Investigating the Unintended Consequences of the 2005 BAPCPA Means Test on the Bankruptcy Chapter Choice Decision

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1 Volume 4, Issue 1, 2011 Investigating the Unintended Consequences of the 2005 BAPCPA Means Test on the Bankruptcy Chapter Choice Decision Donald Hackney, Assistant Professor, Gonzaga University, Matthew McPherson, Associate Professor, Gonzaga University, Daniel Friesner, Professor, North Dakota State University, Abstract The Bankruptcy Abuse Prevention Consumer Protection Act (BAPCPA) introduced a means test to identify highincome bankruptcy filers and force them to file for bankruptcy under Chapter 13. This analysis investigates whether a typical individual s propensity to file under Chapter 7 versus Chapter 13 varies significantly based on factors outside of those captured by the means test. Geographical factors or filer characteristics should not be significant predictors of chapter choice. Findings suggest the means test distorts the propensity of Chapter 7 versus Chapter 13 filings, which leads to the cost of credit being transferred from the debtor to the creditor. I. Introduction The Bankruptcy Abuse Prevention Consumer Protection Act (BAPCPA) was adopted in April One major goal was to discourage high income individuals from filing for protection under Chapter 7 of the Bankruptcy Code (where most of the debts were discharged) in favor of filing a Chapter 13 plan, where the creditors receive some portion of their claims pursuant to a court approved time payment plan. BAPCPA introduces the means test as its principle measure of a filer s ability to repay his/her outstanding debts. The means test relies on median income data from the U.S. Census Bureau, which varies by State and family size. The means test is a median standard, and potential filers below this median can file Chapter 7 bankruptcy (if they otherwise qualify) on the grounds that they are not able to pay their creditors. In that case an individual s non-exempt assets are liquidated to pay as many debts as possible and the filer is not required to repay the remaining obligations to creditors. Those potential filers above the median are presumptively disqualified from Chapter 7 and, subject to further household expense scrutiny, might be shifted to Chapter 13. These filers are considered to be in an income category where Chapter 7 liquidation is unwarranted, and some payment to creditors is appropriate. The crucial factor in the effectiveness of the BAPCPA legislation is the ability of the means test to compel debtors into filing under Chapter 13. If the means test is set appropriately (i.e., sufficiently low), individuals are shifted into Chapter 13 filings, resulting in a higher level of debtor accountability and more repayment to creditors 1. This analysis investigates whether a typical individual s propensity to file under Chapter 7 versus Chapter 13 varies significantly based on factors outside of those captured by the means test. Under the current legislation, geographical factors or filer characteristics, such as occupation or single/joint filer, should not be significant indicators of chapter choice. If significant variation by geography or filer characteristics is found, the means test may distort filing choice in an unintended manner. In this case, further investigation is warranted to identify the cause of this possibly inefficient or inequitable distortion. Failure to find geographic or filer variations in filing patterns suggests (but does not prove) that the means test is, in fact, meeting its intended goals. II. Background The Bankruptcy Code, adopted in 1978, was perceived to be generally debtor friendly by the public, courts, and practicing attorneys. The Code s pro-debtor orientation, coupled with a national trend towards expansion of State exemption statutes, provided a legal environment where bankruptcy was seen as an increasingly attractive solution for financially troubled American families, individuals and businesses. The result was a dramatic and consistent rise in bankruptcy filings over the twenty-five year period of 1980 through 2004 (1980 filings totaled 321,264, increasing to 1 For the Eastern District of Washington State, the actual proportion of Chapter 13 bankruptcies has decreased from percent from to 19 percent in 2010 (United States Bankruptcy Court: Ten Year History in Bankruptcy Filings, 1/4/2011). 1

