Health and the Latter-day Saints.” Judd found that most universities nationwide have much higher suicide rates than BYU which is predominantly LDS.

    Source: American Journal of Epidemiology
    Source Date: March 01, 2002

  22. Frank McIntyre on February 26, 2006 at 4:34 pm

    Anybody who wants the paper can send me an email. Like I said, the paper is about legal and institutional details rather than anything LDS, but anyone with some basic knowledge of regression theory might find it interesting. We bought the data from somebody licensed to give it out, but county level bankruptcy data by year at the county level is available through the ICSPR.

    Speaking of tithing, I agree with John and the DN that very few people pay tithing, and even fewer are full tithe payers at the time of filing. So I guess at the very least one could say that few bakrupt people are temple-worthy. But this is sort of expected. If there is a time when you expect some people might bail on tithing, it is when they are most tested by it.

  23. Frank McIntyre on February 26, 2006 at 4:53 pm

    queno,

    13s and 7s are very different, but even 13s typically involve substantial default on one’s obligations. Also, most 13s don’t actually follow through on their plans. In any case, I used the overall filing rate (as is most often reported in the press) but I get the same results using either just 7s or just 13s filed.

    S

    “Do you suppose that if we changed a few legal technicalities in both places, the bankruptcy rates of Utah and Massachussetts would be reversed?”

    Not reversed, but very different. The institutional factors we consider, and do so only roughly, account for 2/3 of the variation in bankruptcy rates. Compare, for example, North and South Carolina with the lowest bankruptcy rates, and Tennessee/Georgia with some of the highest. They are next-door states but the legal differences lead them to have very different bankruptcy rates.

    Utah’s rate is about 3.5 filings/thousand higher higher than average. I can explain about 2-2.5 of that with the instututional and demographic model in our paper. The vast majority being institutional. But while the demographics are estimated on zip codes, and so are quite generously done, the institutional part is incomplete owing to only having 50 states to estimate on. So that should be thought of as a lower bound on the importance of the institutions. Send me an email and I’ll give you the paper.

    As for your 5 factors:
    1. Lower than national average incomes
    2. Large familes
    3. Young marriages
    4. Certain poor subpopulations (migrant workers, central Utah polygamists, etc.) —

    We control for incomes, family size, young heads of household, and hispanic population. All of these matter but none of them explain Utah’s large difference.

    5. Low rates of health insurance and aggressive pursuit of claims by IHC.– health induced bankruptcies look about the same in Utah and outside of Utah, and in neither case do they plausibly account for more than, say 10-20% of defaults.

    I really doubt the polygamists are filing quite enough to explain what we see, but there is room for them to have a modest impact, just like all the other factors you list do have some impact.

    And as for your ingenious story, well we control for household size and income pretty flexibly in the regressions. So I think that we can rule that one out. On the other hand, I am perfectly willing to believe that lds population has a causal coefficient of 0 and we just need better controls to make it show up that way (as it does in Utah). What I think we can see here is that there is absolutely nothing in this data to make one think that Mormonism contributes to more bankruptcy.

  24. Frank McIntyre on February 26, 2006 at 4:59 pm

    CS,

    I have looked at bankruptcy filings in Utah and I haven’t seen any evidence that they explain Utah’s difference with other places. If you have the paper I’d be curious to see what they are doing to find that.

    Ed, thanks for the reference.

  25. Frank McIntyre on February 26, 2006 at 5:02 pm

    S,

    “Incidentally, if household and demographic characteristics (married young, single income, lots of kids, large house, etc.) are partially caused by church culture, it doesn’t really make sense to “controlâ€? for them, does it?”

    That is why we do the uncontrolled regression as well. But, as I said, those factors are not sufficiently
    a) different in Utah and
    b) important contributors to bankruptcy

    to explain the gap.

  26. Frank McIntyre on February 26, 2006 at 5:03 pm

    OK, I think I’ve answered the questions I saw. Thanks everyone for the good comments so far!

  27. comet on February 26, 2006 at 5:22 pm

    The loose goose here is “mormonness.” I have no idea what that means here.
    I get the feeling that it’s been whittled away by various controls to a benign metaphysic that could hardly be accountable for anything remotely related to the real world.

