Financial fallout from pandemic exacerbates racial inequality: report
A report from Upsolve on the pandemic's financial impact on Black businesses examines the treatment of minorities in the bankruptcy system.
The financial impact of the pandemic is taking a greater toll on Black Americans, according to a new report.
“Racial inequality is not a new problem,” according to a report from Upsolve, a nonprofit that provides free education, community and tools to low-income families navigating financial distress.
“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.“
Upsolve recently conducted a survey about the financial impact of the pandemic and the unequal treatment of minorities in the bankruptcy system. Among the key findings:
Nearly half of Black Upsolve users cited COVID-19 as a reason for seeking bankruptcy protection in January 2021. In April 2020, only 23 percent of Black users mentioned COVID-19 as their main reason for seeking bankruptcy protection.
The sharpest month-over-month increase in Black users citing COVID was from April to May last year (7 percent increase) and June to July (9 percent increase). It has more than doubled to 49 percent in less than a year.
Eight in 10 Black employees are not able to work remotely. During the past year, 80 percent of Black workers had to choose between risking their lives and livelihoods — and those are the ones who have managed to avoid unemployment.
Black unemployment is at its highest level in a decade. In August 2019, Black unemployment was at an all-time low of 5.2 percent. Eight months and one global pandemic later, it has shot up to 16.7 percent — a mere 0.1 percent lower than in March 2010, the worst month since the Great Recession.
Although the numbers have dropped significantly, as of January 2021 Black unemployment was still the highest it’s been in more than five years at 9.2 percent.
Black women are filing for bankruptcy at much higher rates than any other group. 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 percent 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 percent of Black individuals who cited a loss of wages as their motivation for filing for bankruptcy.
Nearly half of Black women say COVID-19 is related to the main reason for their financial distress this past month. In April 2020, 20.8 percent of Black women and 21.4 percent 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 because of the pandemic than white women.
Bankruptcy is a last resort for most Black people. When asked what other measures they took to avoid a bankruptcy filing, 69 percent of Black Upsolve users said they cut back on necessities, 36 percent sold or pawned property to make ends meet and 33 percent avoided necessary medical care.
“Bankruptcy is an often-overlooked social safety net to protect the financially distressed,” the report concluded. “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 moratoriums 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.”
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