2 1,577,651 in 2004). The gross increase of 1,256,387 filings constituted a 391 percent increase in a generally healthy environment, obviously out-stripping population growth and other potentially relevant demographic data (American Bankruptcy Institute, 2009). This substantial increase in discharged debts represented a shifting of costs in the economy and more specifically increased credit costs for all consumers. The predictable outcry from credit proffering businesses, particularly banks and credit card companies (Senate Congressional Report, 2005), provided the impetus for BAPCPA. BAPCPA provides a thorough overhaul of the Bankruptcy Code, generally rendering the Code more creditor-friendly. One of the principle goals of BAPCPA was to shift more debtors from Chapter 7 (Liquidations) to Chapter 13 (Adjustments of Debts). From a typical creditor s perspective, Chapter 13 is preferable allowing for a plan to repay all, or some portion of, debts over a month repayment period. Chapter 7, with its broad discharge and simplicity, (and no more payments) is obviously a better option for debtors and their bankruptcy preparers (usually lawyers). The method Congress adopted to achieve the shift from Chapter 7 to 13 was the modification and strengthening of 11U.S.C.707(b). Under the prior law, 707(b) was a tool available to U.S. Trustees to challenge Chapter 7 filings when a debtor s schedules reflected sufficient income to fund a Chapter 13 plan. The new 707(b) quantified the process, which formerly had been essentially subjective, by adding a means test qualifier 2. Filers over their applicable state-based median income level are presumed able to fund a Chapter 13 plan. A subsequent screening using I.R.S.-based expense categories might qualify the debtor for Chapter 7, but if the schedule still shows income available to fund a Chapter 13 plan, the debtor would be required to select Chapter 13. The premise behind the means test is that those who are able to pay all, or some, of their past debts should do so. The means test helps the courts determine who can and who cannot repay their debts and, perhaps most importantly, how much they can afford to pay. (Senate Congressional Report, 2005) There are obvious advantages of Chapter 7 over Chapter 13. These provide a strong incentive for consumers to attempt to circumvent the means test. Such action may be deliberate; consumers may attempt to reduce their incomes prior to filing for bankruptcy, and thus be allowed to file under Chapter 7. Alternatively, such action may not be deliberate. In particular, individuals living in rural or economically depressed areas may simply have incomes which fall below their state s median, and thus be allowed to file under Chapter 7. Individuals living in areas where wages are higher would fail the means test screen and be compelled to file under Chapter 13. In either case, there is a redistribution of filings and debt repayment across geographic and economic strata within a given state or judicial district. III. Literature Review Quantitative, empirical research has been conducted on the chapter choice decision, but this research was conducted prior to the implementation of BAPCPA. For example, Bermant (1999) used data from the Executive Office for US Trustees and found evidence of regional differentials in bankruptcy chapter filing choices. Bermant attributed these findings to the legal culture 3 existing in each of these regions. Differences in legal culture disproportionately and adversely affected residents in the southern U.S., which traditionally exhibit the highest concentration of Chapter 13 filings. The amount of debt and wealth a bankruptcy filer holds influences the chapter filing choice. Domowitz and Sartain (1999) determined that credit card and medical debt were the most prominent drivers of bankruptcy. Other drivers of bankruptcy included income, marital status, unemployment rates and home ownership. Nelson (1999) found that the ability to garnish wages and the exemption of homesteads affected chapter filing choices. The amount and types of debt (i.e., wealth and net worth considerations), and not just the ability to repay that debt (i.e., income) affects chapter choice. Other studies have focused on how the chapter choice decision has transformed (or not transformed) over time in light of social and economic climate changes in the U.S. Sullivan, Warren and Westbrook (1994) found that while the national economy improved during their 1981 to 1991 sample period, the number of bankruptcy filers had tripled. Focusing on high and low exemption States, the authors examined the effect of the debtors financial condition on 2 Adjustments are periodically made to the means test to reflect changes in the Consumer Price Index. The means test tables are promulgated by the Office of the U.S. Trustee to ensure the correct standard is used in each Judicial District. 3 Legal culture refers to a community s legal and judicial attitudes and preferences. 2

