COVID-19’s economic impacts, from job losses to business closures and relief measures, have disproportionately affected Black Americans as much as the virus itself. And if history is any guide, even the lifeline of bankruptcy may be ill-equipped to give most pandemic-ravaged Black debtors a fresh start, according to a Bloomberg Law analysis. Dozens of academic studies over more than three decades have concluded that Black debtors file for bankruptcy disproportionately more than other racial groups, yet get less permanent relief. A 2017 analysis — co-authored by now-U.S. Rep. Katie Porter (D-Calif.) — found Black filers half as likely as other groups to permanently eliminate their debts, no matter which type of personal bankruptcy case they filed. Now, pandemic-fueled disparate impacts threaten to make relief even more difficult. Although personal filings haven’t spiked, and in fact have dropped since the pandemic began, attorneys expect the reprieve to last only as long as government help. The Black jobless rate was stuck at 14.6 percent in July, despite declining for all other groups and dropping to 10.2 percent overall. Studies have found that the majority of Black Americans seeking personal bankruptcy have chosen to restructure their debts under chapter 13, rather liquidate under chapter 7, even though the latter is used more than twice as often overall. “When you look at the national figures, there’s no question that something is going on,” said John Rao, an attorney at the National Consumer Law Center. “African Americans who have fewer assets and lower income are filing chapter 13s at a higher rate than whites, and that doesn’t make sense.” The Final Report of the American Bankruptcy Institute’s Commission on Consumer Bankruptcy, which devoted a chapter to racial justice in bankruptcy, recommended that Congress authorize collection of race and ethnicity information as part of the petition process.
