CHAPTER 4 FILING TRENDS
| Jurisdiction | United States |
CHAPTER 4: FILING TRENDS
Consumer debtors rely on the bankruptcy code for a variety of reasons and there are many ways to measure the success of a case. One obvious measure is whether or not the individual receives a discharge. The ability to obtain a discharge is heavily dependent on what chapter is filed, with more than 90 percent of chapter 7 debtors receiving discharges. An ABI study considers what factors lead to "dead-on-arrival," or unsuccessful cases, and which states have higher percentages of these cases. Another study considers trends among chapter 13 cases and foreclosures in Georgia over the past 10 years. Georgia has set foreclosure days, allowing for a comparison of chapter 13s filed in foreclosure weeks and in non-foreclosure weeks. Foreclosure week filings are more than double other weeks, have more pro se debtors and are more likely to have repeat filers. The study also considers the financial profiles of debtors, case outcomes, impact on the trustees and number of hearings conducted in a case. Finally, ABI conducted a study on the changing profile of the chapter 7 debtor, examining changes in repeat filings, pro se debtors, filing fee waivers, homeownership, and other financial considerations. Overall, there appears to be a trend towards fewer debtors with less assets.
A. Dead-on-Arrival Cases (at Bankruptcy Court)
ABI Journal
January 2018
Written by:
Ed Flynn
American Bankruptcy Institute
Alexandria, Va.
Bankruptcy laws establish clear goals for debtors in each of the major chapters. Chapter 7 debtors seek discharge of certain debts after liquidation of nonexempt assets,1 while chapter 13 debtors seek a discharge of debts after completion of a repayment plan. Chapter 11 and 12 debtors seek court approval of a reorganization plan.
There is an underlying difference in the success rate by chapter. More than 90 percent of chapter 7 debtors obtain a discharge of debts.2 For chapter 13 debtors, the plan completion rate is in the 35-40 percent range. For chapter 11 cases, the plan-confirmation rate is a little below 40 percent, and about 35 percent of chapter 12 cases result in a completed plan.3
Many cases may have had a reasonable chance at success when they were filed, but ended up being dismissed or converted at a later date. Others fall into miscellaneous categories, such as cases where a discharge is not applicable, cases that are transferred within or to another judicial district, cases filed or closed in error, etc.
However, a portion of bankruptcy cases in each chapter are dead on arrival (DOA) in that they have virtually no chance at a successful outcome. How do these cases differ in key characteristics from other more successful bankruptcy cases?
First, we need to determine what constitutes a DOA case. For the purposes of this article, a DOA case is arbitrarily defined as any case dismissed within six months of filing.
Source of Data
The Federal Judicial Center, in partnership with the Administrative Office of the U.S. Courts, has recently made available an extensive Interactive Data Base (IDB) of bankruptcy cases that contains a record for every bankruptcy case filed and closed since 2008. This data allows researchers to work with case-level data rather than summary data.4 For this article, all chapter 11 and 12 cases closed between fiscal years 2010-16 were examined. For chapter 7 and 13 cases, a sample of cases closed each month during this period was selected.
Chapter 7 Cases
The chapter 7 sample used for this article consists of 240,751 cases filed that were closed in fiscal years 2010-16, as shown in Table 1. Of these cases, 11,130 (4.6 percent) were dismissed within six months of filing.
| Table 1: Sample of Chapter 7 Cases Closed During Fiscal Years 2010-16 | |||
| DOA Cases (Dismissed Within Six Months) | Discharged in Chapter 7 | All Chapter 7 Cases* | |
| Total Cases | 11,130 | 223,505 | 240,751 |
| Percent Filed Pro Se | 50.3% | 6.1% | 8.5% |
| Percent Joint Filings | 15.2% | 30.5% | 29.5% |
| Percent with 1 or More Prior Filings | 21.0% | 6.3% | 7.1% |
| Filing Fees Not Paid in Full at Filing | 38.3% | 9.2% | 10.7% |
| Asset and Liability Schedules Not Filed | 39.7% | 2.0% | 4.3% |
| Percent with Real Property | 41.9% | 50.5% | 50.2% |
| Median Real Property Amount | $154,077 | $132,590 | $134,118 |
| Median Personal Property | $7,975 | $13,297 | $13,125 |
| Median Unsecured Debt | $39,626 | $46,530 | $46,574 |
| Income & Expense Schedules Not Filed | 50.9% | 13.3% | 16.0% |
| Median Current Monthly Income | $2,500 | $2,996 | $2,987 |
| Median Average Monthly Income | $2,259 | $2,609 | $2,602 |
| Median Monthly Expenses | $2,545 | $2,842 | $2,837 |
| * This total includes 6,116 cases that do not fit into the first two categories, including cases dismissed more than six | |||
Unsuccessful chapter 7 cases are much more likely to have been filed pro se, involve debtors who have filed before or be solo (not joint) filings. Debtors in these cases are also much more likely to not file all their required schedules or to pay their filing fees in full at the time of filing.