3 their chapter choices. The data provided little evidence that exemptions influenced behavior in 1991 differently than in Sullivan, Warren and Westbrook (2003) profiled samples of Chapter 13 filers prior to the implementation of BAPCPA. Their study examined Chapter 13 cases filed in 1981, 1991 and 1999, taking random samples of debtors from judicial districts located in Illinois, Pennsylvania and Texas. Significant filer characteristics included whether the petitioner was married, owned a home, was Hispanic, or filed in Texas (a state with a high percentage of Chapter 13s). Overall, the current literature fails to address a critical issue. The passage of BAPCPA dramatically changed the parameters governing bankruptcy chapter filing decisions, and increased the emphasis on debtor accountability and ability to repay debt. Issues of legal culture and other socio-cultural-geographic factors should no longer impact chapter filing choices. This paper provides an important contribution and critical first step in characterizing post- BAPCPA chapter filing decisions, and contains an initial assessment of BAPCPA s effectiveness 4. IV. Empirical Methodology The null hypothesis is that BAPCPA fulfills its objectives. If this is the case, two trends should occur in an empirical analysis of bankruptcy chapter filing decisions. First, there should be a significant proportion of Chapter 13 filings. Perhaps more importantly, income, as characterized by the means test, should be the sole driver of chapter filing choice. 5 One might expect a filer s level of outstanding debt might influence the chapter filing choice, especially if the debt service payments significantly reduce an individual s disposable income. However, if this information is appropriately incorporated into the means test calculations (which, as mentioned earlier, are based on income net of standard living expenses), then the chapter filing choice should not be impacted by debt levels. Further, factors related to a community s legal culture (i.e., the judge presiding over the bankruptcy hearing, local geographic, or economic conditions) should not significantly impact chapter filing choices. Investigating the proportion of Chapter 13 filers versus Chapter 7 filers can be conducted using simple descriptive statistics and hypothesis tests. A random sample of data on individual bankruptcy filings and identify the proportion of Chapter 13 filings is analyzed. T-tests are conducted to identify whether this proportion is statistically significantly different from zero, or some other reasonable benchmark. Examining the second major trend, only net income matters when determining chapter filing choice, requires more advanced econometric techniques. Given a randomly collected sample of individual bankruptcy filings, a straightforward and parsimonious approach to estimate a reduced form, linear in parameters, binary logit model is used: J K j k Prob( Ch7 i) = + Yi j X i k Z i i j 1 k 1 (1) Prob( Ch7 i Ch7i ) ln 1 Ch7 i Where Ch7 i is a binary variable with 1 indicating Chapter 7 filing and zero indicating Chapter 13 bankruptcy filings by individual i, and i = 1,,n indicates each observation in the sample. The variable Y captures a typical filer s net (self- 4 The issue has also been examined descriptively in law and legal studies journals. For a recent example, see Lawless et al. (2008). To date, there is a paucity of empirical analyses on these types of decisions using causal methods (i.e., regression) and post-bapcpa data. 5 Note that, while all individuals who do not pass the means test are required to file under Chapter 13, those that pass the means test still have the option of filing under either Chapter 7 or Chapter 13. For most filers in this situation (whose debts surpass their assets and their ability to repay those debts), there is an obvious incentive to file under Chapter 7, in which non-exempt assets are liquidated, used to repay as many creditors as possible, and the remaining debts are discharged. However, some individuals who have certain types of non-exempt assets (perhaps an inherited family heirloom or a piece of property) may choose to file under Chapter 13 even when they are able to file under Chapter 7, because a Chapter 13 filing would allow them to retain the asset in question. We assume that such cases are not the norm, and as such the null hypothesis holds. Moreover, even if such events are significant, they would also represent an unintended consequence of BAPCPA in that it would force a different group of individuals into a Chapter 13 filing than was originally intended in the legislation. 3

