New Study Addresses Racial Disparities and Consumer Bankruptcy
Does the bankruptcy process discriminate against certain types of consumers? Even if the bankruptcy process itself is not inherently discriminatory, does it ultimately have discriminatory effects on some individuals and communities? According to a recent article in the Wall Street Journal, a new study says that “Black people out of all bankruptcy filers are twice as likely on average to file for a more costly type of personal bankruptcy than debtors of other races.” What are the reasons for the disparity, and what can be done to make the consumer bankruptcy process a more egalitarian one?
Researchers Find Bias in Consumer Bankruptcy
The idea that there is bias in the consumer bankruptcy process is not a new idea. Researchers have been exploring this idea for about a decade. A 2012 article in The New York Times argued that “Blacks are about twice as likely as whites to wind up in the more onerous and costly form of consumer bankruptcy as they try to dig out from their debts.” Now that the COVID-19 pandemic is likely to bring on a wave of personal bankruptcies and is revealing the inequalities that persist in our socioeconomic systems, it is important to consider the ways in which racial biases do impact bankruptcy cases.
The disparities that are present ultimately, as the Wall Street Journal article underscores, “highlight the role unconscious bias and systemic racism play in the bankruptcy system.”
More Black Consumers File for Chapter 13 Bankruptcy
The recent article explains that more Black consumers end up filing for Chapter 13 bankruptcy than white consumers, while the same is not true for Chapter 7 bankruptcy. Although Chapter 13 bankruptcy can be beneficial in certain situations such as cases where a debtor wants to stop a foreclosure and to catch up on mortgage payments, many debtors want to get the fresh financial start that Chapter 7 bankruptcy offers. However, many Black debtors, despite having few assets that can be liquidated, ultimately end up filing for Chapter 13 bankruptcy instead of Chapter 7 bankruptcy.
On average, “the Chapter 13 process for an individual can cost . . . around $3,000 to $4,000 in total, while filing for Chapter 7 typically totals around $1,200.” Moreover, Black debtors who do file for Chapter 13 bankruptcy are less likely than white debtors to ultimately have their remaining debts discharged. Accordingly, they “are less likely to get relief from the process.”
Why do more Black consumers end up filing for Chapter 13 bankruptcy instead of Chapter 13 bankruptcy? The article suggests that implicit bias may be to blame. Even if a debtor might be eligible for Chapter 7 bankruptcy, certain bankruptcy lawyers might make assumptions about the debtor based on racial bias, and might “steer their Black clients” to Chapter 13 bankruptcy instead of a liquidation bankruptcy under Chapter 13. As such, it is critical to consumer protection advocates to consider the risks of implicit bias when they are working with clients. In addition, debtors should understand the ways in which implicit bias and “unintended racial biases,” as the article describes them, can affect the bankruptcy process.
Seek Advice From an Experienced Oak Park Bankruptcy Lawyer
You deserve to have a dedicated consumer protection advocate on your side throughout your bankruptcy case. An experienced Oak Park bankruptcy attorney at our firm can help. Contact the Emerson Law Firm to learn more about how our firm can assist you.
See Related Blog Posts:
How to Avoid Unwanted Surprises in Your Bankruptcy Case
Consumer Bankruptcy Myths: Part II
Researchers Find Bias in Consumer Bankruptcy
The idea that there is bias in the consumer bankruptcy process is not a new idea. Researchers have been exploring this idea for about a decade. A 2012 article in The New York Times argued that “Blacks are about twice as likely as whites to wind up in the more onerous and costly form of consumer bankruptcy as they try to dig out from their debts.” Now that the COVID-19 pandemic is likely to bring on a wave of personal bankruptcies and is revealing the inequalities that persist in our socioeconomic systems, it is important to consider the ways in which racial biases do impact bankruptcy cases.
The disparities that are present ultimately, as the Wall Street Journal article underscores, “highlight the role unconscious bias and systemic racism play in the bankruptcy system.”
More Black Consumers File for Chapter 13 Bankruptcy
The recent article explains that more Black consumers end up filing for Chapter 13 bankruptcy than white consumers, while the same is not true for Chapter 7 bankruptcy. Although Chapter 13 bankruptcy can be beneficial in certain situations such as cases where a debtor wants to stop a foreclosure and to catch up on mortgage payments, many debtors want to get the fresh financial start that Chapter 7 bankruptcy offers. However, many Black debtors, despite having few assets that can be liquidated, ultimately end up filing for Chapter 13 bankruptcy instead of Chapter 7 bankruptcy.
On average, “the Chapter 13 process for an individual can cost . . . around $3,000 to $4,000 in total, while filing for Chapter 7 typically totals around $1,200.” Moreover, Black debtors who do file for Chapter 13 bankruptcy are less likely than white debtors to ultimately have their remaining debts discharged. Accordingly, they “are less likely to get relief from the process.”
Why do more Black consumers end up filing for Chapter 13 bankruptcy instead of Chapter 13 bankruptcy? The article suggests that implicit bias may be to blame. Even if a debtor might be eligible for Chapter 7 bankruptcy, certain bankruptcy lawyers might make assumptions about the debtor based on racial bias, and might “steer their Black clients” to Chapter 13 bankruptcy instead of a liquidation bankruptcy under Chapter 13. As such, it is critical to consumer protection advocates to consider the risks of implicit bias when they are working with clients. In addition, debtors should understand the ways in which implicit bias and “unintended racial biases,” as the article describes them, can affect the bankruptcy process.
Seek Advice From an Experienced Oak Park Bankruptcy Lawyer
You deserve to have a dedicated consumer protection advocate on your side throughout your bankruptcy case. An experienced Oak Park bankruptcy attorney at our firm can help. Contact the Emerson Law Firm to learn more about how our firm can assist you.
See Related Blog Posts:
How to Avoid Unwanted Surprises in Your Bankruptcy Case
Consumer Bankruptcy Myths: Part II
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