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.
Several studies focused on racial disparities in the consumer bankruptcy system also found that Black people make up a higher percentage of debtors across the bankruptcy system compared with the total population, said law professor Robert Lawless at the American Bankruptcy Institute’s Consumer Bankruptcy Forum on Wednesday.
The number of Black people who file for chapter 13 also is significantly higher than among white people and those of other races.
The disparities highlight the role unconscious bias and systemic racism may play in the bankruptcy system, said experts on an ABI virtual panel during a conference focused solely on consumer bankruptcy.
Chapter 13—which can be the “no money down” option for bankruptcy protection—is more expensive and requires filers to make monthly payments for at least three to five years before their debt is discharged, while chapter 7 doesn’t require filing a repayment plan and allows for the liquidation of assets to pay creditors. Most people don’t have assets to liquidate, Mr. Lawless said.
