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Story Publication logo July 8, 2021

Georgia Bankruptcy Filings Reveal Economic, Racial Differences

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In the first two months of the crisis, 14 percent of American workers filed for unemployment...

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Over the last year, The Atlanta Journal-Constitution has collected data from several thousand bankruptcies in Georgia as part of an effort to understand the economic impact of COVID-19 on Georgians.

The legal mechanism of last resort, bankruptcy is the plea for help at the end of a grueling road littered with collection calls, deferred medical treatment and repossessions. A debtor, resigned to the unattainable sum of their debts, asks the court to dismiss much of what they owe. They ask for a second chance at financial life.

This is why Robert Lawless, professor of law at the University of Illinois, calls bankruptcy “The Law of the Second Chance and the Law of the Broken Promise.” His research, based on Consumer Bankruptcy Project survey data, estimates that two thirds of people who eventually file for bankruptcy struggled financially for at least two years before filing. Half of those strugglers sold cars, furniture, and other items to pay their debts. Sixty percent went without medical care of any kind.

This is the second chance of bankruptcy. Wages that were garnished or immediately handed off to pay debts can be used after bankruptcy for health care or food or electricity.


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But bankruptcy can also represent a promise broken for some filers. Young Americans hope that a college education can be a pathway to a living wage and the middle class. But our analysis revealed that hope failed to deliver for poor Georgians who took on student loan debt. One in 10 filers with student loan debt were below the poverty line, owing an average of $10,000, according to the data.

In all, the 2,000 bankrupt Georgians in our analysis owed nearly $220 million scattered over 40,000-plus debts.

Bankruptcies are a lagging economic indicator and stalled during the pandemic. But they are expected to pick back up as the fallout of the pandemic washes through the economy. The AJC plans to dig deeper into them in 2021 to inform readers about the financial and human costs of this seismic jolt to our economy.

Read the highlights of our latest findings below and then use our data explorer at the bottom to learn for yourself what role different debts played in the bankruptcies of different demographic groups. The AJC analyzed differences among white and Black filers, and among poorer and wealthier filers to show the different debts the groups owed. The data revealed some similarities, but also statistical differences among racial groups and income levels.

Please visit The Atlanta Journal-Constitution to view the accompanying interactive infographics.

The policy picture

In December 2020, Sen. Elizabeth Warren, D-Mass., introduced a bankruptcy reform bill intended to address inequities facing debtors. Her bill would make student loan debt dischargeable in bankruptcy, which is, effectively, not currently permitted.

It would allow low-asset, low-income bankruptcy filers to discharge nearly all their unsecured debts without paying filings fees, which currently presents a financial obstacle to a disproportionate amount of Black filers and all poor filers.

The law also makes mortgage modification possible during bankruptcy, something that is already the case for many other kinds of debts. Given that a significantly larger percentage of Black filers’ homes were underwater because of their mortgage terms, this provision could help level the playing field for Black filers.

“Consumer bankruptcy itself cannot solve the racial disparities ... that plague African Americans,” wrote Lawless, who supports Warren’s plan. But it can “address racial disparities within the consumer bankruptcy process.”

To see this report in full and its corresponding data visualization and infographics, click here.

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