Marital breakdown and insolvency

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Khaloeipour, Farnoosh
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Introduction: Family breakdown can be challenging at anytime, even more during a recession due to economic instability, higher unemployment rates, and declines in real estate markets. Additionally, financial mismanagement, overuse and overextension of credit cards, and unexpected expenses, such as legal fees, can cause even more financial complications. As a result of financial strains and other contributing factors divorcing parties may file for insolvency. Although the correlation between marital breakdown and insolvency have been studied, less is unknown about the factors that might associate between family breakdown and insolvency. In particular, very little is known about the factors which might affect the decisions for insolvency among the insolvent individuals due to marital breakdown. Objectives: 1) to determine how the sociodemographic, financial characteristics, and liabilities of individuals who filed for insolvency because of marital breakdown differ from individuals who filed for other reasons; 2) to determine if these characteristics differ by gender; 3) to determine whether these characteristics differ between 2007 and 2010 (pre- and post-recession) ,and 4) To explore whether debt –to- income ratio, reasons for insolvency and sex are associated with filing for bankruptcy versus consumer proposal. Method: This is an analytical observational study based on two years of cross-sectional data. The study sample consists of 8,000 men and women aged at least 18 years of age, who filed for insolvency in either 2007 or 2010. Chi square tests and Mann Whitney Tests were performed to address the first three objectives, and logistic regression was used to address the last objective. Results: 1. Those who filed for insolvency because of marital breakdown were more likely to receive employment income, child support, spousal support, employment income benefit, and other income than those who filed for other reasons; they also had higher personal and household incomes overall. 2. Proportionally more women filed for insolvency due to marital breakdown than men did. Women were more likely to receive child support, spousal support, more likely to have other income, and more likely to receive social assistance than men. Women are less likely to be employed, had fewer bank loans and taxes, more credit card loans and student loans. 3. The real level of liabilities was slightly higher for individuals in 2010 relative to 2007. A smaller proportion of filers in all categories was employed in 2010 relative to 2007. Results show that employment rate decreased for all groups between 2007 and 2010, and total debts increased even after adjusting for inflation. 4. Women and those who list marital breakdown as a reason for filing are more likely to choose bankruptcy than a consumer proposal. There was no relationship between economic variables and the decision to choose bankruptcy as opposed to a consumer proposal.
Marital breakdown, insolvency, divorce, bankruptcy, consumer proposalincome to debt ratio, sex, marital breakdown, Office of Superintendent of Bankruptcy, and Statistics Canada