As per the report, “The main driver of this disparity is chapter choice. Black people struggling with debts are choosing to file under Chapter 13, as opposed to Chapter 7, at much higher rates.” The report notes that Chapter 7 provides permanent debt relief, while Chapter 13 usually requires at least five years of payment before debt is wiped away. This is especially risky for lenders, the report notes, as the Black-American population that file Chapter 13 usually don’t have the resources to make these payments, forcing losses.
From 2008 to 2010, on 39 percent of Black-Americans were able to make the required payments to fulfill Chapter 13 regulations, as opposed to 58 percent of other debtors.
In order to gather data from the report, ProPublica concentrated on the number of Chapter 13 filings in two main regions of the U.S.: The Western Tennessee area, which includes Memphis, and the Northern Illinois district, which includes Chicago. These two regions had the highest rate of consumer bankruptcy filings in the country in 2015, making them especially vital to the dataset. Taken into account as well was the national dataset as provided by the Administrative Office of the Courts, which included data for all bankruptcy cases filed from 2008 to 2015.
The report also took into account the financial profiles of those filing Chapter 13, the types of debt that were filed, and the judicial systems in which bankruptcy cases were heard in.
Both regions have a historically high rate of bankruptcy, whether Chapter 7 or Chapter 13, making them ideal candidates in order to examine national trends based on race and ethnicity.
You can find the full, comprehensive report here.