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Blacks Face Discrimination in Bankruptcy, Too

African-Americans steered more often toward costlier Chapter 13
By John Johnson,  Newser Staff
Posted Jan 21, 2012 6:30 AM CST
Blacks Face Discrimination in Bankruptcy, Too
In this file photo, a foreclosure sign sits atop a for-sale sign at a house in Denver.   (AP Photo/David Zalubowski, File)

(Newser) – It looks to be a discriminatory double-whammy: The banking industry steers black people toward bad home loans, and bankruptcy lawyers stick it to them when the loans go bust. A new study shows that black people are twice as likely to end up in the tougher and more expensive form of bankruptcy than whites even if they have the same financial profile, reports the New York Times.

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“I don’t think there is any overt conspiracy,” says a co-author of why far more black people get steered into Chapter 13 rather than Chapter 7. “But when you have a complex system, these biases can play out and the people within the system don’t see the pattern because nobody is in charge of looking at these big issues.” Bankruptcy experts unaffiliated with the study float one possibility: Chapter 13 fees are higher but can be paid back over years, while Chapter 7 generally requires a lump sump upfront. Lawyers who don't think black clients have the money for the lump sum may push them toward Chapter 13 even if it's not the best choice. (Read more discrimination stories.)

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