Oak Park Real Estate & Estate Planning Blog

At the beginning of the COVID-19 pandemic, economic experts and commentators started to predict that a wave of bankruptcy filings would come months later as a result of job losses and business closures. By and large, that consumer bankruptcy wave has not come, largely due to government relief and stimulus plans that have allowed debtors to continue paying their bills even if their jobs have not returned. While the possibility of a coming bankruptcy wave is still looming when government relief ends, it is important to know that not all Americans have been able to stay afloat during the pandemic. Certain populations and demographics have been disproportionately affected financially by the pandemic and have in fact been filing for personal bankruptcy at much higher rates compared to others. According to a recent article in Yahoo! Finance , Black women have been filing for consumer bankruptcy at much higher rates than other consumers, suggesting that structural racism and sexism may b...

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.” No...

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 n...

Are harmful stereotypes about race and responsibility impacting certain consumers who file for bankruptcy ? In other words, can racial stereotypes affect the bankruptcy process and American bankruptcy statistics more generally? Interdisciplinary Research into Race, Racism, and American Bankruptcy A recent interdisciplinary study from the University of Illinois acknowledges how “prior research has established that society appears to accord less forgiveness to African-Americans when they arrive in bankruptcy court,” which means that “proceedings take longer, cost more, and typically lead to lower levels of debt relief.” According to the new research, “practitioners inside the bankruptcy system have little knowledge of the racial disparities that exist, relying instead on common stereotypes about race, responsibility, and debt.” In other words, without acknowledging structural racial and socioeconomic disparities, assumptions get made about non-white consumers who file ...

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 Chi...