Surprising New Study Shows That Chapter 13 Bankruptcy Prevents Divorce

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According to a new study done by the Department of Finance of Rice University, American University, Virginia Tech., and the University of Rochester, shows that while divorce is a very complex situation to be in, a large portion of them are caused by some intense and sudden financial hardship. And this is where Bankruptcy comes into play.

Chapter 13 and housing instability

House troubles and financial troubles go hand in hand. But by filing a Chapter 13 Bankruptcy you can save your home. This eliminates a large portion of the stress caused by this financial trouble. According to

the study, marriages that filed for Chapter 13 have an 8% decrease in the likelihood of divorce when compared to couples that did not file.

Crunching the numbers and what they mean

They used a credit bureau data sample, which is 1% of the US population from 2011 to 2019. That is over 3 million individuals. The people in the sample that divorced during that time is 6.8%, which is about 204,000 people. The amount of people dealing with debt in outstanding collections is equal to 23% of the sample, which is about 690,000 people. According to the individuals that faced divorce with financial hardship and without financial hardship, we can see that if a couple suffers a drop in income of 5-10% their probability for divorce raises 4-5%.

This is why more people should be looking into Chapter 13 as an option. They found that foreclosures strongly affect marital dissolution. Chapter 13 bankruptcies, which protect debtors from foreclosure, have the opposite effect.

Chapter 13 and its positive impact on marriages

This detailed analysis confirms the experience that consumer debtors attorneys have of the “bankruptcy honeymoon“. This is where couples that had been fighting during their initial consultations aren’t anymore. They are suddenly holding hands and gazing at each other with renewed love at their Meeting of Creditors. This is after they are released from the sweat box of collection and threats of foreclosure.

The recognition that “divorces are expensive to initiate and impose large economic and personal costs on families, especially for women and children” and that the ability to save the family home through Chapter 13 reduces the risks of divorce, shows that the focus by many bankruptcy courts and academics solely on the costs of Chapter 13 bankruptcy, may be ignoring costs (and non-financial harms) of not filing Chapter 13.