22
RACIAL DISPARITIES
IN BANKRUPTCY
A new report by ProPublica looked into the
possibility of racial disparity in bankruptcy
filings by both ZIP codes and the chapter of
choice in which the bankruptcies are filed.
As per the report, "e main driver of
this disparity is chapter choice. Black people
struggling with debts are choosing to file under
Chapter 13, as opposed to Chapter 7, at much
higher rates." e report notes that Chapter 7
provides permanent debt relief, while Chapter
13 usually requires at least five years of payment
before debt is wiped away. is is especially
risky for lenders, the report notes, as the Black-
American population that file Chapter 13 usually
don't have the resources to make these payments,
forcing losses.
From 2008 to 2010, 39 percent of Black-
Americans were able to make the required
payments to fulfill Chapter 13 regulations, as
opposed to 58 percent of other debtors.
In order to gather data from the report,
ProPublica concentrated on the number of
Chapter 13 filings in two main regions of the
U.S.: e Western Tennessee area, which
includes Memphis, and the Northern Illinois
district, which includes Chicago. ese two
regions had the highest rate of consumer
bankruptcy filings in the country in 2015, making
them especially vital to the dataset. Taken into
account as well was the national dataset as
provided by the Administrative Office of the
Courts, which included data for all bankruptcy
cases filed from 2008 to 2015.
e report also took into account the financial
profiles of those filing Chapter 13, the types of
debt that were filed, and the judicial systems in
which bankruptcy cases were heard in.
Both regions have a historically high rate
of bankruptcy, whether Chapter 7 or Chapter
13, making them ideal candidates in order to
examine national trends based on race and
ethnicity.
THE LEADER
IN DEFAULT
SERVICING
NEWS
Help shape the next
issue of DS News.
Drop us a line at
Editor@DSNews.com.
