Researchers Work to Reduce Bias in Bankruptcy Proceedings

Bankruptcy can be life-changing for people who are held back by debt that they are unable to repay without some help. Every person who legally qualifies for bankruptcy protection should be able make a fresh financial start. Unfortunately, researchers at MIT have found that bias on the part of trustees might be preventing some Black Americans from obtaining relief under Chapter 13.

In their study, MIT Professor Chris Palmer and his colleagues wrote that Black individuals are 31 percent more likely than white filers to have their bankruptcy repayment plans dismissed. This disparity underscores potential biases within the system and highlights the role that trustees play in the outcome of Chapter 13 cases, where dismissal can mean continued harassment from creditors, deeper debt and possibly even the loss of one’s home. 

During a Chapter 13 proceeding, trustees are responsible for reviewing the proposed repayment plan, assessing the debtor’s finances and ensuring compliance with bankruptcy rules. They also have the authority to recommend approval or dismissal of the plan to the court. MIT’s study suggests that this discretionary role may allow trustee bias—whether intentional or implicit—to influence outcomes, with Black filers facing more skepticism or scrutiny than white filers.

Such biases could be due to a variety of factors, including preconceived notions about a debtor’s ability to repay, assumptions about financial literacy or unexamined personal biases. These factors can impact the level of support or flexibility trustees extend to debtors, potentially leading to disparate outcomes.

Supporters of changes within the bankruptcy system argue that increased training, standardized procedures and accountability for trustees could help mitigate bias and create a more equitable process for all filers. Additionally, increased data transparency on bankruptcy outcomes by race could encourage reforms and help expose where systemic inequalities exist. Regardless of your particular situation, an experienced bankruptcy attorney can prepare the strongest possible filing to minimize the chance of a dismissal for improper reasons. 

At Jeff Field & Associates, we advocate for Georgia residents in Chapter 13 cases and other types of bankruptcy proceedings. To discuss your potential case in our Douglasville, Gainesville, Bogart, Lawrenceville, Marietta or Decatur office, please call 404-381-1278 or contact us online.