Undocumented Debtors

Chrystin Ondersma

Excerpted from: Chrystin Ondersma, Undocumented Debtors , 45 University of Michigan Journal of Law Reform 517 (Spring 2012) (191 Footnotes Omitted)

 

The recent recession has increased anti-immigrant sentiment and has inspired increasingly harsh measures directed at illegal immigrants, who are accused of taking jobs from authorized residents. For example, Arizona attracted national attention with its new law that makes it a state crime to be in the United States illegally and requires local law enforcement to arrest individuals suspected of being in the country illegally. Georgia, Alabama, Indiana, and South Carolina recently adopted similar measures. Additionally, some anti-immigrant activists have proposed new interpretations of the Constitution that would bar the American-born children of undocumented immigrants from citizenship. Undocumented immigrants are also disproportionately burdened by the economic slowdown, as jobs largely held by undocumented immigrants diminish in number. Undocumented immigrants face high unemployment rates in the wake of declines in construction and manufacturing. At the same time, Congress has considered some legislative proposals to help undocumented immigrants, none have been adopted.

Bankruptcy is an important safety net for those in financial distress. Entering bankruptcy proceedings can stop harassing calls from creditors, wipe away medical debt, cancel credit card debt, forestall a foreclosure, or prevent lenders from suing borrowers personally when a foreclosed property is sold for less than what it is worth.

Bankruptcy is also available, at least in theory, to undocumented immigrants. The Bankruptcy Code contains no requirement that the debtor prove lawful status. Yet, the legal literature has not addressed the availability of bankruptcy for undocumented debtors. Although bankruptcy may be a crucial tool for undocumented debtors in financial distress, these debtors face substantial barriers to bankruptcy filing. As this Article reports, few undocumented debtors seek or obtain bankruptcy relief.

This Article also considers whether the barriers faced by undocumented immigrants should be removed. This question engages two spheres of political and academic debate: first, the bankruptcy context, whether and to what degree accessibility to bankruptcy should be expanded; and second, the immigration context, whether and to what degree rights and privileges should extend to undocumented immigrants.

Many of the barriers to bankruptcy relief experienced by undocumented debtors can and should be eased. This Article proceeds in five Parts. Part I discusses the benefits of bankruptcy for our society, for debtors in general, and for undocumented debtors specifically. Part II explains that undocumented debtors are eligible for bankruptcy relief under the Bankruptcy Code. Part III reports empirical evidence suggesting that a proportionally small number of undocumented debtors currently obtain bankruptcy relief. At most, undocumented debtors file for bankruptcy at one percent of the rate of the general population. Part IV discusses a number of potential formal and informal barriers to bankruptcy relief for undocumented debtors. Part V considers whether, as a normative matter, undocumented individuals should be entitled to obtain bankruptcy relief. From both bankruptcy policy and immigration policy standpoints, the necessary participation of undocumented immigrants in a consumer credit-based economy requires that bankruptcy relief be made accessible to this population. Amendments to bankruptcy rules and guidelines, in addition to education for lawyers and others involved in the bankruptcy system, can relieve some of the existing barriers to bankruptcy relief.

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