Forgive Us Our Debts: How Black Churches Use Bankruptcy to Survive

There is no easy explanation for why a disproportionately high number of Black churches turn to the bankruptcy system to reorganize. Drawing on my data, I looked for distinctions: location, denomination, leadership structure, or the reasons churches took on loans. Nothing explains why Black churches would need to seek to reorganize more often than other churches. Except their Blackness, which may be linked to their lenders.

Churches are essential to Black communities. They have always been prominent places for the Black community to gather. They have served—and continue to serve—as anchors of economic development. Black church buildings are pillars of the community. The buildings themselves are one of the leading places where the community can grow its money and wealth. In a country in which Black households hold a slight fraction of wealth as compared to white households, this is notable.

Research has consistently shown that Black people pay more for home loans, auto loans, student loans, and credit cards. Likewise, research finds that traditional lenders are less likely to offer Black people and Black-owned businesses credit. Lenders may have extended Black churches loans with onerous terms or may have been unyielding in negotiations when Black churches faced difficulties. Such would have matched the history of lending to Black households and businesses.

Based on court records, the Black churches that sought to reorganize did not necessarily seem financially or operationally at fault, at least more so than other churches. Factors outside Black churches' control may have influenced their paths to reorganization. The church lending market and how lenders interacted with churches could lead Black churches to turn to reorganization more so than other churches.

My discussions with church leaders and bankruptcy attorneys confirm that loans and lenders heavily influenced their decisions to turn to reorganization. Black churches were sold the equivalent of subprime home loans to purchase, renovate, or expand buildings. Mainstream banks turned some churches away, leading them to approach financial institutions that would be more likely to sell them expensive loans. And some churches were sold loans by Christian-based lenders that also turned out to have high interest rates and expensive terms.

When churches faced financial or operational problems, their lenders were slow to negotiate or simply refused to negotiate. The legal process of reorganization brought lenders to the table, forcing them to give churches the deals they probably should have gotten in the first place. And more of the churches that needed to force lenders in this way were Black churches.

Forgive Us Our Debts details how Black churches found a place in bankruptcy court and through the reorganization process to fight back and survive. Still, churches that seek to reorganize know they are paying money and sacrificing time they could be helping their communities for their successes in bankruptcy court. The church lending market deserves a rigorous review of its lending practices.

Ongoing thread. More from Pamela Foohey to follow.