Utah has the dubious honor of leading the nation in personal bankruptcy rates. According to the Salt Lake Tribune 1 in 37 households in Utah is insolvent. I suspect that this high level of bankruptcy filings may be what has been behind some recent words on debt in general conference. In 1998, President Hinckley counseled:
- I urge you, brethren, to look to the condition of your finances. I urge you to be modest in your expenditures; discipline yourselves in your purchases to avoid debt to the extent possible. Pay off debt as quickly as you can, and free yourselves from bondage.
More recently, he said:
- We have been counseled again and again concerning self-reliance, concerning debt, concerning thrift. So many of our people are heavily in debt for things that are not entirely necessary. When I was a young man, my father counseled me to build a modest home, sufficient for the needs of my family, and make it beautiful and attractive and pleasant and secure. He counseled me to pay off the mortgage as quickly as I could so that, come what may, there would be a roof over the heads of my wife and children. I was reared on that kind of doctrine. I urge you as members of this Church to get free of debt where possible and to have a little laid aside against a rainy day.
Obviously, there is a great deal of truth to what President Hinckley says. One of the iron facts of consumer bankruptcy is that at as personal debt increases so do bankruptcy filings. However, I wonder if there might be a more benign explanation for Utah’s personal bankruptcy rate.
Bankruptcy is correlated strongly with age. Younger people file bankruptcy more often than older people. This intuitively makes sense. Younger people often have less earning capacity than do people in the prime of their careers. In addition, young people have had less time to accumulate assets (like home equity) that can serve as a financial cushion in the face of economic shocks, like the loss of a job or major medical expenses. Utah has a much younger population than the nation as a whole. Thus, I wonder what happens to Utah’s personal bankruptcy filing rate once you control for its demographic profile. Does its striking prominence disappear? In other words, maybe Utah’s personal bankrtuptcy rate is not a product of rampant, Mormon consumerism, but rather is simply a matter of demographics.
Of course, what data we do have suggests that even if Utah’s level of consumer debt is average, it is still probably too high. Thus, President Hinckley’s stay-out-of-consumer-debt counsel is necessary even if their isn’t anything special about Utah’s insolvency rate.