Miscellany: Items of interest from the broader church and world

Most of us acknowledge that racism is a huge problem in our country. But we often don’t get in touch with the actual cost of this to many African Americans and other racial/ethnic people.

In a Jan. 20 article in the New York Times, Tara Siegel Bernard reports that according to a new study, “Blacks are about twice as likely as whites to wind up in the more onerous and costly form of consumer bankruptcy as they try to dig out from their debts.”

This turned out to be the case “even when the researchers adjusted for income, homeownership, assets and education.” While lawyers would no doubt deny there was any conscious bias, the numbers indicate that they were disproportionately steering blacks into a process that was not as good for them financially.

Bernard points out that “the vast majority of debtors file under Chapter 7 of the bankruptcy code, which typically allows them to erase most debts in a matter of months. It tends to have a higher success rate and is less expensive than the alternative, Chapter 13, which requires debtors to dedicate their disposable income to paying back their debts for several years.”

As part of a study of racial differences in bankruptcy filings, Robert M. Lawless, a bankruptcy expert and law professor; Dov Cohen, a psychology professor; and Jean Braucher, a law professor; conducted a survey of bankruptcy lawyers. It found that these lawyers were much more likely to steer black debtors into a Chapter 13 than white filers, even when they had identical financial situations.

Bernard writes that Neil Ellington, executive vice president of Consumer Education Services, a credit counseling agency in Raleigh, N.C., was not surprised by these findings. He says, “The same underlying issues that created the problem in mortgage lending, with minorities paying higher interest rates than their white counterparts having the same loan qualifications, are present in all financial fields.”

Lawless (yes, that is his name) does not think there is an overt conspiracy. However, he says, in a complex system, “these biases can play out, and the people within the system don’t see the pattern.” That is part of the hidden nature of racism.

Chapter 13 is not always an inferior choice, notes Bernard. “Many distressed borrowers go that route because they may be able to save their homes from foreclosure. But even that does not explain away the difference: among blacks who did not own their homes, the rate of filing for Chapter 13 was still twice as high as the rate for other races.”

There are other implications of this trend. One, Chapter 13 plans are more likely to fail than Chapter 7 ones. Two, the attorneys’ fees for the more labor-intensive Chapter 13 are more than double the charge for a Chapter 7. But some debtors will pursue a Chapter 13 because they can pay the fee over time, unlike in a Chapter 7, which typically requires a payment before the case is filed.

One part of the project surveyed 2,400 households nationwide who filed for bankruptcy in 2007. A second part came from a survey sent to lawyers asking them questions based on fictitious couples who were seeking bankruptcy protection.