Why Black Americans are less likely to end up with debt relief

In March 2011, a sheriff showed up at Michael Render’s childhood home in Collier Heights — the home where his grandmother had served him biscuits, history, and Black Power. The summons was for a claim that Michael wasn’t paying all the child support for his two children.

A few months after the summons, Michael filed for bankruptcy. He had $2,550 in assets and $78,008 in debt. In addition to the child support issue, he owed tens of thousands of dollars in income taxes on past earnings. Michael never publicly discussed his bankruptcy in detail, though he would say, "I went broke, I failed, I was on my ass." In the song Ju$t on his 2020 album, he rapped, "I get broke too many times."

The rapper Killer Mike’s period of personal financial struggles would inform his views on race and money. He knew what it was like to go bankrupt, to be underbanked, to rely on check-cashing shops, and to work for minimum wage at AutoZone.

Many Americans are, in reality, broke. They have negative net worth, meaning their debts are bigger than their assets.

I get broke too many times.

It’s a special kind of “broke” that leads people into bankruptcy court. That’s the broke that has no hope. That’s the broke that can’t see how any amount of earnings will soon pay off those debts. It’s a broke felt at times by people of all races, and bankruptcy exists as a rare example of mercy in the American system. But if people of one race have an easier time obtaining that mercy than people of another race, that can contribute to wealth gaps. An unequal bankruptcy system contributes to the Black-white wealth gap simply by being a benefit that is more easily obtained by white people.

With the historical and present-day hurdles Black Americans face, one might predict a bankruptcy filing gap, with Black Americans filing more than white Americans. In fact, Black Americans have been represented among bankruptcy filers in roughly the same proportion as they are represented in the U.S. population. The gap appears instead in the outcomes of the cases: Black Americans are less than half as likely as white Americans to have their debts reorganized or relieved. This outcome difference has severe effects on Black wealth over time — specifically for the 19% of Black families in 2019 that had negative wealth, versus the 8% of white families. All those families with negative wealth are prospects for bankruptcy... but they enter an unequal relief system.

In 2011, Michael Render was among the people with negative wealth. Shortly after the sheriff went looking for him, he filed a bankruptcy case in Fulton County, Ga. For his assets, he listed a $200 pair of Nike sneakers, $300 worth of leather coats, $250 worth of blue jeans, and a $300 shotgun. He had owned a 2007 Chevrolet Tahoe truck, but documents in the case noted that it had been repossessed. Michael also had some money in the bank: $1,200 in accounts at Chase Bank. He did not own a home.

Michael’s debts were substantial. He owed $47,032 to state and federal tax authorities for unpaid taxes on income from 2006 through 2010. He owed $17,716 on his old car note. And he listed the $13,260 he owed in child support.

In all, Michael owed $75,458 more than he could pay off.

Bankruptcy filings also include income and expense information. Michael’s 2011 income was $2,200 a month, paid by his music manager, supplemented by $1,000 per month in unemployment benefits from his wife. Their monthly expenses were $1,648.45, including $860 in rent, $200 for transportation, $329 for food, and $119 for clothing.

These figures look orderly on the page, but bankruptcy filings tend to come from complex personal stories. For Michael, the story revolved around child support. Like his own parents, he had become a parent at a young age. The filings and a related case in the local court system make clear that he wanted to be an involved father. In one of the cases in 2004, Michael filed for the right to see his children more often and to share in their custody. The agreement in that case outlined the child support payments he would make, but by 2011, he had fallen behind.

Within two months of Michael’s filing, the trustee on the case filed an objection to the repayment plan being created. The trustee pointed out that some of Michael’s obligations (like child support) were not fully reflected. The trustee raised questions about potential future sources of income like voice-overs, which Michael had not mentioned in his filing; the trustee also said that Michael had failed to make a required court payment. And the trustee said the case should be dismissed because Michael had not included his nicknames — “Killer Mike” and “Mike Bigga” — in the filing. Two months later, the judge dismissed Michael’s case, and no debt reorganization or relief was granted.

The results of the bankruptcy system echo the experience Michael had — Black Americans are less likely to end up with debt relief. While the bankruptcy system helps many Americans of all races, it helps white Americans more. The system “is designed to give relief to people who fit a certain profile,” Mechele Dickerson, a professor at the University of Texas at Austin School of Law, has said. The people who benefit the most from the system, she said, are “not going to be, in most instances, Black people.”

