Paul Kiel, a reporter, sent me an email and described his latest article which is fascinating in a bankruptcy kind of way. I can attest having observed similar trends anecdotally for decades but his hard work and documentation makes this far too real.
You can read the story How the Bankruptcy System Is Failing Black Americans.
“Black people who file for bankruptcy are far less likely than their white peers to actually successfully get out of debt. That was the stark finding from our analysis of national bankruptcy filings, and to explain why, we focused on Memphis, Tennessee, the city with the highest bankruptcy filing rate in the country.
There, most filings are under Chapter 13, a form of bankruptcy born in the South and, as we show in a U.S. map accompanying our story, still the dominant choice there. Chapter 13, unlike Chapter 7, usually requires five years of payments to creditors before any debts are eliminated, and as we detail in the story, the vast majority of debtors in Memphis don’t make it. About the Western District of Tennessee, where Memphis is located, we write:
As efficiently as cases are opened, they are closed — usually because debtors fail to keep up with payments, according to a ProPublica analysis of court data. In 2015, over 9,000 cases in the district were dismissed — more cases than were filed in 22 other states that year. Less than a third of Chapter 13 cases in the district result in a discharge of debts. And when their cases are dismissed, debtors are often in worse straits, because as they struggled to make payments, the interest on their unpaid debts continued to mount. Once the refuge of bankruptcy is gone, the debt floods back larger than ever. They’ve borne the costs of bankruptcy — attorney and filing fees, a seven-year flag on their credit reports — without receiving its primary benefit. A system that is supposed to eliminate debt instead serves to magnify it.
Our story explains how this happens – and shows how, with changes to the deeply entrenched legal culture of places like Memphis, things could be different.
Along with our story, we’ve also published a first-of-its-kind analysis of the racial disparities in bankruptcy filings, Bankruptcy and Race in America. It’s something we wrote for experts, scholars, and bankruptcy professionals – but also any interested reader who wants to understand with precision how big these disparities are and how we came to our conclusions. In particular, I recommend taking a look at the section that covers our findings on the national level.”