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Is racism a factor in some personal bankruptcy cases?

Many California residents believe that racism is largely a thing of the past, something to be discussed in high school classrooms as a relic of times gone by. To be certain, race relations and equality matters have come a long way since the civil rights movement, and people of color have access to far more opportunities and are subject to fewer acts of discrimination than in previous generations. In reality, however, there are still remnants of racism at play within our society, and a recent article focuses on how institutional racism can have harmful effects on the financial standing of many African Americans. For some of those individuals, personal bankruptcy will be the end result.

The article looks at small debt, which includes utility bills, parking tickets and various fines and fees that accompany such debt. The author asserts that because African American families often have less robust savings to fall back on, these relatively small debts can turn into big problems. People who cannot afford to cover their light bill on a given month might have their power shut off, and will then be required to pay a hefty fee to have the lights turned back on. That leaves less money to go toward paying other living expenses, and the problem can quickly worsen.

In addition, statistics show that when small debts are brought before the court, communities with mostly black residents experienced judgments at twice the rate of communities where the residents were mostly white. Those judgements can lead to wage garnishments, which leave families with less money to cover their recurring expenses, much less address existing debt. The problem takes on a snowball characteristic, and worsens over time.

Institutionalized racism is only one piece of a larger puzzle that places certain groups at a greater risk of financial hardship, but it is an issue that deserves close attention. For families in California who have been plagued with small debt and resulting court judgments and wage garnishments, it may be time to consider if personal bankruptcy offers a viable solution. In many cases, this move can give individuals and families a fresh financial start, and a chance to rebuild savings and avoid a similar outcome in the years ahead.  

Source: salon.com, "Small debt is destroying black lives: Institutional racism and the wealth gap America still refuses to acknowledge", Paul Kiel, Jan. 9, 2016

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