The system 'is designed to give relief to people who fit a certain profile.'

Research has shown that Chapter 13 filings (more than Chapter 7, which is a faster process but one that does not allow people to keep their house) have a rocky road to success. Chapter 13 cases are dismissed if the judge does not find the information provided to be credible or if the individual filing does not manage to follow all the terms of the repayment plan. In Chapter 13, debt is restructured with some amount of it paid back over time, and the remaining debt is relieved only if the payment plan is completed. When someone drops out of a Chapter 13 payment plan, the original debt is left in place. And legal fees are still owed from the failed bankruptcy.

Roughly two-thirds of people who file for Chapter 13 do not end up completing their repayment plans, according to research by Sara S. Greene of Duke University and other scholars. And race is more of a determining factor than the amount of the debt, having a job, or having had prior bankruptcies, the scholars found. Simply put, if a bankruptcy filer is Black, they are less likely to make it through the system and get relief from their debt.

Why is this? One factor is the subjectivity in the decisions by bankruptcy judges and the recommendations from trustees. These people must answer questions like: Did this person stop payments for the Chapter 13 payment plan because of setbacks that were out of their control? Was their list of assets or debts incorrect due to a mistake or to fraud? And is this person realistically able to make the payments the court is setting? In Michael Render’s case, the trustee raised questions in several areas, like Michael’s car and voice-over work.

In looking at trustees, scholars at the Brigham Young University, University of Pennsylvania, and MIT compared the race of bankruptcy trustees, the race of filers, and then the outcome of the cases. They found that for Chapter 13 bankruptcies, Black people assigned to white trustees were far more likely to have their cases dismissed.

In Michael Render’s case, the trustee was white. So was the judge.

In Atlanta as of 2023, no Chapter 13 trustees were Black. In 2021, the director of the U.S.Trustee Program, Clifford J. White III, acknowledged the lack of diversity among bankruptcy trustees. “I think that all of us who have attended professional bankruptcy conferences can agree that the lack of diversity is apparent,” he said.

Michael Render likely found Chapter 13 appealing because of his child support woes. Congress has said that child support debt cannot be forgiven in bankruptcy; it's too important. That means that in a Chapter 7 process, there's no option to restructure child support debt. A parent simply must pay immediately or face jail time. With Chapter 13, child support arrears can be paid over time in the repayment plan, helping the filer avoid jail or further penalties.

Michael Render talked with us about child support when we asked about his bankruptcy case. “I don’t like the way child support is weaponized against any man ... and especially Black men,” he said. When his bankruptcy case was dismissed, that meant there was no restructuring of any of his debts, child support payments included.

I don't like the way child support is weaponized against any man ... and especially Black men.

To further explore Michael Render’s experience, we called up his lawyer from one of his cases, Nathaniel Blackmon, who is also Michael’s distant cousin. “If you ask a lot of Black men what they fear the most as far as being stopped in the middle of the night by two white cops, they’ll say the legal system,” Blackmon said. “They don’t want to face a white judge. ... You’re going to come up on the wrong side of the law.”

The lack of senior Black professionals in the judicial system is part of the problem, Blackmon said, noting that the courts need officials who can relate to the public they serve. And, he said, when you think about closing the Black-white wealth gap, that’s also connected to a lack of Black Americans serving in these lucrative judicial jobs.

Beyond representation, Blackmon continued, the inequity pervades the way the tort system establishes the value of a life. Traditionally, wrongful death cases provide damages to survivors’ families based on calculations around how much money that person would have earned in the future. These calculations are built on historic inequities that have created racial disparities in earnings. Blackmon told us that his family — Michael Render’s family — had experienced being in a victims’ compensation fund. Primus Blackmon — Michael’s great-great-grandfather — was living in Tuskegee in the 1930s when he was rounded up by the government as a test subject in a study of syphilis.

Decades later, the federal government compensated families, but the money was scant. Nathaniel Blackmon showed us the final check his family had received: It was for just $21.11. Blackmon mused on how it might have affected his family’s wealth had they been properly compensated. He said he doesn’t have much hope that the legal system will change: “I don’t think this is a system where equality is the torch that we carry.”

This adapted excerpt is from "Fifteen Cents on the Dollar: How Americans Made the Black-White Wealth Gap" by Louise Story and Ebony Reed. Please see endnotes related to this excerpt in the book. More information can be found on the book's website and the book can be purchased here.