Upsolve surveyed over 17,000 low-income users over the past year. Here is what we have learned about the pandemic’s impact on their finances.
Although the coronavirus itself isn’t racist, its impact certainly is. A year into the pandemic, Black Americans are almost 3x more likely to end up in the hospital and almost 2x more likely to die from COVID-19 when compared to white folks. 
Racial inequality is not a new problem. Unequal access to health care, de facto segregation in schools, and systemic racism in many forms make it hard for Black Americans to thrive in this country.
COVID-19’s disparate impact on Black communities exacerbates this problem far beyond the health implications. The current crisis has left millions in financial distress. Incomes aren’t covering expenses, bills are piling up, and rent is coming due sooner or later.
Bankruptcy is one of the only lifelines for poor people in America.
Bankruptcy is an often-overlooked social safety net to protect the financially distressed. More than half a million individuals and families seek protection in bankruptcy court every year. Filing for bankruptcy will be the only choice for many when pandemic unemployment assistance and eviction moratoria end.
Yet, it will seem unattainable for most. While you can file bankruptcy without a lawyer, the complicated forms, legal jargon, and unfamiliar court processes serve as a deterrent for those most in need of bankruptcy protection. Like literacy tests and poll taxes in years past, the unnecessarily complicated system makes bankruptcy relief seemingly unreachable for the poorest Americans.
Upsolve is the largest bankruptcy nonprofit in the United States with a mission to close this access to justice gap. Upsolve’s free bankruptcy filing tool empowers people to prepare their forms and navigate the bankruptcy system without a lawyer. Launched nationally in 2018, Upsolve has relieved over $300 million in debt for low-income families suffering from financial distress due to medical bills, layoffs, and predatory loans.
Over the last 12 months, more than 17,000 individuals completed Upsolve’s bankruptcy questionnaire. The data and information collected from their responses offer unique insights into how the pandemic has affected low-income Americans by race, gender, geographic location, and more.
There is a lack of data on bankruptcy and race.
Due to a lack of available data from bankruptcy courts, past studies on the disparate treatment of minorities in the bankruptcy system have relied on population data from the U.S. Census Bureau or directly surveyed a set number of households. The information collected by Upsolve is among the only available data sets on the racial demographics of bankruptcy filers. The federal court system isn’t collecting racial information. Neither is the United States Trustee Program, the division of the Department of Justice that oversees bankruptcy proceedings. The bankruptcy forms don’t ask for information on race or gender.
At best, this is an inexcusable oversight. At worst, it shows that the bankruptcy system is intentionally blind to the disparate effects that anything from predatory lending practices to a global health crisis can have on marginalized populations.
49% of Black users cited COVID-19 as a reason for seeking bankruptcy protection in January 2021.
In April 2020, only 23% of Black Upsolve users cited COVID-19 as related to their main reason for seeking bankruptcy protection. The sharpest month-over-month increases in Black users citing COVID were from April to May (7% increase) and June to July (9% increase). It has more than doubled to 49% in less than a year.
How Did We Get Here?
If there is one thing we have learned in the last year, it’s this: Where you work and what you do directly affects your ability to survive a health crisis. Essential workers, healthcare workers, front-line workers, and blue-collar workers have had a vastly different “pandemic life” than those of us lucky enough to work remotely.
80% of Black Workers Can’t Work Remotely.
80% of Black workers hold a position that doesn’t allow remote work.  For the last year, 80% of Black workers had to choose between risking their lives and livelihoods. And those are the “lucky” ones who have managed to avoid unemployment.
Black Unemployment is at Its Highest in 10 years.
In August 2019, Black unemployment was at an all-time low of 5.2%. This information is from the U.S. Bureau of Labor Statistics, which provides an interactive chart tracking the civilian unemployment rate. Eight short months and one global pandemic later, it has shot up to 16.7%. A mere 0.1% lower than in March 2010, the worst month following the Great Recession.
Although the numbers have dropped significantly, as of January 2021 Black unemployment is still the highest it’s been in over five years at 9.2%. Women held 100% of the jobs lost in 2020. According to the data from the Bureau of Labor Statistics, Latinas have the highest rate of unemployment at 9.1%. Black women are a close second with 8.4%.
Loss of Wages is driving Black women users into bankruptcy at much higher rates than any other group.
Malcolm X once said, “The most disrespected person in America is the Black woman. The most unprotected person in America is the Black woman. The most neglected person in America is the Black woman.” This Black History Month, as we sift through the data that we’ve collected from our users over the past year, it seems that the same sentiment continues to hold true.
Black women fared the worst when compared to other Upsolve users. Black women were more likely to cite a loss of wages as a reason for their bankruptcy than their male counterparts. On average each month women accounted for 70% of Black Upsolve users citing a loss of wages as a reason for their bankruptcy. In August 2020, that number peaked as Black women comprised 76.3% of Black folks who cited a loss of wages as their motivation for filing for bankruptcy.
