From Credit Access to Debt Enforcement: Financial Vulnerability Across Systems

Session Submission Type: Panel

Abstract

This panel examines how evolving credit markets and legal institutions jointly shape financial vulnerability, with a focus on low-income and justice-involved populations. Across four papers, the panel highlights how debt is produced, compounded, and potentially mitigated through interactions between credit access, enforcement mechanisms, and policy interventions.

The first paper, Are Low-Wage Workers Buying Now and Paying Later?, analyzes Buy Now, Pay Later (BNPL) usage among low-wage workers using longitudinal survey data. The authors document high rates of BNPL adoption and substantial “credit stacking” with other high-cost products, suggesting that BNPL often complements rather than substitutes for costly borrowing and may reflect underlying financial constraints.

The second paper, The Relationship Between Wage Garnishment for Consumer Debts and Eviction Filing, examines how debt enforcement relates to housing stability. Using administrative court data from Franklin County, Ohio, the authors explore the relationship between wage garnishment and eviction risk, conceptualizing garnishment as a negative income shock that may tighten household budget constraints and increase housing instability. The paper leverages quasi-random variation in judge assignment to provide suggestive evidence on how both the presence and magnitude of garnishment are associated with eviction outcomes.

The third paper, Assessing the Credit Consequences of Justice Involvement for Families, evaluates whether financial capability interventions delivered through reentry programs improve credit outcomes for justice-involved individuals and their families. Using large-scale administrative data, the study assesses whether targeted supports can mitigate financial hardship and improve credit trajectories following incarceration.

The final paper, The Effect of Incarceration on Child Support Arrears and Consumer Debt, examines how incarceration shapes debt accumulation across both administrative and credit-market domains. Leveraging linked administrative and credit bureau data with a judge-based identification strategy, the authors estimate the impact of incarceration on child support arrears and consumer debt, highlighting how legal and institutional structures generate persistent financial burdens that may hinder reentry and economic stability.

Together, these papers advance a unified perspective: financial distress is not solely the result of individual decision-making but is deeply shaped by institutional design. By combining rigorous empirical approaches with rich administrative and survey data, the panel provides new evidence on the mechanisms through which debt and financial instability emerge, as well as the policy levers that may reduce harm and improve financial well-being.

Policy Area

• Poverty and Income Policy

Chair

• Breno Braga, Urban Institute

Discussants

• Anna Tranfaglia, Federal Reserve Bank of Philadelphia

• Erin Troland, Federal Reserve Board

Organizer

• Rebecca F Xie, The Ohio State University

Individual Presentations

• The BNPL Trap? Usage, Credit Stacking, and Long-Term Impacts for Low-Wage Workers - Presenting Author: Somalis Chy, Washington University in St. Louis

• Wage Garnishment and Eviction Risk: Evidence from Franklin County Municipal Court Records - Presenting Author: Rebecca F Xie, The Ohio State University

• Assessing Credit Consequences of Justice Involvement for Families: Estimating Improved Credit Scores from Reentry Programs - Presenting Author: J. Michael C Collins, University of Wisconsin-Madison

• The Effect of Incarceration on Child Support Arrears and Consumer Debt - Presenting Author: Trisha Chanda, The Ohio State University