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Debt Slavery? Correlation of Slavery with Chapter 13 Filing Patterns

posted by Adam Levitin

Looking at Bob's posting of chapter 7 and 13 filing rates, I couldn't help but notice the correlation between high chapter 13 filing rates and states in which slavery was legal until 1863 (the "South" broadly speaking). The 11 jurisdictions with the highest rate of chapter 13 filings (and all of those with over half the filings being 13s) were slave states. The top 9 (and but for Lincoln imposing martial law in Maryland, the top 11) states were all part of the Confederacy. With a few of exceptions, all former slave states were in the top 15.


What are we to make of this this correlation?

Correlation, of course, is not causation, but this correlation certainly raises some interesting questions (and perhaps eyebrows). Local legal culture is certainly an important factor in variation in 7/13 filing rates, but this is more than local variation. There appears to be a distinct regional pattern. (There also appears to be another pattern of low chapter 13 rates in the upper great plains.)

Despite this post's title, I do not believe that high chapter 13 rates in the South have any causal relationship with slavery (or sharecropping for that matter). For starters, we do not know the racial breakdown of the 7/13 rates by state. It's also hard to see how that causal link would work--court supervised use of income for 3-5 year is totally different from plantation slavery. Instead, I suspect that they may both relate to other factors endemic in the South, perhaps distinct cultural attitudes about debt. (David Hackett Fischer's classic Albion's Seed: Four British Folkways in America, shows very convincingly just what distinct regional cultures exist in America and how old their roots are.)

To be sure, chapter 13 (or XIII) originated in the Northern District of Alabama in the early 1930s before finding its way into the 1938 Chandler Act. But that's just one district, and it seems unlikely that the popularity of 13 in Northern Alabama would spread throughout the entire South, including DC, Maryland, and Delaware (heck, if it is popular in Northern Alabama, that should almost guarantee that it will be unpopular in Lower Alabama).

I'm curious what readers' thoughts are on this. How do we explain the correlation of high chapter 13 rates and the South?


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Although disclaimed, the post hoc ergo propter hoc implication is too strong to be ignored -- or forgiven. "Why is Chapter 13 strong in the South (or any other state or region)?" is a fair question, deserving of consideration and discussion. "What is the relationship of slave states to Chapter 13?" is not.

As a former resident of a former slave state state, may I suggest that the key correlation is not between former slaveholding and chapter 13 filings. The significant correlation may be between mobile home ownership and high filing rates. Mobile homes that a Northerner would find laughable as permanent shelter make up a larger percentage of homes in the South where the weather is milder.

It may have to do with income distribution, since most people who could qualify for Chapter 7 by virtue of having lower than median income presumably would. Note you are looking at jurisdictions, not at entire states.

It may be that the states in question have comparatively few very high earners who skew the average upward substantially. Aside from the Waltons in Bentonville, how many billionaires are there is the South ex Texas? The absence of an elite of super high earners will lead to a lower income cutoff for Chapter 7 availability relative to the total population (in other words, in a state with very high earner like hedge fund operators and real estate moguls like New York, the relationship of average income to the median of the distribution will be very different that a state like Alabama or Mississippi.

I think I was pretty clear in stating that I do not believe there to be a causal relationship between chapter 13 and slavery. The reason I phrased the question as one of chapter 13 and slavery, rather than chapter 13 and the South is that the correlation goes beyond states that I think of as part of the core "south". I hesitate to call either Delaware and Maryland as "southern" and Texas also has a distinct culture from the rest of the South. I recognize, though, that people (and the Census) can, and will quibble with me about the definition of the South. In any case I don't see a lot of other obvious things in common between Texas, South Carolina, and Delaware, that aren't also found in states with low chapter 13 rates, but that's why these comments are so valuable in thinking about the correlation.

The mobile home angle is intriguing. Most of the mobile homes in the US are in the South. But after looking at mobile home ownership rates from the Census Bureau's Structural and Occupancy Characteristics of Housing (2000), I don't think it provides a full answer. DC and Maryland had high chapter 13 filing rates, but some of the lowest percentage of mobile homes. Conversely, New Mexico, West Virginia, Wyoming, and Montana, had very low chapter 13 filing rates, but some of the highest percentages of mobile homes. And Florida, with the most mobile homes numerically, has notably lower chapter 13 rates than the rest of the South.

I'm also dubious about income distribution as an explanation too, given that the means test seems not to have had much of an impact on filing rates, but it'd be nice to put some numbers on it. Again, I think we're unlikely to find the same patterns in Texas, South Carolina, and Delaware.

I think that the analysis would benefit from looking at data below the state level. It would also be interesting to test a different hypothesis, that the rates correlate to racial composition. In Illinois, where slave ownership was not legal since before Illinois was a state (see the Northwest Ordinance) there was, and probably still is, a difference in the ratio of Chapter 13 to Chapter 7 between the three districts. Northern District (includes Chicago - lots of African Americans) has the highest rate of Chapter 13s, then the Southern District, with the lowest rate in the Central District.

