Under federal bankruptcy law, people overwhelmed by debt have a choice: They can either file under Chapter 7, which wipes out debts and, since most filers lack significant assets, allows them to keep what little they have. Or they can choose Chapter 13, which usually requires five years of payments to creditors before any debts are eliminated, but blocks foreclosures and car repossessions as long as debtors can keep up. In most of the country, Chapter 7 is the overwhelming choice. Only in the South, in a band of states stretching from North Carolina to Texas, is Chapter 13 predominant.There are in-depth analyses here that focus on Memphis and on Chicago where the reporters hit on a common contributing factor to the disparity.
The responsibility of knowing which path to pick falls to those seeking relief. In Memphis, about three-quarters of filings are under Chapter 13. That’s how Miller filed. She thought the two chapters were “the same,” she told me.
Initially, they are. Upon filing, debtors are shielded from garnishments and debt collectors. But whereas under Chapter 7 those protections are generally made permanent after a few months, under Chapter 13 they last only as long as payments are made. Most Chapter 13 filers in Memphis don’t last a year, let alone five.
As efficiently as cases are opened, they are closed — usually because debtors fail to keep up with payments, according to a ProPublica analysis of court data. In 2015, over 9,000 cases in the district were dismissed — more cases than were filed in 22 other states that year. Less than a third of Chapter 13 cases in the district result in a discharge of debts. And when their cases are dismissed, debtors are often in worse straits, because as they struggled to make payments, the interest on their unpaid debts continued to mount. Once the refuge of bankruptcy is gone, the debt floods back larger than ever. They’ve borne the costs of bankruptcy — attorney and filing fees, a seven-year flag on their credit reports — without receiving its primary benefit. A system that is supposed to eliminate debt instead serves to magnify it.
Court debt: In our sample, 29 percent of debtors from black tracts had this kind of debt (compared to 9 percent of debtors from white tracts), and for 6 percent of cases, it was the largest debt. The vast majority of this debt came from Shelby County’s General Sessions Criminal Court, which handles traffic cases and misdemeanors. In interviews, bankruptcy attorneys said this was generally related to driver’s license issues. Nonpayment of a court debt can lead to suspension of a driver’s license, and debtors often file under Chapter 13 either to prevent suspension of a license or to have their licenses reinstated. Debtors’ driver’s licenses are generally reinstated upon confirmation of their cases. This type of debt is not dischargeable in a Chapter 7.Terrible harm is being done to the most vulnerable people in the country because municipalities have become ever more aggressive in their efforts to squeeze revenue out of such people. The predictable result is spiraling debt, unstable communities, and violence. In particular it has meant police violence against black people. Municipal fees were at the heart of the tensions with police preceding the murder of Michael Brown in Ferguson, MO. This John Oliver segment from two years ago on municipal violations and poverty still holds up. A national debate over civil asset forfeiture is still ongoing despite suffering a setback this year thanks to the stubborn bigotry of US Attorney General Jeff Sessions.
The racial disparity for this kind of debt in bankruptcy cases is reflective of a disparity in the suspension of driver’s licenses. We obtained data on driver’s license suspensions in Shelby County and found that suspensions stemming from traffic infractions (the most common source of a suspension) were six times more common among black residents than white residents.
In New Orleans, we're struggling with these problems just like every other city. At the same time we hand out special tax break "incentives" to for profit developers, we fund essential public functions such as the basic right to a due process defense with traffic camera revenues.
The compound absurdities of this show up in our current election cycle where all of the major mayoral candidates have pledged to take down at least some traffic cameras. No doubt the cameras are unpopular with voters. But even as they try to make hay of this on the campaign trail, the candidates aren't instilling any confidence that they can make good on their promises. LaToya had to go through several rounds of clarification where her position changed from taking down all cameras, to only the "newer" cameras, and then back to all the cameras before what's lately become all except for the school zone cameras. There was one forum where Desiree said she would take them all down"if we can afford it." When the entire system is rigged to make the cameras fiscally essential, that's going to prove a difficult qualifier to meet.
All of which indicates those cameras aren't going anywhere. A candidate who is serious about removing them would first have to be serious about upending the status quo of systemic violence against poor people and especially poor people of color upon which the fortunes of its privileged classes is built. None among this group fits such a description. Is there a chapter in the code that covers political bankruptcy?