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Race And Bankruptcy: Explaining Racial Disparities In Consumer Bankruptcy, Edward R. Morrison, Belisa Pang, Antoine Uettwiller
Race And Bankruptcy: Explaining Racial Disparities In Consumer Bankruptcy, Edward R. Morrison, Belisa Pang, Antoine Uettwiller
Faculty Scholarship
African American bankruptcy filers select Chapter 13 far more often than other debtors, who opt instead for Chapter 7, which has higher success rates and lower attorneys’ fees. Prior scholarship blames racial discrimination by attorneys. We propose an alternative explanation: Chapter 13 offers benefits, including retention of cars and driver’s licenses, that are more valuable to African American debtors because of relatively long commutes. We study a 2011 policy change in Chicago, which seized cars and suspended licenses of consumers with large traffic-related debts. The policy produced a large increase in Chapter 13 filings, especially by African Americans. Two mechanisms …
Consumer Bankruptcy Pathologies, Edward R. Morrison, Antoine Uettwiller
Consumer Bankruptcy Pathologies, Edward R. Morrison, Antoine Uettwiller
Faculty Scholarship
This paper questions several long-standing descriptions of consumer bankruptcy in the United States. We focus on Chapter 13, which discharges debts after consumers pay disposable income to creditors for up to five years. Many studies document pathologies, including high failure rates, racial disparities, low creditor recoveries, and attorney biases. We observe the same patterns in new data drawn from Cook County, Illinois, but show that these pathologies are central tendencies that ignore substantial heterogeneity across consumers. Several pathologies are driven by subsets of consumers; some disappear once we take account of consumer heterogeneity. We present new evidence that some pathologies …