Personal Bankruptcy and Race: When the Public-Private Welfare State is Predatory

Abstract

This article argues that personal bankruptcy is part of a “dual state,” that simultaneously provides welfare to some while being predatory to others. Viewed from within the tradition of the revisionist welfare state literature, which argues that the American welfare state is larger than it initially appears because of hidden, submerged, delegated, and public-private components, personal bankruptcy matches the definition of a public-private welfare state institution. Scholars argue that personal bankruptcy provides social insurance by forcing private creditors to become “insurers of last resort,” for unfortunate debtors and the outcomes surrounding personal bankruptcy conform to the predictions of revisionist welfare state literature. These outcomes, however, raise questions about whether personal bankruptcy should legitimately be considered as part of the welfare state. Applying critical race theory helps us to see that the social contract underlying the public side of personal bankruptcy is a racial contract and that capitalism, underlying the private side, is racial capitalism. For race-class subjugated populations, personal bankruptcy is part of a predatory credit regulatory regime in which the state is clearly implicated.