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Bankruptcy, Gender, Race : :, overtime, women's insolvency rate has…

- - - - Blacks earn 75% as much as their white counterparts
      - Black and Hispanic women lag behind white women
      - all women have narrowed the gap with men overtime, but still lag behind
      - Black and Hispanic men have not narrowed the gap with white men since none of these men have seen significant wage improvements over decades
      - Asian men outpace white men
    - - despite this, college educated Black and Hispanic men still earn less than their white counterparts
      - part of the wage gaps can be explained due to discrimination
  - - - income of their partner has fallen or they no longer have access to the income of their partner
        
        women are more likely to be dependent on someone elses income
      - more likely to enter bankruptcy due to overspending
      - struggling with the cost of living
- - - - 20% of student loans are in default
        
        compounding the problem is a job market with a high unemployment rate
        
        student debt is only rational if 1) the amount of debt is proportionate to the amount of income that can be expected and 2) there will be sufficient employment opportunities post-graduation
        
        student loans are not dischargeable except under a very strict undue hardship test
        
        federal student loans are about 85% of all student loans
        
        federal student loans not subject to any statute of limitations
        
        Brunner 3 part hardship test
        
        debtor must prove they cannot maintain a minimum standard of living if forced to repay the loan
        
        state of affairs is likely to last an extended period of time
        
        debtor has made good faith efforts to repay the loan
        
        totality of the circumstances test
      - 14% of households have student loan debt
        
        cost of education increasing at a higher rate than inflation
        
        amount of students borrowing also increasing
        
        the Bennett Hypothesis is that as credit becomes more accessible, tuition costs rise, requiring even more credit
    - - lenders will be unwilling to lend to students with no credit history
      - if too many student loans are discharged then there will not be sufficient funds for future students
      - borrowers will abuse student loan discharge
  - - - student debt has lowered consumption and has hampered recovery of the real estate market
    - - investing in human capital is critical for economic development
    - - one solution is repayments that vary with individual income post-graduation
  - - - elite schools spend about twice as much on education per student
      - upper-middle class families that are currently sending their kids to private colleges may choose to send their kids to public colleges, increasing competition for the limited spaces
        
        increasing diversity will be challenging due to Supreme Court limits on affirmative action
  - - - private lenders have the opportunity to charge higher prices than needed to cover risk, due to market inefficiencies
      - factors outside the borrowers control may still impact risk: race, parental socio-economic status, inehrent abilities
        
        imoprtant to not include these factors when calculating risk-based pricing for government objectives
  - - - inconsistency in the application of the legislation
        
        some courts have used surplus income as a measure of harship while others have not
        
        interviews with lawyers show access to justice issues as the explanation for the small number of decisions
    - - some students never graduated so they will not reap the benefits of the higher income associated with the student loans
      - studies show debtors with student loans oftnetimes have the same jobs as other debtors without student loans
      - some debtors experience special hardship making it nearly impossible to pay back their student loans
    - - private student loans should continue to be dischargeable in bankruptcy
      - government student loans should continue to be provable debts in bankruptcy
      - the timeline for the dischargeability of student loans should be removed from the BIA and moved to the Bankruptcy and Insolvency General Rules which can be more easily modified
        
        the General Rules should also outline the criteria for a s178(1.1) hearing, to aid self-reresented debtors
  - - - treatment of medical ailments and single parenthood did differ based on gender (secondary effect of gender)
        
        e.g. female debtors alleging a medical ailment fared worse than their male counterparts
        
        can be due to stereotypes of brave men and emotional women
        
        female single parents had a higher likelihood of discharge compared to their male counterparts
        
        female mothers are oftentimes the custodial parent
        
        policy implications:
        
        legal representation in bankruptcy cases can increase the likelihood of discharge by 64%
        
        more emphasis on legal rules rather than legal standards may remove the opportunity for judicial bias to taint a decision
- - - - housing and lending discrimination was a matter of policy
        
        female head of households and neighbourhoods of colour were excluded from federal lending
        
        women began joining the workforce but still could not acess credit
        
        1974 Equal Credit and Opportunity Act made it illegal to discriminate on gender
        
        important to understand that there was now equal access to the credit market as a whole but not equal access to the same credit products
        
        credit could only be accessed through the male head of household
        
        this Patriarchal element also had negative effects on men
        
        fair housing act of 1968 still excluded women...
    - - fueled by deindustrialization, economic decline, rising unemployment
        
        neoliberalism led to: securitization, change in the conception of market risk, automated underwriting
        
        subprime market began to form due to elimination of interest rate caps
        
        mortgage brokers were incentivized to push subprime loans even if the borrower qualified for a prime loan
        
        the disproportionate amount of women in the subprime loan market cannot be explained by their financial profile
        
        Black people were previously excluded from home-ownership due to redlining and still feel the effects today
  - - - households used the higher wealth (due to the bubble) to borrow more
        
        lower interest rates also led to homeowners to purchase more expensive homes
        
        subprime borrowers were deceived to take out loans with teaser rates
        
        subprime borrowers also did not require a down payment
        
        when the crisis occurred, subprime borrowers were encouraged to refinance their home... thereby turning unsecured debt into secured debt
        
        subprime lenders targeted minority neighbourhoods and poor neighbourhoods
        
        subprime lenders also used predatory practices such as bait and switch
    - - the Federal Reserve was reactive not proactive
    - - national ratings agencies also are responsible for giving higher ratings to mortgage backed securities that had terrible quality loans mixed in with them
- - - - relies upon time-varying preferences (e.g. consumer vs planner self)
      - requires people to over-indulge / over-consumer
      - explains middle class bankruptcies better than lower class bankruptcies
        
        even with full information about the risks, there may be times that taking on debt is optimal
      - the change of preferences over time, impulsiveness
    - - used to justify non-waivable right of discharge, and a ban on reaffirmation of debts
        
        individuauls underestimate the risk of borrowing
        
        can also be used to justify the dischargeability of student loans
        
        creditors have learnt to exploit the lack of information and cognitive biases of consumers
        
        policy-makers can also use price-wedges to make certain contracts unnatractive
        
        only minority of cases are impacted by bounded rationality, self interest, or willpower, since most bankruptcies occur due to unexpected and unforeseen events
        
        Jackson argues that consumers understand their bounded willpower and rationality may cause them to waive their right of discharge
        
        it is also in a lenders self-interest to induce borrowers to underestimate risks
        
        studies have found no impact that exemptions increase the cost of borrowing
        
        assets that are typically protected in bankruptcy:
        
        retirement savings since they are hard to access early
        
        Jackson argues that non-purchase money security interests should be protected
        
        the law aims to balance the desires of society as potential bankrupts and the desires of society as those who potentially bear some of the costs of bankruptcies
      - the use of heuristics or rules of thumbs to make calculations
        
        e.g. over-optimism, availability, representativeness, anchoring and adjusting
        
        decisions underestimate future risks
        
        helps lower deliberation costs
    - - non-dischargeability of student loans is due to the negative impact of making discharge freely available
      - education is a human capital asset that cannot be repossessed
    - - protection of reputation, altruisim
      - decision makers are more generous than traditional models assume