Available at: https://www.racism.org/articles/basic-needs/economic-issues-and-race/12229-breaking-bias
Abstract:
This article explores the aftermath of the Covid-19 pandemic, revealing a looming medical debt crisis among Black families, while examining the intersection of racial bias, attorney practices, and the existing two-chapter consumer bankruptcy system. Proposing a solution, the article advocates for the consolidation of Chapters 7 and 13 into a single chapter, citing the Consumer Bankruptcy Reform Act of 2020 (CBRA) as a potential remedy. Further, this article argues that a single chapter would simplify the bankruptcy process, reducing the influence of attorney bias and promoting uniform eligibility criteria. This approach aims to make debt relief more accessible, especially for Black Americans disproportionately facing financial challenges exacerbated by the pandemic.
Summary:
Jerron Wheeler examines racial disparities in consumer bankruptcy, particularly the disproportionate likelihood that Black debtors will file Chapter 13 rather than Chapter 7. Drawing on research concerning racial differences in bankruptcy outcomes and attorney recommendations, Wheeler argues that the current two-chapter system permits implicit biases to influence which form of relief debtors receive.
The article also considers the economic consequences of COVID-19, including medical debt, employment instability, and the disproportionate financial burdens experienced by Black households.
Wheeler largely endorses the Consumer Bankruptcy Reform Act of 2020 (CBRA), introduced by Senator Elizabeth Warren, which proposed replacing Chapters 7 and 13 with a unified consumer bankruptcy chapter. By eliminating the initial choice between two distinct forms of bankruptcy, Wheeler argues that the CBRA could reduce opportunities for racial disparities in attorney recommendations and debtor outcomes.
Importantly, while recognizing the criticisms of Chapter 13 raised in other scholarship, including low completion and discharge rates, Wheeler also acknowledges that Chapter 13 can provide meaningful benefits even when a debtor does not ultimately obtain a discharge.
Commentary:
This is a relatively brief contribution to the literature supporting the CBRA, with its most useful discussion perhaps being its explanation of implicit bias.
Wheeler recognizes that everyone possesses implicit biases—unconscious associations and assumptions that can influence decision-making. Having such biases is not the same as being racist, nor does evidence of implicit bias necessarily establish conscious discriminatory intent. Nonetheless, those biases can produce disparate outcomes, even among attorneys sincerely seeking to serve their clients' best interests.
That distinction is particularly important in consumer bankruptcy, where attorneys exercise considerable discretion in recommending Chapter 7 or Chapter 13.
The article also deserves credit for recognizing something sometimes overlooked in critiques of Chapter 13: A Chapter 13 case that ends without a discharge is not necessarily a failure. A debtor may have stopped a foreclosure, cured mortgage arrears, retained a vehicle, addressed tax obligations, or obtained other meaningful relief during the case. Discharge and plan-completion statistics are important, but they do not measure every benefit provided by Chapter 13.
While Wheeler's proposed solution largely follows Senator Warren's CBRA, the article leaves substantial questions about whether a unified chapter would preserve all the flexibility and protections currently available under Chapter 13. Eliminating the distinction between Chapters 7 and 13 would not necessarily eliminate disparities in legal representation, access to relief, or outcomes.
Nonetheless, the article provides a useful reminder that bankruptcy reform should address not only the relief theoretically available under the Bankruptcy Code, but also how debtors are advised, which options they are offered, and whether similarly situated debtors actually receive comparable opportunities for relief.
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