Racial Differences in Consumer Bankruptcy Outcomes

Finance

Speaker: Paul Goldsmith-Pinkham (Yale SOM)

Room: T209

Abstract

Using administrative data on consumer bankruptcy filings, we study the difference in  bankruptcy filing behavior for Black and non-Black Americans. We first document three facts: 1) Black bankruptcy filers are 27 percent less likely to successfully discharge their debt compared to a non-Black filers, and are more than twice as likely to file for Chapter 13, the more stringent chapter of consumer bankruptcy; 2) Chapter choice is extremely predictable out-of-sample using only balance sheet characteristics at time of filing, but that the prediction loadings do not coincide with things typically associated with Chapter 13, such as homeownership;  3) the Black-White gap in bankruptcy success rate for Chapter 13 is concentrated in bankruptcy dimissals in the first year of repayment plans.  Then, using new data, we study the extent to which attorneys affect the Black-White gap in chapter choice and discharge rates.