  28. Frank McIntyre on February 26, 2006 at 5:59 pm

    The value used is the percent of the population that reports being affiliated with the Church. That is what I mean by mormon-ness. One could imagine other regressors based on tithing payment or religious devotion. But I don’t know of any public place to get those.

    And if you are worried about “over-controlling”, I discuss both in the post. In neither case does percent lds in a county lead to higher predicted bankruptcies in the county.

  29. ed on February 26, 2006 at 8:49 pm

    Frank, you said you used the Glenmary study? I thought the Glenmary study used membership as reported by the church leaders, not “the percent of the population that reports being affiliated with the Church.” Am I mistaken?

  30. Clair on February 26, 2006 at 9:15 pm

    >>> “Also, like bankruptcy, the suicide rates among non-Mormons and less active Mormons may be a lot higher in Utah than among active Mormons: … ”

    Stop the presses. We have to change the headline from, “Mormonism Causes Bankruptcy and Suicide” to, “Living with Mormons Causes Bankruptcy and Suicide.”

  31. Stephen M (Ethesis) on February 26, 2006 at 9:31 pm

    Couple that with the highest number of women on Prozac that is actually not correct either, btw.

    Getting to the point, in case anyone is still reading the comments:

    Bankruptcy exclusions drive bankruptcies.

    In Texas you can not garnish current wages. When I was in Utah, you could garnish everything above minimum wage. In Texas, most people are judgment proof. I am, for example, even though I live in a reasonable home (under $200k) and we have three cars and save a lot.

    As a result, it takes a lot more to drive a Texan to bankruptcy than it does to drive someone in Utah to bankruptcy.

    Studies seem not to control for those sorts of things.

  32. Frank McIntyre on February 26, 2006 at 10:35 pm

    Stephen,

    We do. And you are right that wage garnishment laws matter a lot.

  33. Seth R. on February 26, 2006 at 10:40 pm

    I’d be careful about those assertions Stephen. I think Congress took a real shot at trying to get rid of the safe harbors you mentioned in states like Texas with the recent legislation.

  34. Frank McIntyre on February 27, 2006 at 8:54 am

    ed,

    You’re probably right. I just grabbed the data and threw it in since it was available, but I don’t know what Glenmary used for their counts.

  35. Matt Evans on February 27, 2006 at 9:13 am

    OK, I think I’ve answered the questions I saw.

    Frank, I’d asked earlier about measuring the bankruptcy rate per-adult or per-household rather than per capita. Since kids can’t be in the numerator it seems like they should be excluded from the denominator.

  36. Frank McIntyre on February 27, 2006 at 9:28 am

    You’re right, that will help Utah some. I looked at that at one point but I stick with the standard method of measurement so as to make this comparable with other work and what you see in the media.

    What I do here is somewhat better than just changing the denominator. I include regressors for each possible household size and let the regression figure it out. They do matter. I’ll send you a copy of the paper and you can see for yourself.

  37. Matt Evans on February 27, 2006 at 9:33 am

    Thanks, Frank. But I think that measuring bankruptcy my way would make Utah’s bankruptcy rate look worse, not better, because Utah’s denominator would be reduced by a higher percentage (more of our population is under 18) than other states, but each state’s numerator (number of bankruptcies) would be the same as used in the traditional bankruptcy rate.

  38. Frank McIntyre on February 27, 2006 at 9:43 am

    Oops! What’s really funny is that I went through this whole chain of reasoning a year ago. At the end I realized just what you’d said (it makes Utah look worse to change the denominator), and then in the interim I completely forgot about it!

    Fortunately I didn’t forget about it so much that I left household size out of the regression, so I think we’re still covered.

  39. jr on February 27, 2006 at 10:26 am

    http://www.mlm-thetruth.com/UtahTaxStudy.htm

    this is a great article on ‘legit’ companies like usana noni and nuskin…it focuses on utah taxes and who actually is making money on these things.

  40. jr on February 27, 2006 at 10:45 am

    sorry, i forgot to finish my post….

    …I believe that the direct correlation between pyramid schemes(noni, nuskin, usana, xango, etc) and high bankruptcies in Utah are no coincidence.

