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The Stark Facts of Race and Bankruptcy

posted by Bob Lawless

The Woodstock Institute in Chicago has a fantastic new report entitled, "Bridging the Gap II: Examining Trends and Patterns of Personal Bankruptcy in Cook County's Communities of Color." The results are ugly for anyone who believes in equal access to economic opportunities and justice.It should be required reading for anyone working with bankruptcy and credit. The basic findings from Cook County:

  • Personal bankruptcies are concentrated in African-American communities
  • African-Americans are much more likely to file chapter 13
  • Women make up a larger share of individual bankruptcy filers, and a dramatically larger share in African-American communities, than men do

The only statistic that contradicts the story of a racially sorted bankruptcy system is that from 2008 to 2010 the bankruptcy filing rate increased everywhere but increased the most in white and Latino communities. The African-American fiing rate was already so much higher, however, that it is not surprising that it showed less of an increase than the increase for other racial groups.

The Chicago Reporter has published a story about the Woodstock report focusing on the disparity in chapter 13 filing rates between African Americans and all other races. Although only about one-third of all bankruptcies in Cook County are chapter 13's, more than half of the bankruptcies by African Americans are chapter 13's.

The Chicago Reporter has a bunch of quotes from yours truly, but the reason for that is not entirely coincidental. In a recent study with my colleague, Dov Cohen, we found the same racial disparity in chapter 13 filing rates not just in Cook County but across the country. In a national random sample of bankruptcy filers, Dov and I found that African Americans are around twice as likely to file chapter 13 than debtors of other races. This disparity remained even after controlling for factors such as home ownership or geographic location. An African American homeowner in a place with a high chapter 13 rate like Georgia or a low chapter 13 rate like Iowa is still twice as likely to file chapter 13 than a white homeowner in the same locale. Our study also controls for income and wealth, which should be a good proxy for ability to afford the attorney's fee and court fees. We think our data suggest that whatever is driving the racial disparities in filing rates it is not the ability to pay attorney's fees through a chapter 13 plan.

That last sentence has a key qualifier: "whatever is driving the racial disparities in filing rates." Our study and the Woodstock study cannot answer that question. We have observed a correlation between race and chapter choice in bankruptcy, but as the old saw goes, correlation is not causation. It is certainly possible that the disparity could stem from subtle or institutional racism. It is also possible that the disparity stems from cultural attitudes or economic factors we did not observe that correlate with race. Dov and I are doing further work to try to get at some of the causal questions. Right now, I think we can say that the racial disparity in chapter choice is a fairly well-established fact. Anyone who cares about the bankruptcy and credit system certainly should be concerned.


Am I missing something, or is this nothing more than typical socialist hand-wringing?

The whole reason we have this "problem" is that years ago some moron convinced a bunch of other morons that people who didn't deserve credit should be given credit. One fig leaf for this ridiculous position was the racial make-up of those unworthy of credit. Now that these unworthy have demonstrated once again why they are unworthy of credit, the morons have convinced themselves that there is some racial aspect to the defaults!

Thus, the moron position is that while whites at first withheld credit from non-whites due to racism (that is, not wanting them to get ahead), NOW the same whites who made available the credit demanded by the morons (and much of the goods and services purchased with that credit) are acting out of racism to ensure that non-whites are relieved of their financial responsibilities to white institutions, so that whites can once again subsidize non-whites (that is, not wanting them to get behind). Brilliant! The best part of the whole thought process is that continued subsidies and access to undeserved credit further infantilizes non-whites, making them ever-more dependent on morons for future "help" in overcoming "racism."

In other words, the "racial" component of this "problem" is entirely due to the initial, race-based actions of the morons in charge of this insane behavior. These race-based actions arise from racism on the part of the morons, who believe that the white man's burden is to support the non-white, no matter the cost financially, socially, or morally.

In a free society, you have equality of opportunity. In a communist society, you have equality of outcomes (except in the cases of those who are "more equal" than the rest of us). If you want equality of outcomes, please feel free to move to a more socialist country: Leave your hands off what's left of my freedom, please.

""It is certainly possible that the disparity could stem from subtle or institutional racism.""

I agree with with G Raven. Just more hand wringing. Blacks are NEVER responsible for what they do. The evil white man is.

Bankruptcy isn't always the result of financial irresponsibity. In fact, many more people file bankruptcy due to job losses or medical catastrophes. Bankruptcy exists to give people a fresh start no matter what your color.

Good luck to all,


Let me share to you these important points about bankruptcy that I have researched.

Bankruptcy is still a frightening and embarrassing situation for many people. The dictionary doesn’t help when it gives definitions like: “utter ruin, failure, depletion”. No wonder so many people won’t consider bankruptcy until it’s the last resort.

What is bankruptcy?
Simply put it’s “being legally insolvent” or an “inability to discharge all your debts as they come due”. Bankruptcy isn’t the cause of debt, it’s the result.

What causes bankruptcy?

Is it simply living beyond your means, or spending indiscriminately more than you make? No. Though that may be true with some – such as celebrity lifestyles – for many, it’s much simpler and beyond their control. There are many outside factors which contribute to bankruptcy.

Common causes of consumer bankruptcy are:
• Medical expenses
• Unemployment
• Accidents
• Business failure
• Divorce
• Ballooning interest rates

Check it out http://www.barney-mckenna.com/

I find it odd that there is a high filing for Chapter 13 bankruptcy rather than Chapter 7 bankruptcy. If the argument is that African Americans are not given credit as easily as other races, then why wouldn't the Chapter 7 rates be much higher than Chapter 13 rates? This assumes that much of the community has work, but have trouble making ends meet. Maybe there is more of a systemic link between the pay scale for African Americans and bankruptcy than we'd like to believe.

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