COVID-19’s Devastating Impact on Black Americans and Bankruptcy

The coronavirus isn’t racist, but its impact certainly is. Black Americans face nearly 3x higher hospitalization rates from COVID-19. Death rates are almost 2x higher compared to white Americans.

Racial inequality existed long before the pandemic. Unequal healthcare access, segregated schools, and systemic racism create massive barriers. COVID-19 made everything worse, especially financially.

Millions now face financial distress. Incomes don’t cover expenses. Bills keep piling up. Rent is still due.

Bankruptcy Offers a Financial Lifeline

Bankruptcy provides crucial protection for financially distressed families. Over half a million Americans seek bankruptcy protection each year. Many more will need it when pandemic assistance ends.

The system remains difficult to navigate. Complicated bankruptcy forms, legal jargon, and unfamiliar court processes create barriers. The unnecessarily complex system keeps bankruptcy seemingly out of reach.

Data Reveals Disturbing Trends

Over 17,000 low-income individuals completed detailed bankruptcy questionnaires. Their responses reveal how the pandemic affected different communities. The data shows clear patterns by race, gender, and location.

Bankruptcy Courts Don’t Track Race

Federal bankruptcy courts don’t collect racial information. The United States Trustee Program doesn’t track it either. Bankruptcy forms never ask about race or gender.

This represents a serious oversight. The system remains blind to disparate impacts on marginalized populations. Past studies relied on population estimates or small surveys.

49% of Black Filers Cite COVID-19 as Primary Factor

In April 2020, only 23% of Black bankruptcy filers cited COVID-19. The number jumped sharply over the summer. It more than doubled to 49% by January 2021.

The sharpest increases occurred from April to May (7% jump) and June to July (9% increase). The trend shows worsening financial conditions.

Most Black Workers Cannot Work Remotely

80% of Black workers hold positions requiring in-person work. For an entire year, they chose between risking their lives and losing their jobs. Many faced unemployment anyway.

Black Unemployment Reaches 10-Year High

Black unemployment hit an all-time low of 5.2% in August 2019. Eight months later, it shot up to 16.7%. That matched the worst levels following the Great Recession.

As of January 2021, Black unemployment remains at 9.2%. Women held 100% of jobs lost in 2020. Black women face an 8.4% unemployment rate.

Black Women Hit Hardest by Wage Loss

Malcolm X said Black women are the most disrespected, unprotected, and neglected people in America. Recent data confirms this reality continues.

Black women suffered the worst outcomes. They were more likely to cite wage loss than men. On average, women accounted for 70% of Black filers citing wage loss. In August 2020, that number peaked at 76.3%.

White women also faced disproportionate impact. They accounted for 60% of white filers citing income loss.

COVID-19 Impact Grows Over Time

In April 2020, Black and white women cited COVID-19 at similar rates. Black women reported 20.8% while white women reported 21.4%. The gap has since widened dramatically.

By January 2021, 49.4% of Black women linked bankruptcy to COVID-19. That’s a 137.4% increase since April 2020. It’s also 44% higher than white women at 34.2%.

Bankruptcy Remains a Last Resort

69% of Black bankruptcy filers cut back on necessities first. 36% sold or pawned property to make ends meet. 33% avoided necessary medical care.

People exhaust all options before filing bankruptcy.

Black Filers Have Fewer Assets

Most Chapter 7 bankruptcy filers don’t have much. Black filers have even less on average. Racist policies prevented Black families from building generational wealth. Life costs more for Black people.

Over 7,100 filers provided detailed asset information. Black filers average $257 in checking accounts. White filers average $343 in checking. Black filers keep an average of $205 in savings.

Fresh Start Doesn’t Level the Playing Field

Bankruptcy should provide a clean financial slate. It should free up wages for living expenses and savings. Unfortunately, the fresh start works differently for minorities.

Rent is higher for Black filers in 27 of 42 states. In Massachusetts, rent consumes 55% of monthly income. In Wisconsin, Black tenants pay 39% of income for housing.

Even after getting a bankruptcy discharge, Black families have less left over. They must make do with less despite similar incomes.

Financial Collapse Looms Again

One unexpected expense could destroy marginalized families financially. Bankruptcy relief under Chapter 7 is available only once every eight years. Any job loss, divorce, or illness could spell disaster.

A combined bank balance of $462 doesn’t solve pandemic-era problems. Black families remain vulnerable.

Bankruptcy Cannot Be the Only Solution

Bankruptcy provides powerful relief but isn’t a long-term solution. Generations of inequity require systemic change. A broken water heater shouldn’t trigger financial collapse.

Without change, Black and brown families face another cycle of debt. Without bankruptcy as an option this time.

This demands action. The COVID-19 pandemic is only the latest crisis hurting Black Americans. We must address all forms of racial inequality. We must push policymakers to do better.

Breaking the cycle of racist oppression is the only path forward. It’s the only way to achieve true equality for all races.

If you’re facing overwhelming debt and considering bankruptcy, you can speak with a bankruptcy attorney for free to explore your options for debt relief.