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Were these consumers made aware of Chapter 7 bankruptcy?

When a Connecticut resident is in need of bankruptcy services, the initial stages of that process involve a consultation with a bankruptcy attorney. That professional will review the consumer's financial information, and provide a recommendation about which type of bankruptcy is appropriate. Very often, consumers with no sizable assets are advised to pursue Chapter 7 bankruptcy, which can lead to the elimination of many forms of unsecured debt.

According to a recent report, there are areas of the country where consumers are not provided with the guidance and advice needed to complete the bankruptcy process. It appears that in at least one southern city, African American residents who are living at the lowest end of the economic spectrum are encouraged to file any form of bankruptcy. That action is completed not to create lasting debt relief, but simply to slow down collection efforts.

A large percentage of African American consumers who were included in the investigation were completely unaware of the differences between Chapter 7 and Chapter 13 bankruptcy They were at times unaware that there is any difference at all between the options. That left many with a Chapter 13 bankruptcy, when Chapter 7 would have been a far better fit for their needs. Many of those cases did not even reach completion, leaving consumers in the same or worse circumstances than when they began.

It appears that the individuals who were part of this report were encouraged to pay a small up-front fee or to sign up for extended payments for legal services that amounted to little more than filing the paperwork. Many might have achieved lasting debt relief through a Chapter 7 bankruptcy case. However, the picture painted by this report was one in which a fast profit at the expense of low income Americans was the primary goal. For many in Connecticut, that type of treatment seems completely unacceptable.   

Source:, "How the Bankruptcy System Is Failing Black Americans", Paul Kiel and Hannah Fresques, Sept. 28, 2017

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