Racial Bias Reflected in Bankruptcy Filings

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By Daniel Gill

Oct. 28 — Racial biases—probably implicit or unconscious—are reflected in what chapters of the Bankruptcy Code consumer debtors file in the United States, speakers said Oct. 28 during a bankruptcy conference.

The panel of two law professors, a judge and a public interest attorney said that in multiple studies from 2007 through 2013, data reflects that African American debtors are significantly more likely to file Chapter 13 cases than Chapter 7, when compared to non-African American debtors.

Chapter 13 allows individuals receiving regular income to obtain debt relief while retaining their property. To do so, the debtor must propose a plan that uses future income to repay all or a portion of his debts over a three to five year period. In Chapter 7 bankruptcy, a debtor’s nonexempt assets are liquidated by a trustee, and the proceeds are distributed to creditors.

The finding is especially pronounced in those jurisdictions in which Chapter 13 cases are more prevalent when compared with Chapter 7 cases, the panel said.

The panel stressed that their findings relate to what is known as implicit or unconscious bias, noting that most bankruptcy professionals, on the bench and bar alike, strive to be unbiased and are not “racist” in their decision making.

Instead, the panel explained, unconscious biases causes everyone—of all races—to categorize people by race, age and gender (among other things) and to associate certain traits with those categories.

The panel addressed ways in which judges and practitioners can avoid the effect of unconscious bias. Primary among these is to slow down decision making and assumptions, and to gather as much information as possible before drawing any conclusions.

The panel discussion took place at the National Conference of Bankruptcy Judges 90thannual meeting in San Francisco.

To contact the reporter on this story: Daniel Gill in Washington at dgill@bna.com

To contact the editor responsible for this story: Jay Horowitz at JHorowitz@bna.com

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