Black people struggling with debts are far less likely than their white peers to gain lasting relief from bankruptcy, ProPublica finds. Prime reason: Chapter 13, the type of bankruptcy favored by lawyers in the South. Unlike Chapter 7, which wipes out debts and allows people to keep what little they have, Chapter 13 blocks foreclosures and car repossessions as long as debtors can keep up payments for five years. "Most Chapter 13 filers in Memphis don't last a year, let alone five," this story says.
From ProPublica:
Read Full Article »Driving this tremendous churn of filings is a handful of bankruptcy attorneys with what sounds like an easy pitch: immediate relief, for free. In Memphis, it typically costs around $1,000 to hire an attorney to file a Chapter 7, but most attorneys will file a Chapter 13 for no money down. Ultimately, the fees for Chapter 13 filings are higher — upwards of $3,000 — but the payments are stretched over time. For many people, this is the only option they can afford: debt relief on credit. For attorneys, they gain clients — and a regular flow of fees — they might not otherwise get, even if few of their clients get lasting relief.