    Also, how come when studies come out and say that “utah has the lowest teen pregnancy rate in the US” no one doubts it’s because of ‘the great teachings of the church’ but when something negative comes out it’s the rest of the utahns?

  41. Matt Evans on February 27, 2006 at 11:19 am

    jr,

    I think that most of the time we assume that if Utah is an outlier, it probably has something to do with Utah’s high concentration of Mormons. Then someone like Frank comes along and shows that that assumption might not be justified. Someone’s probably done research like Frank’s to see what role religion plays in Utah’s birth rate to unmarried women.

  42. sam on February 27, 2006 at 5:19 pm

    Just glanced over a Utah health insurance website: I’m amazed at how poor the coverage is compared to Massachusetts, where I live. Really does make you wonder to what extent health insurance issues contribute to bankruptcies. Of course, the favorable environment for the insurance companies may be related to the Mormons (versus just a midwestern conservatism; I don’t know the extra-SLC non-Mormon population well), who, in their Utah-cultural variant, are more friendly to big business than to the little guy in terms of regulation.

  43. Ivan Wolfe on February 27, 2006 at 6:33 pm

    And, as comment #42 shows, no matter how many people like Frank show that Utah isn’t really all that unique, people will still try to find a way to make any problem in Utah the fault of the Mormons.

    Very odd. Or actually, not so odd.

  44. Mathew on February 27, 2006 at 8:39 pm

    Ivan,

    Loosely speaking, Frank has suggested reasons for thinking that a phenomenon in Utah may not be related to Mormonism. Sam has suggested alternative reasons for thinking that it may be related to Mormonism. Neither of them has come out and stated that they can entirely explain the bankruptcy phenomenon, but have merely suggested explanations that don’t even necessarily compete. What’s more, as far as I can tell, both make their cases in laid-back, if not neutral, language. I don’t read Frank’s post as an exoneration anymore than I read Sam’s comment as an indictment–it looks to me that they are both simply positing theories. Am I missing something?

  45. Seth R. on February 27, 2006 at 9:18 pm

    Sam,

    Absolutely. Health Care costs are the biggest reason for bankruptcies as far as I’m concerned.

    In fact, the General Authorities would arguably be better served to admonish the brethren at Priesthood Session to get adequate insurance coverage rather than talking about getting out of debt.

    Since the discussion seems to have slowed down, on the main topic, here’s an interesting link to the biblical view of bankruptcy:

    link text here

    Sorry about self-indulging here. Half the motivation was that someone just recently showed me how to do hyperlinks and I want to see if it works.

  46. Seth R. on February 27, 2006 at 9:18 pm

    Woo-hoo! It worked!

  47. Adam Greenwood on February 27, 2006 at 9:47 pm

    “Health Care costs are the biggest reason for bankruptcies as far as I’m concerned.”

    But not as far as the evidence is concerned, as we’ve discussed elsewhere on this site. Wish I could remember where. Any help, any one?

  48. Edje on February 27, 2006 at 11:50 pm

    I think you’re looking for comment 58 in “Rich and Poor, in Utah�:

    [Frank McIntyre] “…the claims that bankruptcy is caused by medical problems is largely wrong. The median bankruptcy in Utah is for about $20,000 in debt. The median bankrupt person in Utah only owes a few hundred dollars to medical instutitions when they declare, based on their filing. Thus, although many bankrupt people have some sort of shock, and many of them have some medical bills, it is not likely that medical bills are the driving force. …�

  49. Julie M. Smith on February 27, 2006 at 11:56 pm

    Edje/Frank–

    Do we know whether people are paying their health care bills and then not having enough left for other bills?

    (I don’t have a dog in this race. Just curious.)

  50. Edje on February 28, 2006 at 12:06 am

    Julie M. Smith:

    I haven’t the foggiest, though I am intrigued and hope Frank comes through for us.

    (I only posted the citation because I wanted to participate meaningfully in a conversation instead of just reading; I’m rather out of my depth here, but I can google.)

