Towards Achieving Long-Term Debt Sustainability: A Systematic Review of the Key Determinants of Personal Bankruptcy

Abstract

Purpose: This systematic review aimed to assess previous research about financial and non-financial causes of personal bankruptcy among individual households. Additionally, the paper aimed to provide an insight into the key determinants of personal bankruptcy and to determine their relationship with individual characteristics. The fundamental causes of bankruptcy and its effects on financial status were also discussed. Through understanding the causes of bankruptcy, we hope to help financial institutions to minimise the number of personal bankruptcies.
 Design/methodology/approach: A comprehensive systematic search was conducted to identify articles on determinants of personal bankruptcy. The selected articles were then analysed using the Preferred Reporting Items for Systematic Reviews and Meta-Analyses (PRISMA) protocol.
 Findings: We identified several themes that emerged as the key determinants of personal bankruptcy filings. These determinants were demographic indicators, socioeconomic status indicators, debt indicators, financial indicators, social stigma indicators, behavioural indicators, and macroeconomic indicators.
 Research implications: The key determinants of personal bankruptcy that were identified in this systematic review are renowned factors in the personal bankruptcy literature. Therefore, these determinants should be studied extensively to examine their effects in other studies and using a different type of datasets.
 Practical implications: The findings of this study help the financial institutions to predict the likelihood of consumer default by developing an effective credit scoring model. Additionally, the development of an effective credit scoring model could serve as an early warning indicator to identify “high risk” client.
 Originality/value: Bankruptcy is a long-term process that does not occur instantly. Therefore, a longitudinal and comprehensive approach is required to understand bankruptcy. Our findings contribute to the current literature by providing a better understanding of the causes of personal bankruptcy. We recommend developing an effective credit scoring model to predict the likelihood of personal bankruptcy.