189 research outputs found
Professional Fees and Other Direct Costs in Chapter 7 Business Liquidations
Here we provide a comprehensive look at direct costs associated with chapter 7 business bankruptcy liquidations by examining cases from five geographically dispersed judicial districts. This Article measures chapter 7 direct costs, which are essentially out-of-pocket administrative costs associated with chapter 7 proceedings. Examples of direct costs include attorneys\u27 fees, filing fees, and other professional fees. Part II describes the procedures we followed in gathering data. Part II also sets forth several assumptions we made when describing direct costs. Each time an assumption needed to be made, we took the assumption that produced the lowest bankruptcy costs. Accordingly, the data in this Article is a conservative estimate of chapter 7 costs. Part III describes the characteristics of the debtors and cases in our sample. Part IV discusses the actual cost measurements and quantifies the costs of chapter 7 business bankruptcy. Part V uses statistical analysis to identify determinants of chapter 7 costs. Part VI summarizes our major conclusions
Driven to Bankruptcy
Over the last ten years, 15.1 million people owning 16.4 million cars filed for bankruptcy. These cars provided access to work, education, medical care, childcare, food, and other life necessities. They were also major household investments, the most expensive asset most bankruptcy filers owned other than a house. Using original data from the Consumer Bankruptcy Project, we document what happens to car owners and their car loans when they enter bankruptcy. In brief, we find that people who file bankruptcy own automobiles at the same rate as the general population and that they overwhelmingly indicate they want to use bankruptcy as a tool to keep their automobiles. We further identify a subset of debtors, constituting about a third of bankruptcy filers, who come to bankruptcy owning automobiles and little else. These cases are the most likely to be filed by people driven to bankruptcy. We detail what our results show about how people use consumer bankruptcy and where the system appears to falter. We conclude with recommendations on how to remedy these systemic issues as well as what the future of the automobile marketplace, particularly subprime auto loans, means for people\u27s continued use of bankruptcy
Life in the Sweatbox
The time before a person files bankruptcy is sometimes called the financial âsweatbox.â Using original data from the Consumer Bankruptcy Project, we find that people are living longer in the sweatbox before filing bankruptcy than they have in the past. We also describe the depletion of wealth and well-being that defines peopleâs time in the sweatbox. For those people who struggle for more than two years before filing bankruptcyâthe âlong strugglersââtheir time in the sweatbox is particularly damaging. During their years in the sweatbox, long strugglers deal with persistent collection calls, go without healthcare, food, and utilities, lose homes and other property, and yet remain ashamed of needing to file. For these people in particular, though time in the sweatbox undermines their ability to realize bankruptcyâs âfresh start,â they do not file until long after the costs outweigh the benefits. This Articleâs findings challenge longstanding narratives about who files bankruptcy and why. These narratives underlie our laws, influence how judges rule in individual cases, and affect how attorneys interact with their clients
Life in the Sweatbox
The time before a person files bankruptcy is sometimes called the financial âsweatbox.â Using original data from the Consumer Bankruptcy Project, we find that people are living longer in the sweatbox before filing bankruptcy than they have in the past. We also describe the depletion of wealth and well-being that defines peopleâs time in the sweatbox. For those people who struggle for more than two years before filing bankruptcyâthe âlong strugglersââtheir time in the sweatbox is particularly damaging. During their years in the sweatbox, long strugglers deal with persistent collection calls, go without healthcare, food, and utilities, lose homes and other property, and yet remain ashamed of needing to file. For these people in particular, though time in the sweatbox undermines their ability to realize bankruptcyâs âfresh start,â they do not file until long after the costs outweigh the benefits. This Articleâs findings challenge longstanding narratives about who files bankruptcy and why. These narratives underlie our laws, influence how judges rule in individual cases, and affect how attorneys interact with their clients
No Money Down Bankruptcy