  51. Adam Greenwood on February 28, 2006 at 12:09 am

    Julie M Smith,

    Its not just the Utah evidence. The only major study finding that medical problems were a major factor in lots of bankruptcies included (1) deaths in the family, alcoholism, drugs, and gambling as medical problems and (2) treated any debt of more than $1000 in medical bills over a two-year period as a major factor in the bankruptcy.

    http://volokh.com/archives/archive_2005_02_13-2005_02_19.shtml#1108558247

  52. Frank McIntyre on February 28, 2006 at 9:39 am

    Julie/Edje,

    It’s possible that people pay off medical debt disproportionately, but we looked for evidence of that in the data and could not find it, nor does it make much sense to do that. My guess would be that medical debt is less likely than most to be paid off, because it is billed later and you can get the service even if you don’t pay.

    As Adam points out, the hooplah over medical bankruptcies is based on a study that made everything the result of medical debt. By the criterion they used, I would guess two thirds to all of the T&S perme-bloggers have had a medical “crisis” that caused their bankruptcy (except no one, that I am aware, has had a bankruptcy).

    One obvious problem is they make no attempt to account for alterntive causes, nor do they have any sort of comparison between the bankrupt and the not bankrupt. Their sample entirely consists of bankrupt people. So how in the world is that going to tell you what caused bankruptcy? Furthermore, the average bankruptcy is $20,000-$30,000 in discharged debt. By their criterion, $1,000 in medical debt is the “cause”. Or, if you had a pregnancy, that was the cause. The other $19,000-$29,000 in consumer debt is, apparently, irrelevant to your filing. The fact that most people who have a pregnancy don’t go bankrupt was also apparently not worth considering.

    Last, they use means instead of medians, thus creating the impression that most bankrupts have lots of medical debt, when in reality only a few people have tons of debt, skewing the mean. It’s a beginner mistake in health research to ignore the huge skewness in the data that creates that problem. So the mean medical debt of the bankrupt is around 10 grand. The median is closer to $500.

  53. Jonathan Green on February 28, 2006 at 10:15 am

    Frank, so it sounds like there’s a certain percentage of bankruptcies that are caused by very, very high medical expenses, and lesser medical expenses are a contributing factor (among many other, perhaps equally strong factors) in other cases of bankruptcy, and in a lot of bankruptcies medical costs play no role at all. Is that an accurate summary?

    I don’t think it makes sense to compare people bankrupted by pregnancy to all pregnancies, though. If you have good health insurance, you won’t go bankrupt. If you don’t have good health insurance, a major medical event might just push you over the edge. If you have no health insurance, any significant medical event may likely result in bankrupty. Or would you disagree?

  54. Adam Greenwood on February 28, 2006 at 10:43 am

    It is unlikely that a routine pregnancy would bankrupt someone without health insurance who wasn’t loaded down with consumer debt. That is my intuition at least.

  55. Ivan Wolfe on February 28, 2006 at 10:46 am

    mathew:

    Sam’s comment: e favorable environment for the insurance companies may be related to the Mormons . . . who, in their Utah-cultural variant, are more friendly to big business than to the little guy in terms of regulation.

    is hardly value neutral or laidback. It’s a direct indictment of Utah Mormons, laying the blame of medically based bankruptcy on their suppossed political leanings.

    Perhaps you missed it because you tend to be favorable towards the argument? Studies show we often find arguments we tend to agree with as “neutral” or “unbiased” more often than arguements we don’t favor.

  56. Frank McIntyre on February 28, 2006 at 11:28 am

    Jonathan,

    You have already gone far deeper than the authors of that study ever did. They make no attempt to dig into what really causes bankruptcy. Anyone with a pregnancy in the last two(?) years who files for bankruptcy is considered a medical bankruptcy– no questions asked. As best I can tell from their paper, their goal is to rack up the highest number they can under the term “medical bankruptcy” and then call the newspapers.

    I think you’ve summarized my view pretty well.

    So I think a good way to think about bankruptcy is that most bankrupt people can point to some shock that contributed to their bankruptcy. But upon examination you will find many equivalent shocks among the non-bankrupt.

    Thus some bankruptcies are truly caused by horrible circumstances. But for the majority, the “shocks” are pretenses, in that many other people in just as bad economic shape, with the same moderate economic shocks, don’t declare bankruptcy. And the shocks are often rather moderate in size, accounting for only a small fraction of the debt the agent discharges or defaults on. Most of it is still the standard consumer debt or living beyond one’s means.

  57. bbell on February 28, 2006 at 11:31 am

    Hey guys,

    Interesting topic.

