Excerpted From: William C. Price Jr. And Edward S. Adams, Dismantling the Parking Ticket to Bad Bankruptcy Pipeline and its Disparate Impacts on the Black Community, 53 Cumberland Law Review 347 (2022-2023) (312 Footnotes) (Full Document Requested)

PriceadamsMel is a Black single mother living in a large city. Like many Americans, she works a job making a couple dollars over minimum wage and struggles to keep up with bills, but she prioritizes taking care of her growing children. Her job is far from her house, a thirty-minute drive by car, but a ninety-minute commute with multiple transfers if she takes public transportation.

One morning Mel drives to her dad's apartment to drop off her children so she can go to work. When she comes out from his house, she has another parking ticket (which only ever seems to happen in her neighborhood, and never in the more affluent neighborhood where she works). She knows without looking what this means: the fine is $100, but with fees, the total due will be $375. If she misses the due date, that's another $300. She also knows without looking that she will not be able to afford to pay that amount and keep up with her food and rent bills. With a bit of resignation, she puts the parking ticket in the glove box with the others. In all, her glove box collection contains probably $3,000 in fines and fees owed to the city. She wants to pay them, but they are simply too expensive--after all, $375 is over half of her weekly pay. For now, she will set aside $40 per week, and pay each ticket off one at a time.

The next week she receives a letter from the city informing her that her driver's license has been suspended for her unpaid fees and fines and threatening to impound her car. The following week, her car is booted and then impounded. She needs her car to get to work, to take her kids to childcare, and to get groceries, but the city tells her that she will not be able to get her car back until she pays her fines and fees in full--including $500 in new booting and impound fees. The city also has a payment plan option, but that requires a fifty percent down payment. That is just not possible.

Without a car, Mel tries to take public transportation to work, but she is consistently late and agitated from the long, frustrating, and unpredictable commute. She starts clocking out fifteen minutes early so she can run to catch the last train home. She soon loses her job because of her consistent tardiness and early departures. Without a job, she has no ability to pay rent or buy food--or save money to pay off her ticket debt.

She knows she needs a fresh start, so she calls a bankruptcy attorney after seeing one of his ads. He quickly counsels her to file for Chapter 13 bankruptcy, assuring her it is for the best since most of her debt is fines and fees and some old credit card debt. He also tells her this is the only way to get her car and license back quickly. She remembers hearing about another bankruptcy option but does not really understand the difference. Plus, the attorney says that filing a Chapter 13 case will not cost her anything up front, but the other type of bankruptcy will require $1,000 now. She does not have $1,000, so she agrees.

After she files her case, she gets her car back and finds another job, but this one is just minimum wage. She struggles to keep up with her repayment plan required in her bankruptcy. She falls behind, and her bankruptcy case is terminated early without a discharge. She leaves the bankruptcy process with her old debts still burdening her and with new debt owed to the attorney who filed her bankruptcy. With the protections of the bankruptcy process gone, the city is again threatening to impound her car. She is in a worse position than she was before the bankruptcy process.

It is all too common for egregious fees and fines to drive Black people into bankruptcy. Local governments are increasingly turning to an array of fees and fines to fund operations and avoid tax increases. Governments levy these fees and fines disproportionately on communities of color, creating a regressive tax-replacement burden on a group that is already economically marginalized. When the debt burden becomes too great to bear, those seeking debt relief encounter a bankruptcy system in which Black debtors are much less likely to achieve a meaningful discharge of debt compared to their White counterparts, often causing even more harm. To begin solving the “parking ticket to bad bankruptcy pipeline” and its disproportionate effects on the Black community, Congress must make several necessary statutory fixes to appropriations bills and the Bankruptcy Code. These changes are important, given that racial inequities are often overlooked in the bankruptcy process.

This Article will explore the components of this “parking ticket to bad bankruptcy pipeline” with an emphasis on the disparate impact on the Black community. This specific topic fits into broader discussions of racial justice and racial equity at both the individual enforcement and systemic levels, though this Article will focus mainly on systemic causes and solutions. This topic is especially timely for two reasons given the economic uncertainty brought on by the coronavirus pandemic. First, during recessions, cities and states raise fees and fines to offset lost tax revenue, so the disproportionate burden communities of color bear for these fees and fines will likely be exacerbated, leading to debt spirals into bankruptcy. Second, personal bankruptcies in total increase during recessions.

This Article will explore the causes and potential federal legislative solutions to begin dismantling the inequitable pipeline. Part I of this Article will discuss the background of the rise of fees and fines to fund local government and provide a basic primer on certain relevant portions of the Bankruptcy Code and process. Part II will examine two case studies--Chicago and Ferguson--to determine how these policies intersect in real communities to disproportionately impact communities of color. Part III will offer and analyze solutions that Congress should adopt to both incentivize a decrease in the use of fees and fines to fund governments, in addition to mechanisms to improve the likelihood for Black debtors to achieve a successful discharge of their fine and fee debt if they choose to file bankruptcy. The solutions include conditions on certain federal funds given to states, as well as amendments to the Bankruptcy Code to make the process more equitable.

[. . .]

At present, the parking ticket to bad bankruptcy pipeline disproportionately affects Black Americans. Economic downturns and an aversion to taxes drive the rise of municipal fees and fines, and governments disproportionately target Black communities to shoulder those burdens. To collect this debt, many governments turn to license suspensions and car seizures, creating inescapable debt spirals that drive debtors to bankruptcy. Once a Black debtor gets into the bankruptcy system, that system itself can perpetuate the debt spiral, and he or she is less likely to achieve a discharge than his or her White counterparts.

By using Congress's constitutional powers for spending and bankruptcy, these solutions provide incentives for state and local governments to decrease reliance on regressive fees and fines, especially on the backs of marginalized citizens. Under these solutions, governments will be incentivized to levy reasonable fines and to create achievable payment plans. These reforms will also decrease the disproportionately bad outcomes Black debtors experience in the bankruptcy system by updating the Bankruptcy Code and increasing awareness of the current disparities. With these changes, Black debtors will hopefully encounter a just, equitable bankruptcy system that they successfully navigate to discharge. Ultimately, the authors hope that the solutions presented in this Article can lead to a system in which fewer people need the “fresh start” of bankruptcy but all people have an equitable opportunity to achieve that fresh start when needed.

William C. Price Jr. J.D. 2022, University of Minnesota Law School; B.S. 2013, Miami University Farmer School of Business.

Edward S. Adams. Howard E. Buhse Professor of Finance and Law, University of Minnesota; M.B.A. 1997, Carlson School of Management at the University of Minnesota; J.D. 1988, University of Chicago; B.A. 1985 Knox College.