2018 The University of Florida Award for Investigative Data Journalism, Small/Medium Newsroom finalist

Too Broke for Bankruptcy

About the Project

In October 2017, two members of the Memphis City Council published an open letter about the shortcomings of how personal bankruptcy cases are handled in their city. They noted that less than one-third of Memphis residents who enter debt repayment programs actually complete them, a stunningly low rate much worse than the national average.

“This is unacceptable and we plan to act,” they wrote.

The officials were reacting to a ProPublica investigation that identified Memphis as “the bankruptcy capital of the U.S.” The story, by reporter Paul Kiel, described how the bankruptcy system is disproportionately failing African Americans, particularly in Memphis, and identified the driving force behind this trend. A handful of attorneys, mostly white, steer their African-American clients into Chapter 13 rather than Chapter 7 bankruptcy proceedings, which makes it more likely bankruptcy petitioners will pay their legal fees – but less likely that they will get lasting debt relief.

That seemingly arcane distinction can have devastating consequences. It was life-changing for Novasha Miller, a mother of three who was trying to escape from desperate financial straits when Kiel met her at the U.S. Federal Bankruptcy Court in Memphis.

Chapter 13 requires minimal upfront payment – many Memphis attorneys allow clients to go forward with no money down. But over time, the proceedings end badly far more often than Chapter 7, according to a first-of-its-kind analysis undertaken by Kiel and Hannah Fresques, a ProPublica journalist who specializes in advanced statistics.

Kemp Conrad and Patrice Robinson, the two council members, say the ProPublica story has prompted them to look holistically at the problem, from improving mass transit (so residents won’t feel forced into bankruptcy to retain their cars) to efforts to reduce utility cutoffs by Memphis Light, Gas & Water.

The Memphis Commercial Appeal reprinted the ProPublica article and ran an editorial reprising its findings. “When this bankruptcy issue came to my attention, I immediately wanted to make it my next priority,” Robinson said at a hearing earlier this year. “We’re going to act, quickly and decisively.”

Later, in “How to Get Away With Bankruptcy Fraud,” Kiel described how a network of hustlers prey on people in Los Angeles. No other district in the country had nearly as many bankruptcy cases filed without an attorney. When Kiel dug further, he discovered the reason behind this anomaly. Fly-by-night firms with names like JC Foreclosure Service were helping people stay in their homes temporarily by filing hopelessly flawed bankruptcy petitions. Not only were these legal strategies ineffective, they also frequently prevented poor people from filing legitimate bankruptcies. Remarkably, Kiel interviewed several operators of these companies who casually acknowledged breaking the law.

Kiel and Fresques’ work combined cutting edge statistical analysis with gritty, street-level reporting. We are proud to nominate it for the University of Florida Award for Investigative Data Journalism.