Contributions of Debt and Bankruptcy to Life Course Mobility∗

This paper considers the significance of credit markets and bankruptcy for life course mobility. Comparing parallel data from the 2007 Survey of Consumer Finances (SCF) and the 2007 Consumer Bankruptcy Project (CBP), we analyze use of the bankruptcy process as a function of the distribution of unplanned events, the ability of households to use credit markets to limit the adverse effects of such events, and barriers in access to the bankruptcy system. Our findings suggest two things. One, bankrupt households generally come from the bottom quartiles of the population in assets and income and the top quartile in debt, but the financial characteristics of filers vary by age and race. Two, households neither attribute their bankruptcies to the same causes nor use the same strategies to avert bankruptcy. The comparative explanations reveal ageand race-based variations that are consistent with disparate racial access to markets and institutions and the increased incidence of financial activity among the elderly.