Chicago’s ticketing policies cause spike in bankruptcies
A ProPublica report shows that since 2009, the rate of bankruptcy filings in black neighborhoods in the Northern District of Illinois has doubled.
ProPublica recently released an in-depth analysis of its study on racial patterns in individual bankruptcy filings and outcomes. The analysis focused on bankruptcy trends in the Western District of Tennessee, which includes Memphis, and the Northern District of Illinois, which includes Chicago.
The analysis found that the Chicago area’s black neighborhoods are driving the spike in Chapter 13 bankruptcy filings in the U.S. Bankruptcy Court for the Northern District of Illinois. Since 2009, the rate of Chapter 13 filings in black areas in the Northern District has doubled. In 2015, the Northern District saw more consumer filings than any other district in the nation, thanks to the massive increase in Chapter 13 bankruptcy cases.
Chapter 13 bankruptcy in Chicago
In Chapter 7 bankruptcy, the debtor’s nonexempt assets are sold off, and the proceeds are handed over to the creditors. The cases typically conclude months after filing. According to ProPublica, between 2008 and 2010, 95 percent of Chapter 7 cases nationwide involved debtors with so little in nonexempt assets that they didn’t pay anything at all. Approximately 96 percent of Chapter 7 debtors saw their debts discharged.
In Chapter 13 bankruptcies, however, debtors make ongoing payments to creditors over three to five years. Chapter 13 allows debtors to keep assets such as cars and homes, provided they make auto or mortgage payments under their repayment plans. The plan payments are based on a debtor’s income.
ProPublica found that outside the South, most consumer bankruptcies are filed under Chapter 7, except in Chicago.
Controlling for income, the report found that black debtors in the Northern District of Illinois were around four times likelier than white debtors to choose Chapter 13 over Chapter 7. This occurred despite the fact that most of the people from predominantly black neighborhoods filing Chapter 13 did not have real estate holdings.
ProPublica says this trend is being driven by low-income black debtors who can’t afford to pay Chicago traffic tickets. If a motorist doesn’t pay her traffic tickets in Chicago, her driver’s license can be suspended and her vehicle can be impounded, either of which can be a financial disaster for a low-income household.
Could red-light cameras be to blame?
From 2007 to 2014, Chicago issued more than 4 million tickets from red-light cameras, according to an investigation by the Chicago Tribune. At the same time, ProPublica shows the rate of Chapter 13 filings in the Northern District by residents in predominantly black neighborhoods increased significantly during that period. The only year to see a decrease during this time was 2011, but after that slight dip, the trend continued until ProPublica’s data set ends in 2015. The data show the number of Chapter 13 filings by debtors from predominantly black neighborhoods skyrocketed to nearly 10 per 1,000 residents in 2015, up from less than 5 per 1,000 residents in 2006. One factor contributing to the increase in such Chapter 13 filings could be the expansion of the city’s notorious red-light cameras.
One estimate from the Chicago Tribune shows the city’s red-light camera ticket revenue tripled in just seven years to more than $68.3 million in 2013 from about $21.5 million in 2006. It’s possible a correlation exists between the issuance of red-light camera tickets and the sharp rise in Chapter 13 filings.
A bankruptcy filing stops property seizures and suspensions, and Chapter 13 allows low-income debtors to keep important assets, such as cars, in exchange for structured payments to creditors. But ProPublica’s numbers show that most of these debtors cannot keep up and will not have their debt successfully discharged.
The true cost of ticketing
While not all bankruptcies are avoidable, better policy can help prevent some of these outcomes. Excessive ticketing, fines and driver’s license suspensions are fundamentally regressive and are proven to have a disproportionate impact on low-income communities as well as communities of color. And there’s evidence to suggest that many of these ticketing practices, such as those enforced by red-light cameras, don’t really keep people safe, but serve primarily as ways to generate revenue for local government.
What’s worse, many of the red-light camera tickets in Chicago have likely been issued illegally. In July, the Chicago Sun-Times reported that the city of Chicago had agreed to a settlement worth $38.75 million with motorists involved in a class-action lawsuit alleging the city had not followed its own rules pertaining to red-light and speed camera ticketing. The lawsuit alleged the city failed to give second violation notices before issuing liability determinations, failed to specify makes of vehicles, and charged late fees 21 days after the determined liability, instead of the required 25-day period.
But despite these alarming findings and Chicago’s controversial history of fines and citations, some are calling for even more ticketing. One proposal calls for hiring “super ticket writers” in all of Chicago’s 50 wards to generate revenue from fines and fees to help fill the city’s nearly $260 million budget hole.
Chicago should heed this worrisome report and implement policy solutions that remedy factors pushing low-income and black residents into bankruptcy. Rolling back Chicago’s red-light camera program would be one place to start.