Collection Lawsuits Disproportionately Affect Black Neighborhoods

Financial distress can happen to anybody at any time, but new analysis by ProPublica reveals that black neighborhoods are drastically more likely to suffer high rates of collections lawsuits than white neighborhoods.

There are a number of possible reasons why this might be true. According to ProPublica’s findings, the disparity is not only because black families on average earn far less than white families. After studying groups in St. Louis, Chicago, and Newark, it was determined that regardless of income, the rate of judgements was twice as high in black neighborhoods as white neighborhoods, with more than one lawsuit filed against every four residents. While this may immediately seem to be an indication of racial bias by collectors and lenders, another possible theory is that black families have fewer resources to turn to in times of financial trouble. Consider that while a typical white household has a net worth of nearly $142,000, the average black household has an average net worth of only $11,000.

Many companies have turned to a routine use of the courts to pursue consumer debts, and have been able to seize wages from millions of people to pay them off. Take St. Louis, for example. While only one-quarter of the population in St. Louis County live in predominantly black neighborhoods, more than 50 percent of all court judgments have been concentrated in these areas. The plaintiffs in these lawsuits, who are typically banks, hospitals, debt buyers, utilities, high-cost lenders, and auto lenders, have successfully obtained nearly $34 million from residents of black neighborhoods in St. Louis between 2008 and 2012 alone.

Those who are sued rarely make it to court, and if they do, often do so without the aid of a lawyer. This usually ends up with the plaintiff attempting wage garnishment. Sadly, the highest rates of garnishment are among those who earn between $25,000 and $42,000 in yearly income. People who already struggle with a tight budget may have as much as 25 percent of their income garnished in order to pay down their debts. Priorities like rent, utilities, and food become that much more difficult to meet. This unfortunate situation is reflective of a number of hardships faced by black communities, leaving people “stuck in a web of indebtedness” that prevents them from achieving economic mobility.

While the majority of plaintiffs contend that they have done nothing wrong in asserting their right to take collective efforts, and that they treat all people in the same manner regardless of race or socioeconomic standing, the reality is that this is a major, yet not often spoken about, crisis in the black community. It has become increasingly more difficult for less economically advantaged people to extricate themselves from a cycle of crushing debt that effectively keeps them chained to poverty.

If you are struggling with debt, are facing foreclosure, or are being harassed or sued by creditors, we encourage you to contact the Chicago bankruptcy lawyers at Atlas Consumer Law today. We may be able to help you find a solution to your debt troubles that is as least disruptive to your life as possible. You have a right to defend yourself – call (312) 313-1613 to get started.

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