It can come as a surprise to some that personal bankruptcies can do more than just wipe out debt. This form of relief can affect the national level of employment, its earnings and even its mortality rates. Bankruptcy, of course, doesn’t give someone a raise, but its effects may appear that way that when you make comparisons. The National Bureau of Economics Research (NBER) recently came out with a study that examined 500,000 Americans who had filed a Chapter 13 bankruptcy in the recent past and come to a few interesting conclusions.

The study focused on people at the “margin.” This group included some of the people who were able to file bankruptcy as well as most of those whose petitions were dismissed. Bankruptcy judges are assigned randomly, which is a necessary precondition for the research. Bankruptcy judges typically listen to bankruptcy trustee’s recommendations. Often, a trustee conducts a courtroom hearing for bankruptcy petitioners while representing creditors and makes a recommendation to the judge as to whether or not the petition should be approved (discharged) or dismissed (rejected). There are established federal bankruptcy laws and guidelines, but judges are given a great degree of freedom or leeway in their decisions. A person at the “margin” for the purposes of this study was someone whose bankruptcy case involved a judge by reviewing from standards in his or her decision to accept or reject the petition. By looking at differences, researchers were able to make comparisons.

The researchers were able to use data in this study to look at mortality rates. Mortality is essentially the likelihood of death. The researchers controlled for variables like age and race that could affect mortality. They found that bankruptcy affected those who filed at the margin as well as the whole group. One year after filing for Chapter 13 bankruptcy, mortality decreased by 0.6% for petitioners at the margin. The researchers did not find this statistically significant meaning it was not a sound conclusion. However, it was significant that the two-year mortality rate dropped for the same group by 1.6%. The report also states data for the entire group of people that received Chapter 13 bankruptcy protection. It stated that their five-year mortality rate fell by 1.9% in comparison to a control group.

How could bankruptcy lower mortality? Bankruptcy can help resolve a stressful financial situation. Losing a job creates financial distress. The paper authors found that bankruptcy improved employment rates, so perhaps because people were less likely to lose a job and be in financial distress; their mortality rates fell slightly. Also, because personal bankruptcy can cause personal earnings to rise, people might be more likely to seek out additional healthcare if they earn more. Also, because some jobs offer health insurance, an increase in the number of employed people means that more people will have access to healthcare, which logically would reduce mortality.

If you are considering filing for personal bankruptcy, then you should talk to an attorney about your particular situation and review what your options and rights are. Jayson Lutzky is a lawyer with over 31 years of legal experience in New York State. He has helped many highly satisfied clients file for bankruptcy and offers free in person consultations. To set up an appointment, please call 718-514-6619. Convenient weekend hours are available. Visit Mr. Lutzky’s website for more information on bankruptcy in the news.