Supportive and mitigating factors associated with financial resiliency and distress

Abstract

The associations between and among general human capital, financial management behavior, and social capital with an individual's financial position following bankruptcy are examined in this study. Using data from the National Longitudinal Survey of Youth 1979, the significance of each type of capital or practice associated with two separate measures of financial well-being following bankruptcy are estimated. Results indicate that individuals who possess higher levels of general human capital, social capital, and normative financial management behavior are significantly more likely to both recover financially following bankruptcy, as well as experience lower levels of financial distress when compared to individuals with similar amounts of nonfinancial capital. Study results suggest that postbankruptcy education programs should encourage human and social capital development in addition to financial education as a means to increase the likelihood of financial wealth accumulation following bankruptcy. Implications for financial planners include the consideration of clients' general human capital and social capital when seeking to mitigate potential shocks to client's financial capital.