Informal Bankruptcy: Health Expenditure Shocks and Financial Distress Avoidance

Posted: 7 Nov 2019

See all articles by G. Nathan Dong

G. Nathan Dong

Boston College - Department of Finance

Date Written: 2018


This article studies the financial decision-making behavior of U.S. families that have difficulties paying for their medical bills and investigate what alternatives they have to avoid filing for formal bankruptcy and what influence their motivation to do so. Using household financial and demographic information from the Health Tracking Household Survey in 2007 and 2010, this article finds that families with younger age members, minority ethnic background, more doctor visits, and without insurance made more diverse and severe choices to finance the payments before resorting to personal bankruptcy. Interestingly, households with better education seek more diverse but easier financing methods, suggesting that financial literacy may play a dual role in undertaking financial planning—strategic default and bankruptcy avoiding.

Keywords: family financial planning, medical bill, personal bankruptcy, strategic default

Suggested Citation

Dong, Gang Nathan, Informal Bankruptcy: Health Expenditure Shocks and Financial Distress Avoidance (2018). Journal of Financial Counseling and Planning, Vol. 29, No. 1, 2018. Available at SSRN:

Gang Nathan Dong (Contact Author)

Boston College - Department of Finance ( email )

Carroll School of Management
140 Commonwealth Avenue
Chestnut Hill, MA 02467-3808
United States

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