This review of the literature summarizes the current knowledge in Israel and around the world regarding the phenomenon of over-indebtedness among households in general and among young debtors in particular. The review is characterized by a broad, international and up-to-date coverage of academic research literature and public policy literature. It surveys the causes of over-indebtedness, dividing them into systemic factors and factors related to the profile of the debtor, and describes intervention methods used around the world to prevent and treat a public phenomenon.
The factors related to over-indebtedness can be divided into external factors, which are less controlled by the debtor (macroeconomic effects and systemic factors, such as low interest rates in recent years, and regulatory developments and technologies in the credit market) and internal factors that characterize people in debt, their personality, skills and economic conduct. Studies in economic psychology point to three main personality traits of the debtor profile: self-control, time preference, and access to debt. Young debtors are even less likely to seek counseling and guidance relative to other age groups in the population. The conclusion from that literature is that the most effective way to combat the phenomenon of over-indebtedness amongst young people is through regulation, both to prevent excessive debt and to ensure help is provided when needed.