    I have no data but I do know three LDS couples who lacked health insurance got pregnant, had complications and went bankrupt. My wife and her sister have spent the last 6 months trying to convince a life long friend to get health insurance prior to conception. She did not and we fear for the worse.

    Since about 25% (my exp only) of pregnancies have really expensive complications its very dangerous financially to have a child without coverage.

    This could lead to some of the BK’s in Utah. Childbirth is very very expensive. This then leads to what is up with Medicaid and BYU students?? Whole nother topic.

    Just my 2 cents

  58. John Mansfield on February 28, 2006 at 11:53 am

    Brother Frank, here is a tangential economics question. Could it not be said that creditors are happy with current levels of default, that if they felt losing less to default would be better business, then they would have tightened credit?

  59. Frank McIntyre on February 28, 2006 at 12:00 pm

    John,

    That’s one way of looking at it. The more default, the higher the interest rate, and so the net result (in a competitive market) is pretty much a wash for banks. The people who actually pay for defaults are the other debtors, who face the higher interest rates. Thus bankruptcy is largely paid for by other creditors who share the demographic features of those who go bankrupt.

  60. Ivan Wolfe on February 28, 2006 at 12:03 pm

    bbell –

    what is up with medicaid and BYU students? Does it matter? I’m a UT-Austin student and we have medicaid for our kids. Is there something wrong with that?

    I recall when I was at BYU the stake president came in and declared that anyone using medicaid was committing a grevious sin.

    At the time I wasn’t using Medicaid, but I knew lots of couples that were. I saw nothing wrong with it. But I always find it odd when people spend their time getting all worked up about it.

  61. DavidH on February 28, 2006 at 12:14 pm

    Ivan,

    Nothing is wrong with that. I am glad you have medical coverage for your children.

  62. bbell on February 28, 2006 at 12:18 pm

    Actually I am “worked up” over BYU not offering decent health insurance for married couples. ESP at BYU where they encourage rightly I think couples to start families.

  63. Seth R. on February 28, 2006 at 12:19 pm

    Thanks for the link. I stand corrected, as usually happens when I start talking like a cariacature of myself.

    However, I’m not entirely persuaded. At present, I’m willing to concede that we simply need better data.

    I’ve heard it said that a very large group of people out there are living “paycheck-to-paycheck” and are one crisis away from financial ruin. The assertion that there are an alarming number of Americans without medical insurance is also frequently made. Let’s also not forget the incidents where a person’s insurance provider refuses to pay a valid claim which is also a lot more common than it should be.

    $1000 dollars in medical bills admittedly doesn’t sound like a lot. But consider this: a lot of the important action happens at the margins of your budget. Companies are made or ruined on margins as small as 3% of their gross. When you don’t have much of a financial buffer, even expenses that are quite small can push you over the top.

    I also think that including secured debts in the equation misleads a bit as well. You simply have to make the mortgage payment, or they’ll take your house, same with the car. Student loans are another special case since they are often nondischargeable. So right there, you’ve got a massive chunk of static debt that really has to be paid. Those loan payments alone can take a massive chunk out of the budget. The Volok article acts like the debtor had some sort of a choice in which lenders to pay, but that’s not really true. You have to pay the house, car and student loans (and the IRS of course). That’s non-discretionary. You might as well lump it in with the food budget.

    So perhaps we can say that mortgage and student loan payments cause bankruptcies? Of course, that doesn’t make the average bankruptcy filer any less sympathetic but it does shift the focus from the medical problem.

    Now imagine you’ve got the typical debt load for a car, student loans, mortgage, and, like many people, you have no medical insurance since you think it’s too expensive. A thousand dollars in medical bills might be just enough to push you into a downward spiral.

    Realize also that interest rates can quickly make that medical bill A LOT more than the original $1000. Then come the collection agencies with all sorts of wacko suggestions to get some extra payments out of you (like taking out another mortgage to pay UNSECURED debt, or selling your car, or garnishing your wages … it goes on). If you believe them, you’re getting yourself even further into trouble. Then people start paying bills on their credit cards to try and stay afloat. This doesn’t help things, especially when you mess up and the “low fixed APR” suddenly shoots up to 30%.

