Consumer Bankruptcy and Race in Chicago

Are there correlations between personal bankruptcy filings and the race of the individuals who file? On a related note, are there correlations among race, Chapter 7 bankruptcy filings, and Chapter 13 filings? According to a recent report in ProPublica, there is a clear racial disparity when it comes to consumers who are filing for bankruptcy and choosing between Chapter 7 and Chapter 13. Specifically, the report notes that black Americans choose to file under Chapter 13 more often, and fewer complete their repayment plans to have debts forgiven: “[O]nly 39 percent of Chapter 13 cases filed by debtors from majority black zip codes ultimately resulted in a discharge of debts. In contrast, 58 percent of the cases filed by debtor from majority white zip codes were discharged.”
This data speaks to bankruptcy trends nationwide, and even when other factors (such as income) are taken into account and controlled for, this disparity remains, according to the report. Where does Chicago fit into all of this? Following the ProPublica report mentioned above, a separate article discussed racial disparities in Chicago bankruptcies in particular.
Bankruptcy Trends in Chicago and the Role of Race
As that article explains, a majority of Americans outside the U.S. South tend to file for Chapter 7 bankruptcy when they are struggling with unmanageable debt. However, that trend is much different in Chicago. The ProPublica article describes Chicago as “one big geographic exception.” In Chicago, “Chapter 13 filing rates have been rising steeply in black areas.” In 2015 alone, there were more Chapter 13 filings in the U.S. Bankruptcy Court for the Northern District of Illinois than in “any other district in the country.” That district includes bankruptcies in Chicago.
Why are there so many more Chapter 13 filings in Chicago? The article contends that “almost exclusively fueling this rise are residents of the district’s black communities, where the rate of filings has doubled since 2009.” While the racial disparity in bankruptcy filings that exists in Chicago is prevalent elsewhere in the country, the article notes that “there’s hardly anywhere else in the country where the gap is quite so wide.” What is causing the disparity? There are, of course, underlying matters of structural racism, yet in more immediate terms, traffic tickets appear to play an important role.
How Chicago Traffic Tickets May be Linked to Rising Bankruptcy Rates
There are a lot of people in Chicago who have unpaid traffic tickets, and as those tickets go unpaid, many of those who have been cited have lost their driver’s licenses and/or had their motor vehicles impounded, preventing them from getting to work or working altogether. What is the link between unpaid traffic tickets and Chapter 13 filings? When you file for Chapter 13 bankruptcy, you can benefit from an automatic stay that may be able to prevent a creditor from seizing your car. Given the importance of transportation for working, many debtors with unpaid Chicago traffic tickets are turning to Chapter 13 for relief.
Yet many of those filers simply do not keep up with the payments that are required of the repayment plan, and as such, many end up having their vehicles seized or repossessed anyway while they fall deeper into debt.
Bankruptcy can be an important tool for consumers, but it is important to learn about your options and to choose the one that is right for you with the help of an Oak Park bankruptcy attorney. An advocate at our firm can speak with you today about the options that may be available to you. Contact the Emerson Law Firm for more information.
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