1 Race and Consumer

Among consumers who file for bankruptcy, African Americans file Chapter 13 petitions at substantially higher rates than other racial groups. Some have hypothesized that the di↵erence is attributable to discrimination by attorneys, who “steer” African American debtors into Chapter 13, instead of Chapter 7, which is less lucrative for the attorneys. We explore an alternative hypothesis: Among distressed consumers, African Americans have longer commutes to work and supermarkets, rely more heavily on cars for these commutes, and therefore have greater demand for a bankruptcy process (Chapter 13) that allows them to retain their cars. We begin by showing that African Americans tend to have longer commuting times than other consumers and, when they do have longer commuting times, they also have relatively high Chapter 13 filing rates. We show this using data from Atlanta, Chicago, and Memphis, each of which has been identified as a location with overrepresentation of African Americans in Chapter 13. We then test our hypothesis that African Americans’ reliance on automobiles is a cause of their substantially higher use of Chapter 13. We do this using data from Chicago, where the the city recently implemented an aggressive program to collect parking debts by seizing the cars and suspending the licenses of consumers with large debts. We show that this city-wide program disproportionately a↵ected African Americans living on the West and South Sides of the City. Because African Americans were most a↵ected by the program, their share of Chapter 13 filings increased substantially. Although we do not disprove the possibility of discrimination by attorneys, our data show that selection e↵ects are potentially as important in explaining racial patterns in Chapter 13 cases.