This Article reports on a breakdown in access to justice in bankruptcy, a system from which one million Americans will seek help this year. A crucial decision for these consumers will be whether to file a chapter 7 or chapter 13 bankruptcy. Nearly every aspect of their bankruptcies â both the benefits and the burdens of debt relief â will be different in chapter 7 versus chapter 13. Almost all consumers will hire a bankruptcy attorney. Because they must pay their attorneys, many consumers will file chapter 13 to finance their access to the law, rather than because they prefer the law of chapter 13 over chapter 7. Attorneys charge about 3,200 to file a chapter 13 bankruptcy, but clients can pay attorney fees over time as part of their cases. Chapter 7 and 13 bankruptcies also differ in the relief achieved. Almost all chapter 7 cases end with the debtor receiving a discharge of debts. In contrast, only around one-third of chapter 13 cases end in discharge. This Article exposes the increasingly prevalent phenomenon of debtors paying nothing in attorneysâ fees to file chapter 13. New data from the Consumer Bankruptcy Project, our original empirical national study, suggest that these âno money downâ consumers are similar to those who use chapter 7. However, because they cannot afford to pay their attorneys up front, these âno money downâ bankruptcy debtors suffer. They pay $2,000 more and have their cases dismissed at a rate 18 times higher than if they had filed chapter 7. The two most significant predictors of whether a consumer files a âno money downâ bankruptcy are a personâs place of residence and a personâs race. We could not identify legitimate ways that these factors correlate with debtorsâ needs for the substantive legal benefits of chapter 13. âNo money downâ bankruptcy can be a distortion in the delivery of legal help. We suggest reforms to how attorneys collect fees from consumer debtors that will reduce the potential conflict between clientsâ interests and attorneysâ interests. The reforms will deliver access to justice and improve the functioning of the bankruptcy system
Predispositions and the Political Behavior of American Economic Elites: Evidence from Technology Entrepreneurs
Economic elites regularly seek to exert political influence. But what policies do they support? Many accounts implicitly assume economic elites are homogeneous and that increases in their political power will increase inequality. We shed new light on heterogeneity in economic elites' political preferences, arguing that economic elites from an industry can share distinctive preferences due in part to sharing distinctive predispositions. Consequently, how increases in economic elites' influence affect inequality depends on which industry's elites are gaining influence and which policy issues are at stake. We demonstrate our argument with four original surveys, including the two largest political surveys of American economic elites to date: one of technology entrepreneursâwhose influence is burgeoningâand another of campaign donors. We show that technology entrepreneurs support liberal redistributive, social, and globalistic policies but conservative regulatory policiesâa bundle of preferences rare among other economic elites. These differences appear to arise partly from their distinctive predispositions
Did Bankruptcy Reform Fail? An Empirical Study of Consumer Debtors
Just three years ago, Congress enacted controversial amendments to the Bankruptcy Code. The proponents claimed that the changes would drive the can pay debtors (of which there were supposedly many) from the bankruptcy courts with tough new income-based eligibility requirements. And indeed, after the enactment of the amendments, the number of people filing for bankruptcy plunged. In this Article - the initial report of the 2007 Consumer Bankruptcy Project - the authors analyze the first national, random sample of post-amendments bankruptcy filers. Contrary to the advocates\u27 claim that high-income filers would be driven from the system and, by implication, that those remaining would have more modest incomes, the data show no change in the income levels of bankruptcy filers after the amendments. These findings thus cast doubt on the suggestion that those purged from the bankruptcy courts - approximately 800,000 in 2007 alone based on trend extrapolation - were high-income deadbeats; they instead appear to have been ordinary American families in serious financial distress. The data also show that debtors filing for bankruptcy in 2007 have even greater debt loads than their counterparts from 2001, a development that seems to track a national trend of increasing consumer debt. The findings thus align with at least two predictions of some legal scholars. The first is that the bankruptcy reform bill was not aimed at high-income abusers but was instead a general assault on all debtors, regardless of their financial circumstances. The second is that debtors are waiting longer - and incurring more debt - before ultimately seeking bankruptcy relief, consistent with the so-called sweat box theory of credit card lending
Interpreting Data: A Reply to Professor Pardo
Professor Pardo has published a pointed critique to our Report, raising three major complaints. First, he claims that we make two predicating assumptions in our study that are flawed. Second, he contends that we misunderstand the means test and fail to appreciate with sufficient nuance its operative effect. Third, he maintains that our Report suffers from methodological problems. We can address the two impugned assumptions quickly. The first one - that BAPCPA\u27s means test is the sole causal agent driving 800,000 putative filers from the bankruptcy courts - is not one we make. The second - regarding the income profiles of the missing 800,000 bankruptcy filers - is actually somewhat consistent with predictions Professor Pardo himself makes elsewhere in his critique. The thrust of Professor Pardo\u27s commentary, however, is his second point - that we simply don\u27t get the means test - and so we begin our response by addressing this contention. We then discuss our methodology, which we believe is quite robust, before finally elaborating on why we are sanguine in dismissing his complaints with the two assumptions he claims we make
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