Available at: https://www.sciencedirect.com/science/article/pii/S0749597821000662

Abstract:

Financial hardship is an established source of shame. This research explores whether shame is also a driver and exacerbator of financial hardship. Six experimental, archival, and correlational studies (N = 9,110)—including data from customer bank account histories and several longitudinal surveys that allow for participant fixed effects and identical twin comparisons—provide evidence for a vicious cycle between shame and financial hardship: Shame induces financial withdrawal, which increases the probability of counterproductive financial

decisions that only deepen one’s financial hardship. Consistent with this model, shame was a stronger driver of financial hardship than the related emotion of guilt because shame increases withdrawal behaviors more than guilt. We also found that a theoretically motivated intervention—affirming acts of kindness—can break this cycle by reducing the link between financial shame and financial disengagement. This research suggests that shame helps set a poverty trap by creating a self-reinforcing cycle of financial hardship. 

Commentary:

This article,  which I discovered while reading Adam Galinksky's recent and excellent book about the science of leadership,  Inspire, points towards an important difference between  shame and guilt  (which might also be more neutrally called "responsibility") as emotional responses to the financial hardship that leads (or  doesn't lead)  to bankruptcy.    While it is  natural for people to feel bad about financial struggles, it's important to know (and help clients understand) the difference between shame and guilt. Shame can make them feel like they're a bad person—leading to counterproductive behavior like avoiding bills, ignoring help, or giving up. Guilt, on the other hand, means while someone regrets  decisions that contributed to the financial distress,  they still believe that by taking responsibility they can move forward and improve their circumstances. Shame keeps you stuck; the responsibility moves you forward. Our job as consumer bankruptcy attorneys  is to help clients move past  shame and take smart steps toward a better financial future.  

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