Bankruptcy rates by race cannot be measured directly because court filings never record a debtor's race, but researchers have found workarounds, and the picture they paint is striking: Black Americans file for bankruptcy more often, gravitate toward a costlier and less forgiving type of filing, and see their cases dismissed far more frequently than White Americans do.
At a Glance
- No official data tracks bankruptcy by race, so researchers compare majority Black and majority White ZIP codes instead.
- A 2017 ProPublica analysis found Chapter 13 made up half of all filings in Black ZIP codes, versus 26% in White ZIP codes.
- Only 39% of Chapter 13 filers in Black ZIP codes discharged their debts successfully, compared with 58% in White ZIP codes.
- Legal fee structures and the risk of losing a car appear to be major drivers of the disparity.
- A 2023 study found Black filers were 16 percentage points more likely to have Chapter 13 cases dismissed without relief.
What the ZIP Code Data Actually Shows
Since bankruptcy petitions don't ask about race, ProPublica took a different approach in its 2017 analysis: it compared aggregated filing data from majority Black ZIP codes against majority White, non Hispanic ZIP codes. The pattern that emerged wasn't subtle. Debtors in Black ZIP codes chose Chapter 13 bankruptcy at roughly twice the rate of those in White ZIP codes, even though Chapter 13 is widely considered the harder road to actually clearing your debts.
The consequences of that choice show up in the success rates. Just 39% of Chapter 13 filers in Black ZIP codes managed to discharge their debts, compared with 58% of filers in White ZIP codes. A separate 2023 study reached a similar conclusion, finding that Black filers were 16 percentage points more likely than others to have their Chapter 13 cases dismissed with no debt relief at all, and 3 percentage points more likely to see the same outcome under Chapter 7.
Chapter 7 Versus Chapter 13, by the Numbers
The gap becomes clear when the two most common individual bankruptcy paths are placed side by side using ProPublica's 2008 to 2010 data.
| Bankruptcy metric | White ZIP codes | Black ZIP codes |
|---|---|---|
| Chapter 7 success rate (debts discharged) | 97% | 90% |
| Chapter 13 success rate (debts discharged) | 58% | 39% |
| Share of Chapter 7/13 filings that are Chapter 13 | 26% | 50% |
| Chapter 13 failure rate (case dismissed) | 40% | 58% |
| Failure rate across all filings (case dismissed) | 12% | 31% |
Every one of those rows points the same direction. Filers in Black ZIP codes were more likely to choose the harder path and less likely to make it through successfully, whichever chapter they picked.
How Chapter 7 and Chapter 13 Actually Work
Chapter 7, often called liquidation, works fast. A court appointed trustee sells off the debtor's non exempt assets, pays creditors whatever that raises (usually a fraction of what's owed), and then wipes out most of the remaining debt. Some obligations, like alimony, child support, and taxes, survive the process regardless. Exemption rules vary by state, but clothing, home furnishings, retirement savings, and some equity in a car or house are commonly protected.
Chapter 13 takes a slower route. Instead of liquidating assets, the debtor commits to a court supervised repayment plan lasting three to five years, while keeping more of their property along the way. Miss the plan's terms and the case can get converted into a Chapter 7 liquidation anyway. The main appeal of Chapter 13 is that it can shield a home from foreclosure, something Chapter 7 doesn't guarantee.
Chapter 7 is generally simpler, cheaper, and quicker at clearing debt. That's exactly why the preference for Chapter 13 in Black ZIP codes is worth digging into.
Why Chapter 13 Draws More Filers in Black ZIP Codes
Here's the part that seems to defy logic at first glance: protecting a home is Chapter 13's biggest selling point, yet Black Americans have a lower homeownership rate than White Americans overall. So why the heavier lean toward Chapter 13?
ProPublica's reporting points to money, plain and simple, specifically how legal fees get structured. At the time of that study, a Chapter 7 filing typically ran about $1,000 in legal fees, due upfront or within a few weeks. Chapter 13, by contrast, could often be started for $0 down, even though the total legal bill, usually $3,000 to $4,000, ended up higher over the life of the case. Those payments got stretched across the repayment plan, sometimes over five years.
Put simply, someone who can't scrape together $1,000 right away has little choice but to go the Chapter 13 route, whatever their long term financial interest might be.
There's a second thread researchers have pulled on: transportation. In some cities, unpaid parking tickets or court debt can trigger license suspensions, revocations, or even car impoundments. A 2020 study focused on Chicago found that a decade old city policy allowing seizure of cars and licenses from drivers with heavy unpaid fines hit predominantly African American ZIP codes disproportionately. Chapter 13 has an advantage here too: it can force the return of seized cars and licenses, a remedy that Chapter 7 typically doesn't offer.
The same researchers noted that African Americans are more likely to live in ZIP codes where a car is essential for getting to work or the grocery store. Even in cities without a Chicago style seizure policy, the pressure to hang onto a vehicle may help explain why Chapter 13 shows up so often in Black communities.
Where the Underlying Data Comes From
ProPublica's analysis drew on the national bankruptcy dataset maintained by the Administrative Office of the United States Courts, covering cases filed from 2008 through 2015. The study zeroed in on consumer cases filed under Chapter 7 or Chapter 13 between 2008 and 2010, a window chosen specifically so researchers could observe the full five year arc of most Chapter 13 plans.
Common Questions About Filing
Individuals can file for Chapter 11 bankruptcy, though it's mostly associated with businesses. Someone might turn to it if their debts exceed Chapter 13's limits or their income can't support a Chapter 13 repayment plan.
Keeping a car through bankruptcy is possible under either chapter. In Chapter 13, the car generally stays as long as the debtor keeps up with the court supervised plan. In Chapter 7, state exemption rules may let a filer keep the car outright or protect some equity in it. Filers with an outstanding car loan sometimes negotiate a reaffirmation agreement with the lender to keep making payments, or use a process called redemption to pay off the loan in one lump sum and keep the vehicle free and clear.
What Would Close the Gap in Bankruptcy Outcomes
The disparities documented across these studies point to a system where legal fee structures and practical needs, especially keeping a car running, end up steering people toward the more expensive, less reliable form of debt relief. Researchers say more work is needed to fully untangle cause and effect, but the numbers so far describe a bankruptcy system where race, income, and access to legal help intersect in ways that shape who actually gets a clean financial start and who doesn't.