UNJUST DEBTS

An exposé of the racial, class, and corporate biases in the U.S. bankruptcy system.

In her first book, Jacoby, a professor of law at the University of North Carolina, argues that bankruptcy has “fallen short” as a legal tool to provide debt relief for struggling individuals and families. Instead, it “entrenches existing hierarchies and power structures.” Under the federal Bankruptcy Code, individual bankruptcy places onerous demands on filers and tramples on their privacy, with Black filers suffering additional discrimination. The bankruptcy courts are more accommodating to businesses, which the author labels “fake people.” Businesses are able to retain their autonomy, and all debts, unlike for individuals, qualify for cancellation. In municipal bankruptcy filings (such as Detroit recently undertook), the courts favor financial claimants over public services. What most angers Jacoby are organizations such as Purdue Pharma or the Boy Scouts of America, which use the system to resolve civil liabilities resulting from the harm—e.g., opioid addiction, sexual abuse—that they have caused. Many of these filings occur when the organization is not seriously indebted. Such cases deny claimants a voice in the resolution, block them from pursuing civil cases, and grant minimal payments or none at all—“a promise to pay is not money.” Although the legal and administrative detail is at times daunting, Jacoby offers a convincing and mostly accessible assessment of how an ostensibly just system can be manipulated to be decidedly unjust. As for reform, she offers only general recommendations such as prohibiting the use of bankruptcy for litigation management and increasing transparency in corporate and municipal filings. Given the prevalence of personal and business bankruptcies and the ripple effects they induce (job loss, family disruption), this book is deserving of wide readership.

An impassioned plea for confining bankruptcy to its core purpose of resolving just debts justly.