    Under such a scenario, it is at least arguable that the medical bill was the original cause of this mess. I say “arguable,” but I think I’ll have to concede that there was more to it than that. Namely, an overarching structure of massive secured or nondischargeable debt, and inadequate financial management skills. But this doesn’t make the subject in question “a deadbeat.”

    I am also concerned about the time period scrutinized in any study of bankruptcy. If you took only one year of statistics, you might indeed find that the number of people with a uninsured medical bill who subsequently filed for bankruptcy was rather low. Spread it out over 5 years though and the group of such people is likely to increase significantly.

    It’s my own experience that people generally try to pay their creditors long after it makes any sort of financial or legal sense to do so and they’ll do all sorts of ill-advised things to keep paying. Those people might evade a study’s radar if it didn’t cover a sufficient time period.

  64. Seth R. on February 28, 2006 at 12:24 pm

    Adam, I’d also have to question what you admitted was merely a “gut instinct” that an uninsured pregnancy needn’t lead to bankruptcy.

    I remember my wife and I meeting with our doctor regarding our first pregnancy. The doctor happened to be my dad, who’d been delivering babies for nearly 20 years.

    He asked us at one point, what our insurance situation was. We told him it was a combination of Medicaid and BYU insurance and that it would cover the expenses (we were both students at the time). He told us to double-check on that saying that if we weren’t covered “you will file your first bankruptcy.”

    You know, he was right.

    Adam, I think you might be presuming a level of financial resourcefulness among the uninsured that simply isn’t there.

  65. Ivan Wolfe on February 28, 2006 at 12:27 pm

    bbell –

    ah, yes.

    BYU’s health coverage is interesting and I actually agree that it needs some serious revision. However, there are some good points. We had our first kid when my wife was still attending (well, actually, just after she graduated) and if you are a student, the maternity insurance is great.

    However, if you are just married to a student, the maternity insurance was sky-high expensive. Though in a way it worked out for us, since we decided to have our second kid with a nurse-midwife and we had a really wonderful experience (plus it was cheaper than even having a kid with full coverage as a student).

    The health coverage for spouses and kids at BYU was actually pretty good if you didn’t have maternity insurance, though. I have no complaints about the coverage we recieved from BYU for basic medical care. But the costlier than tuition payments required for adding maternity insurance to BYU coverage was a bit of a head-scratcher.

  66. bbell on February 28, 2006 at 12:45 pm

    Yep,

    Nail on head. Issue is when the spouse is not a student. Common on second child.

    I personally think that BYU needs to get a handle on this. Esp after all the talks on not delaying families

  67. Frank McIntyre on February 28, 2006 at 4:48 pm

    Seth,

    As I said above, very few filers for bankruptcy have substantial medical debt. The median is a few hundred dollars, with around 20-30 thousand in _non-secured_ (typically consumer) debt. These medical debts already account for interest. Observed medical debt also accounts for all prior years accumulated debt. You talk of a downward spiral from a few hundred dollars debt, but if the spiral were based on interest, we would observe that in the debts they have when they file.

    The top 20% have substantial medical debt. But for the rest, you are inventing an interesting story that is not replicated in the data. Most (not all) bankrupt people have lived beyond their means not due to having more bad luck, but because they don’t take control of their finances. For these people , they have exactly the same amount of bad luck as others who don’t go bankrupt because they haven’t been overspending for years.

    “Namely, an overarching structure of massive secured or nondischargeable debt, and inadequate financial management skills. ”

    Yes, where that “overarching structure” is debt they freely entered into but should not have.

    “It’s my own experience that people generally try to pay their creditors long after it makes any sort of financial or legal sense to do so and they’ll do all sorts of ill-advised things to keep paying. Those people might evade a study’s radar if it didn’t cover a sufficient time period. ”

    I am not sure what you have in mind here. All a person’s outstanding debts are observed at the time of filing, plus a three year history of income. And if by not making legal sense you mean they won’t be prosecuted, that does not change the fact that they are defaulting on debt, which I think is the part most people find interesting.

