How Race Affects Consumer Debt and Bankruptcy
When we think about consumer debt and personal bankruptcy filings, it is important to think beyond the socioeconomic bracket in which an individual or married couple falls. Indeed, according to a recent article in Forbes, many families who are struggling with consumer debt may be likely to file for bankruptcy in the near future, and race and ethnicity may be significant predictive factors. As that article explains, although white families have more consumer debt than non-white families, by and large, white families who are taking on consumer debt have more income and assets to cover what they are borrowing. However, for many African American and Latinx families with consumer debt, more borrowing could ultimately lead to bankruptcy as a result of underlying structural inequalities at work.
More Consumers are Borrowing
Similar to the late 1990s, more consumers are taking on debt as employment levels look promising. Yet the idea that this is a “good” kind of consumer borrowing may not be true for all individuals and families. While many white families make charges on credit cards and borrow money for automobiles and student tuition payments with the expectations that their salaries and assets will be able to cover what they have borrowed, the same is not necessarily true for non-white individuals and families.
As the article explains, “African-Americans in particular are mired in large amounts of consumer debt, which tends to cost more than mortgages.” Indeed, “people of color tend to pay more for this debt than white families.” Accordingly, if we are going to think about consumer debt and its bankruptcy implications carefully and thoughtfully, we need to take into account racial disparities that exist and structural inequalities that persist. As the Forbes article underscores, “consumer debt . . . adds to all families’ financial insecurity, but especially to that of people of color.”
How Debt Burdens are Unequal and Have Varying Implications
In general, consumer debt has grown over the last decade. For the most part, economists see this as a good sign: Consumers feel confident in the economy and in their jobs, and thus they feel confident to take on more consumer debt. Much of the recent consumer debt is also linked to student loans and auto loans as opposed to credit card debt, which also seems promising. In other words, the fact that credit card debt is not rising substantially suggests that consumers are not necessarily turning to credit cards when they do not have sufficient income to make purchases. Over the last 10 years, overall consumer credit card debt has actually declined and “recently stabilized around 6.5 percent of after-tax income.”
As we noted above, thinking about the “good” kind of consumer spending is not necessarily equal. While white families owed significantly more consumer debt that families of color, white families “also held a lot more assets such as cars to offset that debt, in addition to earning more money that makes it easier to pay off that debt.” On average, white families owed an average of $32,838 in September 2019, while African-American families owed an average of $8,554 and Latinx families owed an average of $5,590. Given the economic circumstances of families of color, even average debts of $8,000 or less make those families of color more vulnerable economically and, potentially, more likely to file for bankruptcy in the future. The article underscores how “Black families are especially deep in a financial hole” given that “they are the only group that owes more than their things are worth.”
Contact an Oak Park Consumer Protection Advocate
If you have questions about bankruptcy or your rights as a consumer, an experienced Oak Park consumer protection lawyer at our firm can speak with you today. Contact the Emerson Law Firm for more information.
See Related Blog Posts:
Do I Need to Tell My Creditors When I File for Bankruptcy?
What is an “Injury in Fact” for FDCPA Standing?
More Consumers are Borrowing
Similar to the late 1990s, more consumers are taking on debt as employment levels look promising. Yet the idea that this is a “good” kind of consumer borrowing may not be true for all individuals and families. While many white families make charges on credit cards and borrow money for automobiles and student tuition payments with the expectations that their salaries and assets will be able to cover what they have borrowed, the same is not necessarily true for non-white individuals and families.
As the article explains, “African-Americans in particular are mired in large amounts of consumer debt, which tends to cost more than mortgages.” Indeed, “people of color tend to pay more for this debt than white families.” Accordingly, if we are going to think about consumer debt and its bankruptcy implications carefully and thoughtfully, we need to take into account racial disparities that exist and structural inequalities that persist. As the Forbes article underscores, “consumer debt . . . adds to all families’ financial insecurity, but especially to that of people of color.”
How Debt Burdens are Unequal and Have Varying Implications
In general, consumer debt has grown over the last decade. For the most part, economists see this as a good sign: Consumers feel confident in the economy and in their jobs, and thus they feel confident to take on more consumer debt. Much of the recent consumer debt is also linked to student loans and auto loans as opposed to credit card debt, which also seems promising. In other words, the fact that credit card debt is not rising substantially suggests that consumers are not necessarily turning to credit cards when they do not have sufficient income to make purchases. Over the last 10 years, overall consumer credit card debt has actually declined and “recently stabilized around 6.5 percent of after-tax income.”
As we noted above, thinking about the “good” kind of consumer spending is not necessarily equal. While white families owed significantly more consumer debt that families of color, white families “also held a lot more assets such as cars to offset that debt, in addition to earning more money that makes it easier to pay off that debt.” On average, white families owed an average of $32,838 in September 2019, while African-American families owed an average of $8,554 and Latinx families owed an average of $5,590. Given the economic circumstances of families of color, even average debts of $8,000 or less make those families of color more vulnerable economically and, potentially, more likely to file for bankruptcy in the future. The article underscores how “Black families are especially deep in a financial hole” given that “they are the only group that owes more than their things are worth.”
Contact an Oak Park Consumer Protection Advocate
If you have questions about bankruptcy or your rights as a consumer, an experienced Oak Park consumer protection lawyer at our firm can speak with you today. Contact the Emerson Law Firm for more information.
See Related Blog Posts:
Do I Need to Tell My Creditors When I File for Bankruptcy?
What is an “Injury in Fact” for FDCPA Standing?
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