Even with just the former slaving owning states, it would be interesting to see if there are differences that correlate with race, though separating race from income in many states is tricky

Perhaps it has to do with a combination of circumstances. A cultural and often religious desire to pay whatever you can to creditors, rather than avoid paying what you owe. A higher median income due to a significant number of wealthy people added to a larger amount of lower middle income people, and a lot of retired residents, which makes the average two income family fall above the median income. A significant number of higher income layoffs (like in the financial industry, or management level layoffs in the manufacturing industries). Relatively cheap housing and ARM's tempting middle class people into buying more home than they can afford, and then they get caught when the ARM adjusts and the universal default rate kicks in after they miss a credit card payment or two. I practice in North Carolina and the situation is much more complex than simply race.

You can also look at FBI-maintained crime statistics, or life expectancy, and probably infant mortality and low birthweight stats, and I would not be surprised if you found the same pattern. (I am sure you will on the first two, actually: see http://www.manhattan-institute.org/html/mpr_04.htm and http://www.fbi.gov/ucr/05cius/offenses/standard_links/state.html). Just a hunch but I suspect if you looked at state spending on education you would find the same correlation and personally it would be my belief that that is a meaningful contributing cause to every one of these disparities.

Legal Eagle is probably correct that multiple factors are at play.

Mt is right about the South having lower life expectancies, but not all crime statistics match this pattern. While murder rates are higher throughout the South, total violent crime rates show a different pattern. Even though violent crime rates are higher in the South as a census region, several Southern states (Virginia, Kentucky, Mississippi, Georgia, Alabama, North Carolina) have violent crime rates that are below (and sometimes far below) the national average.

I don't think it's at all surprising to see various statistical patterns matching onto the South. But it is surprising to see such strong regional correlations with chapter 13 filing rates.

I don't think there's single simple answer. The patterns are more likely the result of a combination of factors including moral/religious attitudes, cyclical and competitive economic drivers (agriculture, softwood lumber, textiles), low rates of unionization, easy garnishment, and maybe the prevalence of codebtors on many personal loans (certainly in Puerto Rico, which you left out).

Chapter 13 was created - out of whole cloth, with no statutory basis - in Alabama.

"With the advent of the Bankruptcy Reform Act of 1978 and its many sweeping changes in Chapter 13 and other areas, one may easily forget the origins of Chapter 13, even before the Chandler Act of 1938. The history and noble purposes of this curiously humane part of bankruptcy law should not be ignored, especially in the Southern District of Georgia where the "wage earner plan" has been so popular and so much a part of this district court throughout the years.

"Wage earner" plans are a creature of American law, bred, born and suckled in the lore and values of the southeastern United States of America.

Dean Phillips has observed that:

No feature of the Bankruptcy Act has received as much general acclaim as Chapter XIII, entitled "Wage Earners Plans." It was an innovation in the bankruptcy legislation which added the Chandler Act in 1938, but it codified a practice which developed without the sanction of statutory authorization in Birmingham, Alabama, prior to 1938. The Chapter continues to be extensively used in Birmingham and elsewhere in Alabama, and it has also had considerable use in other areas of the country, including notably the districts of Ohio, the districts of California, the districts of Georgia, the district of Tennessee, the district of Kansas, and the district of Maine."

In re Kull, 12 B.R. 654, 656-657.

Chapter 13 is, far more than any other Chapter of the Bankruptcy Code, a creature of local practice. It is not surprising that Chapter 13 continues to be most popular where it arose and is most firmly entrenched in local practices.

Well here in Texas and in the Southern District the Judges have said consistently over the 14 years I've been working BK that debtors here in South Texas are full of pride. They do not wand to accept and abhor the concept of not paying a debt back. They would rather be in a 13 and pay something than to file a 7 and pay nothing. They feel that the banks and credit card companies have done them a favor. Even the poorest of the poor feel that way. People are filing 13 when they qualify for 7 sometimes because of not wanting to lose property other times they want to protect co-debtors who are not their immediate family. Most of the time you have to break it to them in simple terms. YOU CANNOT AFFORD IT! If you do this 13 you will be living in rice, beans and tortillas. Most of the time they are perfectly fine with that. PRIDE. The vast majority down here anyway do not want to get away with something they will pay to their own detriment. Sometimes it takes some convincing that someone who has racked up 20 to 30k in medical and credit card debt @ $35,000.00 a year jointly cannot pay this kind of debt and keep their home, car, pay property taxes...etc.. Food! That’s another issue. People are willing to try to live on $100.00 to $200.00 per month with a fam. of 3-4!!!! PRIDE! PRIDE! PRIDE!

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