    Ivan/bbell,

    Insurance is based on pooling low-risk and high risk people. Since pregnancy is often a decision, you get problems where the people who wish to be insured are people who know they are going to have a child. Thus the annual premium at BYU for non-student spouse probably works out to be about the cost of a pregnancy (since the vast majority of people who take the maternity coverage do, in fact, have a child). But in that case, there is no pooling going on, because everyone faces the costs. This is a peculiarity of BYU’s demogrpahics, not the administration. BYU could use Church funds or tuition payments to pay for those students, but that would be basically money coming right out of the Church coffers. Usually, the complaint is that BYU is over-subsidized by the Church, not under…

  68. Seth R. on February 28, 2006 at 5:44 pm

    Well, I’m certainly interested in the study anyway.

    But I ought to note that the “debt they freely entered into but shouldn’t have” is not necessarily discretionary. You typically can’t have a house without committing to a large amount of debt. Neither can you get an education without a lot of debt (unless you are one of the select few with a full-ride scholarship).

  69. Adam Greenwood on February 28, 2006 at 5:49 pm

    Seth R.,

    Frank M. is referring to unsecured debt. This means it isn’t for homes. The debt probably isn’t student loans either, since you can’t discharge that in bankruptcy.

  70. Frank McIntyre on February 28, 2006 at 7:36 pm

    “You typically can’t have a house without committing to a large amount of debt. Neither can you get an education without a lot of debt (unless you are one of the select few with a full-ride scholarship).”

    There is debt, and then there is debt. And once again, there are plenty of people who take on house and school debts, experience the same shocks, and have the same income as the bankrupt. But they do not o bankrupt. The difference, I imagine, is that they pay attention to their consumption and they are willing to make sacrifices to stay out of default.

  71. Seth R. on February 28, 2006 at 8:30 pm

    Yes Adam, I explained as much in my post above.

    I don’t know … I’ve kind of lost track of what it is exactly that we’re disagreeing on (if we are, in fact disagreeing). Probably means it’s time to call it a night.

  72. The Wiz on March 1, 2006 at 11:12 pm

    OK, I don’t know if anyone is still reading this post, or its comments, but I have found the whole discussion fascinating. I’m glad to see some data on “Mormons go backrupt more often”. I’m still waiting for data on “mormons take more Prozac.” But I’m too lazy to search for it, so that might be why I’m still waiting.

    Anyway, for what it’s worth, and it’s probably not much, since it’s anecdotal “evidence” at best, I have a friend who works in the credit unions in UT. She says they gear up for right after conference time, because every time the prophet says “get out of debt”, the bankruptcies go up. People unclear on the concept, basically.

  73. Edje on March 2, 2006 at 12:47 am

    The Wiz: Here is a BYU NewsNet article citing Utah’s primacy in anti-depressant use:

    “More Utahns take Prozac-style drugs than in any other state, according to a study conducted in June of 2001 by Express Scripts, a pharmacy benefit management firm. The study indicated that Utah residents average 1.1 prescriptions per person per year of medications such as Prozac, Zoloft, and Paxil. The national average is 0.7.�

    The NewsNet article also listed some conjectures for Utah’s primacy: larger families, LDS stress, higher per-capita education, and lower alcohol use. The article cited in #18 and #21 (AJEpidemiology 155(5):413-419) addresses and seems to debunk the impact of LDS stress.

    A press release about the Express Scripts study is here. (The URL for the full report listed at the bottom of the page doesn’t work.)

  74. The Wiz on March 2, 2006 at 5:35 pm

    Very interesting. Thank you.

  75. The Blue Goose on March 2, 2006 at 9:24 pm

    If you can’t connect the dots of why Utah leads the nation in bankrupcy — then just suck on these variables for a few minutes:

    1) Fewer LDS women work outside the home than non-LDS women (1 income families)

    2) 10% tithing reduces household income vs non-LDS household

    3) LDS people have significantly higher children than non-LDS families

    4) LDS people are equally (if not more so) commercially driven to consume / spend as non-LDS people

    5) Utah has lower average wages than non-Utah areas.

    Any one factor by itself may be insignificant, but taken together the evidence is compelling as to why Utah leads the nation in bankrupcies….

  76. John T. on March 11, 2006 at 12:31 pm

    …… Lastly we have the percentage of the population that is LDS by county (this last from the Glenmary survey in 1990)……

    Frank, why do you want to be a scientist with an organization that is so stingy with its data?