Researchers have found a puzzling disparity in bankruptcy filings across the country. Through an analysis of cases and a survey of attorneys, the authors concluded that blacks are disproportionately likely to file for Chapter 13 bankruptcy protection. The trend troubles the authors and others for several reasons. Critics say the study is based on a false premise.

According to the authors, the study shows that bankruptcy professionals intentionally or unknowingly steer blacks toward what the authors believe is the more expensive and more onerous option. In the broadest terms, Chapter 13 involves a repayment plan, while Chapter 7 wipes the debt out completely.

The conclusion is based in part on the responses to the survey of attorneys. Given two couples, one black and one white, who are in exactly the same financial situation, the respondents tended to recommend Chapter 7 for the white couple and Chapter 13 for the black couple.

The researchers included various contingencies in their analysis, but the results still showed disproportionate preference for Chapter 13 among blacks. In one example, they removed all the blacks from the database who had homes. Chapter 13 allows a debtor to keep his home and to protect it from foreclosure. The numbers still did not explain the discrepancy; the authors report that, among those debtors without homes, blacks were twice as likely to file Chapter 13 as other races.

If the authors are correct, choosing Chapter 13 over Chapter 7 can have a long-term negative impact on a family. We'll explain that and get into why critics heartily disagree in our next post.

Source: New York Times, "Blacks Face Bias in Bankruptcy, Study Suggests," Tara Siegel Bernard, Jan. 20, 2012