Even if a debtor finds a new job, the job interruption itself often leads to bankruptcy. The unemployed debtors at the time of filing are in the minority among those who identify a job-related problem. For most debtors, a previous period of unemployment put them in financial trouble. By the time of filing, the debtor was back at work but was facing bills that could not be paid. In some cases, the bills were run up while everyone was fully employed. Or bills that seemed reasonable on an income of US Dollars60,000 became insurmountable on a new income of US Dollars26,000. In other cases, bills may have been run up during a period of unemployment because a laid-off worker used credit cards to supplement meager unemployment insurance and savings.
Once the worker is back on the job, the day of reckoning may come: there is not enough income to cover the outstanding bills - ever. In any case, more than three-quarters of the people filing for bankruptcy are currently working, but their earlier job problems may lead them to bankruptcy to stabilize themselves economically.An astonishing 48 percent of the first respondents reported that they had had an interruption in their job-related income. Among the spouses in the joint petitions, 44 percent reported that they had had an income interruption. Of the couples who reported any income interruption, 40 percent reported that both the husband and the wife had suffered a job interruption. As serious as open unemployment seems to have been among the debtors, the incidence of job interruption was twice as grave.
From the wording of the question we asked, we can be certain only that there was at least one interruption per worker, but some debtors indicated in their written responses that a single earner had experienced multiple interruptions. Although we have no comparable national data on income interruption, it seems likely that the loss of an earner's income for at least two weeks could create serious difficulties for many families, and the loss of two earners' income, even at different times, could be devastating. The systematic questions on current unemployment and past income interruptions reveal a picture of debtors in highly unstable work situations. The tie between job loss and economic failure is unmistakable.
In contrast to the specific questions on unemployment and job interruption, our third source of data on job-related problems comes from our open-ended question about the reasons for a debtor's bankruptcy. We asked respondents to explain in their own words why they filed for bankruptcy. Almost one-half (48 percent) of the sample who reported any reason gave a job-related reason for filing. More than half of these, and therefore more than a fourth (27.5 percent) of the sample, were like Jeanne Salem in identifying only a work-related reason for their bankruptcy.
The job-related reasons were general in coverage. Although unemployment rates vary around the country, job troubles affected bankrupt respondents everywhere. From one-third to a majority of the debtors in each district identified work problems as the reason for bankruptcy. The written responses of the debtors can be summarized into several patterns through which work was tied to economic downfall. The first pattern was the one experienced by Jeanne Salem: simple job loss. For many workers, job loss results in weeks of unemployment while they seek new work. Some bankrupt debtors report owning businesses that have failed. Others report working for firms that have failed or closed. Some of them saw their jobs exported overseas, whereas others sawtheir jobs disappear in a merger. Sometimes these changes result in unemployment for a time.
For other debtors, the result is job skidding or job erosion, two patterns that cost both job quality and income. Besides job loss, Jeanne Salem also illustrates job skidding because her new job as a dry-cleaning clerk did not pay as well as her previous job. Sometimes the job skidding leads only to part-time work. But the job skidder is in a better position than the job loser, because the skidder finds some kind of new job, albeit with lower wages, benefits, and seniority.
The third pattern is job erosion, which happens when the working conditions for a job change, so that even with the same job and the same employer, and no period of unemployment, take-home pay declines or hours of work decrease. With job erosion, there is at least the stability of having the same job, but it is accompanied by the disquieting reality that the job no longer provides as well. The open-ended responses to our question enable us to see beyond the gross statistics on unemployment to various other forms of job-related income reduction.
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