Observing Bankruptcy Court in Memphis
A few months ago I was lucky enough to spend 3 days observing bankruptcy court in Memphis, Tennessee. I am indebted to my colleague, Shelby Grossman, who kindly gave me a place to stay, enabling me to conduct research on this “shadow case” (Memphis is not one of my main cases, but I learned through the course of my dissertation research that it might be worth checking out).
If you follow the world of Chapter 13 bankruptcy, then you are probably aware that Memphis has been in the news due to its high rates of Chapter 13s and the racialized nature of bankruptcy in this area (it is used predominately by blacks, who are also less likely to get lasting bankruptcy relief). Articles by Paul Kiel in ProPublica and The Atlantic highlighted the experiences of black debtors in Western Tennessee, calling attention to this inequality.
For those who don’t know, Chapter 13 bankruptcy is a predominately middle class form of bankruptcy. It is used by people who make above median income (who have been barred from filing Chapter 7 since 2005) and by people who are trying to save homes from foreclosures. It usually costs around $3,000 to $5,000 to file Chapter 13 bankruptcy, though these payments can sometimes be spread out over the 36 or 60-months that the debtor is in bankruptcy. The fact that this is possible Western Tennessee means that for some debtors Chapter 13 is likely more affordable up front. However, for many debtors a Chapter 13 bankruptcy is much less helpful than a Chapter 7. Any good bankruptcy lawyer will tell you that if you have the option to file Chapter 7 you should, unless you have a home you’re trying to protect from foreclosure. Kiel brings this factor to light in his articles, suggesting that the high rates of Chapter 13s in Western Tennessee are likely evidence of exploitation of the black population by bankruptcy attorneys.
Kiel is probably spot on about this, but one thing I noticed in my 3 days observing 341 meetings (sort of like an intake meeting for bankruptcy) that was only briefly covered in his articles was the way that the criminalization of being black was landing people in bankruptcy.
For my dissertation research, I have been observing Chapter 13 proceedings in Eastern Massachusetts, Eastern Tennessee, and North-Central Utah. In his ProPublica article Kiel highlights that debtors in Western Tennessee were likely to have debt from criminal court, but my comparative research highlights how strange this is. Only in Western Tennessee have I observed large numbers of people in Chapter 13 bankruptcy with debt from criminal offenses. The amount of criminal debt owed by Chapter 13 debtors in Western Tennessee was so high that there was a delegate from the criminal court present at all the intake meetings. Usually there are only representatives from the IRS, the state tax commission, and often a local furniture-on-credit store who are always present (other creditor attorneys come in and out depending on the case).
In Western Tennessee, however, it was very common to see debts from criminal offenses. This was striking to me, because as I’ve explained above, Chapter 13 is mostly a middle class kind of bankruptcy (compared to Chapter 7). It was also interesting to note that the most common category of criminal debt, at least on the three days I was present, was “driving with a suspended license.” My pet theory is that this is due to a combination of two factors: 1) The state of Tennessee revokes a person’s license as a common punishment for failing to do things like pay your property taxes, child support, or not paying speeding or parking tickets. 2) African Americans get disproportionately pulled over for “driving while black.” The combination of these factors probably leads to a disproportionate number of African Americans accruing fines from criminal offenses that become debts and contribute to landing them in bankruptcy.
Tuesday, March 6, 2018