“Unjust Debts”: A Book Talk with Melissa Jacoby

When Melissa Jacoby was in law school, one particular course changed her life: a bankruptcy course taught by Elizabeth Warren, then a law professor. After graduation, Jacoby clerked at a federal bankruptcy court. Today, Jacoby is the Graham Kenan Distinguished Professor of Law at the University of North Carolina, where she researches and teaches bankruptcy law. 

But in her book “Unjust Debts: How Our Bankruptcy System Makes America More Unequal” (The New Press), Jacoby writes about how her relationship with bankruptcy law “is a story of falling out of love.”

On March 4, the Solomon Center for Health Law and Policy hosted Jacoby for a conversation about “Unjust Debts” with Visiting Lecturer in Law G. Eric Brunstad Jr. ’11 LLM, ’14 JSD.

Written for a general audience, the book talks about the many paths in which the law perpetuates hierarchies in society, including racial disparities and disparities between individuals and corporations, Jacoby explained. 

Jacoby noted that the problem the book highlights is that the system underperforms when it comes to individual filers, the people who need the law’s protection the most. 

Although the majority of bankruptcy filers are people, bankruptcy courts are sometimes considered a preferred forum for corporations. 

Jacoby said lawyers for big corporations use the bankruptcy system to advance their clients’ goals, even if those goals have little to do with bankruptcy. Specifically, she pointed to three elements of U.S. bankruptcy law that she said make the law a convenient tool for such efforts: (1) Automatic injunctive relief once bankruptcy is filed; (2) cancellation or modification of debts, which are defined broadly; and (3) the option to seek restructuring plans, where a decision by the majority of creditors binds everyone.

Racial disparities that pertain to bankruptcy processes and outcomes are also a major problem, according to Jacoby. She discussed the ways in which the system makes it more difficult for Black people to receive debt relief and how the system exacerbates preexisting racial discrimination in credit markets. 

Jacoby traced some of the problem to 2005 amendments to the U.S. bankruptcy code, which were lobbied for by credit card companies. According to Jacoby, the system wasn’t perfect before, but in her view, the 2005 set of amendments in 2005 exacerbated preexisting problems.

Jacoby pointed to recent high-profile litigation — such as opioid cases involving Purdue Pharma — as just one example of how bankruptcy and health are related. She noted that since the beginning of her academic career she has seen a relationship between health policy and bankruptcy, including researching debt as a social determinant of health. Moreover, many people file for bankruptcy for health-related reasons, such as unpaid medical bills or the need to provide care work for older adults.

The event concluded with an active Q&A session that included questions about the role of bankruptcy in mass tort litigation and the definition of debt.