Dismissal with Prejudice? Race and Politics in Personal Bankruptcy

41 Pages Posted: 1 Jul 2010 Last revised: 8 Nov 2012

See all articles by Sumit Agarwal

Sumit Agarwal

National University of Singapore

Souphala Chomsisengphet

Office of the Comptroller of the Currency (OCC)

Robert McMenamin

Federal Reserve Bank of Chicago - Economic Research

Paige Marta Skiba

Vanderbilt University - Law School

Date Written: June 30, 2010

Abstract

We exploit the random assignment of judges in personal bankruptcy proceedings to test whether race and politics bias judges granting debt discharges in chapter 13 (reorganization) and chapter 7 (liquidation) bankruptcy proceedings. To do so, we have collected a random sample of 9,526 bankruptcy petitions. As race is not reported on court documents directly, we use information on name and zip code to calculate a Bayesian-likelihood estimate of individual debtors' race. Controlling for debtors' demographics and financial situation, results show that white judges are 21% more likely to dismiss the chapter 13 petition of an African American debtor relative to a white debtor. In chapter 13, judges have the most discretion and debtors actually appear in front of the judge at a confirmation hearing. We do not find significant effects for chapter 7 cases. Bankruptcy judges who were appointed by a Republican president are less debtor-friendly than those appointed by a Democrat.

Keywords: Personal Bankruptcy, Household Finance, Judges, Discrimination, Law and Economics

JEL Classification: J71, K35, D12

Suggested Citation

Agarwal, Sumit and Chomsisengphet, Souphala and McMenamin, Robert and Skiba, Paige Marta, Dismissal with Prejudice? Race and Politics in Personal Bankruptcy (June 30, 2010). 5th Annual Conference on Empirical Legal Studies Paper. Available at SSRN: https://ssrn.com/abstract=1633083 or http://dx.doi.org/10.2139/ssrn.1633083

Sumit Agarwal

National University of Singapore ( email )

15 Kent Ridge Drive
Singapore, 117592
Singapore
8118 9025 (Phone)

HOME PAGE: http://www.ushakrisna.com

Souphala Chomsisengphet

Office of the Comptroller of the Currency (OCC) ( email )

400 7th Street, SW
Washington, DC 20219
United States
202-649-5533 (Phone)

Robert McMenamin

Federal Reserve Bank of Chicago - Economic Research ( email )

230 South LaSalle Street
Chicago, IL 60604
United States

Paige Marta Skiba (Contact Author)

Vanderbilt University - Law School ( email )

131 21st Avenue South
Nashville, TN 37203-1181
United States
615-322-1958 (Phone)

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