The differences were less marked in their financial profiles. The DOA debtors had less personal property and slightly lower monthly incomes and expenses than other chapter 7 debtors. They were also less likely to be homeowners, but among the homeowners, property values were a little higher.
States with the highest proportion of DOA chapter 7 cases include California (9.3 percent),5 Florida (6.9 percent), Utah (6.6 percent), Arkansas (6.1 percent) and North Dakota (5.9 percent). States with the lowest proportion of unsuccessful chapter 7 cases include Kansas (0.9 percent), Alaska (1.1 percent), Minnesota (1.2 percent), Hawaii (1.3 percent) and Maine (1.5 percent).
| Table 2: Chapter 11 Cases Closed, Fiscal Years 2010-16 | ||||
| DOA Cases (Dismissed Within Six Months) | Other Dismissed or Converted Cases | Other Cases (Mostly Confirmed) | All Chapter 11 Cases * | |
| Total Cases | 9,543 | 35,148 | 30,466 | 76,082 |
| Percent of Total Cases | 12.5% | 46.2% | 40.0% | |
| Filed Pro Se | 23.4% | 5.5% | 0.8% | 12.5% |
| Joint Filing | 5.1% | 10.1% | 9.1% | 9.0% |
| Prior Filing | 17.6% | 10.1% | 5.1% | 9.4% |
| Fees Not Paid | 9.9% | 3.1% | 2.0% | 3.6% |
| Asset and Liability Schedules Not Filed | 44.5% | 16.8% | 37.0% | 29.0% |
| Small Business Case | 41.5% | 27.8% | 15.2% | 24.0% |
| Single-Asset Real Estate | 18.4% | 12.5% | 6.3% | 11.1% |
| * Total includes 925 cases that do not fit into the first two categories, including cases dismissed more than six months after filing | ||||
Chapter 11 Cases
The chapter 11 population examined here includes the 75,157 cases that were originally filed under chapter 11 and that were closed in fiscal years 2010-16, as shown in Table 2. These were divided into three groups — DOA cases, cases dismissed or converted more than six months after filing, and all other cases — most of which presumably resulted in a confirmed reorganization plan.6
About one out of eight chapter 11 cases fall into the DOA category. Pro se debtors, single-asset real estate, debtors with one or more prior filings, small-business debtors or debtors who did not pay their fees in full at the time of filing are much more likely to fall into this category. One anomalous finding is that a higher-than-average percentage of the presumably confirmed cases were missing their asset and/or liability schedules. This did not occur with the data for cases filed in other chapters.
Chapter 12 Cases
The sample includes all 3,090 cases that had been filed under chapter 12 that were closed in fiscal years 2010-16, as shown in Table 3. They are sorted into three groups: DOA cases, discharged cases and other cases, most of which were converted or dismissed more than six months after filing.
| Table 3: Chapter 12 Cases Closed, Fiscal Years 2010-16 | ||||
| DOA Cases (Dismissed Within Six Months) | Discharged Cases | Other Cases (Mostly Dismissed or Converted) | All Chapter 12 Cases | |
| Total Cases | 285 | 917 | 1,888 | 3,090 |
| Percent of Total Cases | 9.2% | 29.7% | 61.1% | |
| Filed Pro Se | 20.4% | 1.9% | 5.5% | 6.3% |
| Joint Filing | 25.6% | 59.2% | 37.0% | 42.5% |
| Prior Filing | 25.7% | 8.6% | 17.6% | 16.3% |
| Fees Not Paid | 7.0% | 2.3% | 3.4% | 3.4% |
| Asset and Liability Schedules Not Filed | 35.4% | 11.0% | 13.6% | 15.3% |
| Median Real Property Amount | $646,000 | $360,000 | $500,000 | $475,000 |
| Median Personal Property | $146,994 | $157,822 | $140,964 | $146,563 |
| Median Unsecured Debt | $99,025 | $117,218 | $112,845 | $114,104 |
The DOA chapter 12 debtors were much more likely to file pro se, involve a solo filer, have one or more prior filings, or not pay the full filing fee. Many of the DOA cases also had missing asset-and-liability schedules. Where the schedules were filed, the personal property and unsecured debt levels were comparable to other chapter 12 debtors, and the real property debt levels were somewhat higher than for other chapter 12 debtors.
Chapter 13 Cases
The sample includes 123,185 cases that had been filed and that were closed in fiscal years 2010-16, as shown in Table 4. DOA chapter 13 cases were much more likely than average to have been filed pro se, be solo filings, to have one or more prior filings or not pay the full fees. In addition, the required schedules were often not filed in the DOA cases. In cases where the schedules were filed, DOA debtors generally had less personal property and unsecured debt and lower monthly income and expenses compared to other chapter 13...
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