Furthermore, the pandemic’s outsized impact on women applies across racial lines. On average each month, white women accounted for 60% of all white Upsolver users pointing to a loss of income as one of the reasons for filing.
49% of Black women say COVID-19 is related to the main reason for their financial distress this past month.
Early on, Black and white women completing Upsolve’s questionnaire indicated that COVID-19 played a role in their need for bankruptcy protection at about the same rate. In April 2020, 20.8% of Black women and 21.4% of white women pointed to the pandemic as the motivating force behind their main reason for filing. The gap between these two groups has since widened, however, suggesting that Black women are at a higher risk for financial hardship due to the pandemic than white women.
As of January 2021, 49.4% of Black women noted that their main reason for filing bankruptcy was related to COVID-19. This is a 137.4% increase of users reporting since April 2020. Moreover, it is 44% higher than white women, who cited COVID-19 as related to their main reason for filing only 34.2% of the time in January. Yet, again reflecting the pandemic’s disparate effects on Black women.
Bankruptcy is still a last resort for most Black people.
When asked what other measures they took to avoid a bankruptcy filing, 69% of Black Upsolve users told us they cut back on necessities. 36% sold or pawned property to make ends meet, and 33% of Black users avoided necessary medical care.
Bankrupt folks don’t have much. Bankrupt Black folks have even less.
When it comes to assets, most Chapter 7 bankruptcy filers don’t have much. That’s generally true across the board when it comes to consumer debtors. But Upsolve’s Black users – on average – have even fewer assets of value.
Racist policies have made it virtually impossible for Black families to create and build generational wealth. Plus, life is more expensive for Black people than it is for white folks (more on that below). As a result, it is more difficult for Black families to set aside an emergency fund and save for the future.
More than 7,100 users provided us with information regarding their assets since April 2020. From their responses, we have learned that Black Upsolve users have an average of $257 in their checking account. White Upsolve users reported an average balance of $343 in their checking accounts. The average amount of money Black users have in their savings is $205.
Even after bankruptcy relief, Black people are still at a financial disadvantage.
Bankruptcy is supposed to give you a fresh start, a clean slate. Free up your wages to pay for living expenses, create an emergency savings fund, and set you up for a healthy financial future. Unfortunately, this clean slate does not work the same for minorities in a world where everything is more expensive if you’re a person of color.
Rent is higher for Black Upsolvers in 27 of 42 states. In Massachusetts, rent takes up a monthly average of 55% of a Black person’s income. In Wisconsin, Black tenants can expect to pay as much as 39% of their income just for a place to lay their heads. As a result, even after getting a clean slate in the form of a bankruptcy discharge, a Black person still has to make do with less even if their income matches that of their white neighbors.
On the brink of financial collapse...
If just one thing goes wrong, folks in marginalized communities – especially Black families – will be out of options. Again. Bankruptcy relief under Chapter 7 of the Bankruptcy Code is available only once in an eight-year period. Every job loss, divorce, illness, or unexpected expense while the world recovers can potentially spell financial disaster. A combined bank account balance of less than $500 ($257 in checking and $205 in savings) does not solve most (if any) of the problems many Black families are facing during the pandemic.
Bankruptcy cannot be the only way out for low-income Americans. It’s a powerful band-aid, but it is not a long-term solution to the problems caused by generations of inequity. A broken water heater or a flat tire should not start a financial tailspin that puts a family into poverty.
If nothing changes, Black and brown families will continue to find themselves trapped in a vicious cycle of debt and a life of financial instability once again. Without bankruptcy as a possibility for relief this time.
This Black History Month – as we imagine a better future for Black America – it is imperative that we acknowledge and address all forms of racial inequality. The COVID-19 pandemic is only the latest of many crises disproportionately hurting Black Americans. We must push ourselves, our policymakers, our whole country to do better to end the cycle of racist oppression. It’s the only way to make Dr. Martin Luther King Jr.’s dream of equality for all races a reality.
Upsolve is a nonprofit that provides free education, community, and tools to low-income families navigating financial distress. To date, Upsolve has relieved over $300 million in debt for families facing dealing with medical bills, job loss, and wage garnishment. Guided by our mission that “Civil rights should be free”, we empower low-income Americans in financial distress to access Chapter 7 bankruptcy even if they can’t afford to hire a lawyer.
- Centers for Disease Control and Prevention. (2021, February). Risk for COVID-19 Infection, Hospitalization, and Death By Race/Ethnicity. Retrieved February 22, 2021, from https://www.cdc.gov/coronavirus/2019-ncov/covid-data/investigations-discovery/hospitalization-death-by-race-ethnicity.html#print
- The American College of Epidemiology. (2020, July). Assessing differential impacts of COVID-19 on black communities. Annals of Epidemiology, Volume 47, pg. 39. Retrieved February 22, 2021, from https://www.sciencedirect.com/science/article/pii/S1047279720301769?via%3Dihub