4 reported) cash flow, and thus is indicative of the BAPCPA means test. X i is a vector of variables denoting the amount and distribution of debts a filer has accumulated at the time that they file for bankruptcy. Z is a vector of individualspecific explanatory variables intended to characterize the socio-cultural-economic differences across filers. λ, φ, δ and β represent parameters (or sets of parameters) to be estimated. Lastly, ε represents the error term, which is assumed to be (cumulatively) logistically distributed. If the second null hypothesis is appropriate, only the model s constant term (λ) and the coefficient estimate for the net income variable (φ) should be statistically significant determinants of filing choice. Alternatively, if any of the remaining parameter estimates are significant (and especially the δs), then geographic and legal culture characteristics influence filing choice. In that case, the BAPCPA legislation, and specifically the means test, produces unintended consequences by inducing individuals to base their chapter choice decision on non-incomerelated factors. A. Data To test this hypothesis, a random sample of individual bankruptcy filings from the Federal Bankruptcy Court s Eastern District of Washington State (and more specifically from the Public Access to Court Electronic Records, or PACER, system maintained by the Court) filed during 2007 is collected. The time frame of the analysis represents a period after the implementation of BAPCPA (October 2005), and thus is consistent with the null hypotheses. Moreover, filings over the course of 2007 are used to ensure that the data are not distorted by shocks created by individuals attempting to exploit the legislation and file immediately before (or after) the law went into effect. The Eastern District of Washington is representative of many other Districts within the U.S. The District is relatively large and covers the vast majority of Washington State lying east of the Cascade Mountains. Both urban centers (including Spokane, Yakima and the Tri-Cities area of Kennewick, Richland and Pasco) and very small rural communities are found in Eastern Washington. These communities exhibit substantial variation in personal income and economic vitality, and are reliant on a number of industries, including agriculture and mining, light manufacturing, health care, government services and high-tech industries. Eastern Washington s residents also display a wide array of socio-demographic characteristics, including (but not limited to) a significant Hispanic community (www.ofm.wa.gov). To collect the data, an interval random sampling procedure is used to identify a set of 450 personal bankruptcy filings during the time frame of interest. 6 After identifying these filings, financial, demographic and court-related information germane to the analysis is extracted. Table I contains the names, definitions and some basic descriptive statistics for each of the variables. A number of these files did not contain a complete set of information, and thus were excluded from the analysis, leaving a working sample of 344 observations. The majority of the eliminated observations were discarded because filers failed to provide verifiable residential addresses or did not provide complete information on the number and types of outstanding debt. 6 The sample size calculation assumes a 95% confidence interval with 5% sampling error and a conservative (50%) effect size. This leads to a sample size of slightly less than 400 observations (Dillman, 2000, page 207). We chose to slightly exceed this number to ensure that a reasonable number of observations would remain after eliminating observations with missing or unusable information. 4

5 V. Results A. Summary Statistics Examining Table I, several trends emerge. First, over 20 percent of the sample are Chapter 13 filings. T-tests indicate that this value is significantly greater than both 10 percent (test statistic value = 6.36, p-value < 0.01) and 15 percent (test statistic value = 2.75, p-value < 0.01). Thus, a significant portion of filers do, indeed, file under Chapter 13. Table I: Summary Statistics Variable Description Mean Std.Dev. Minimum Maximum CHPTDV Dummy variable identifying those filing for Chapter 7 bankruptcy (as opposed to Chapter 13 bankruptcy) SCWA Dummy variable identifying residents of South Central Washington State EAWA Dummy variable identifying residents of Rural, Eastern Washington State SPWA Dummy variable identifying residents of Spokane County in Washington State BFWA Dummy variable identifying residents of Benton and Franklin Counties of Washington State NCWA Dummy variable identifying residents of North Central Washington State JNTFILE Dummy variable identifying joint filers MALE Dummy variable identifying gender JUDGE Dummy variable identifying one of the two presiding judges PRIORBK Dummy variable identifying filers who have previously filed for bankruptcy PMEDDV Dummy variable identifying whether filers had medical expenses/debt PMEDICAL Proportion of total unsecured debt that is due to medical expenses PNDISCH Proportion of total debt that is non-dischargeable PUNSEC Proportion of debt that is unsecured Dummy variable identifying filers who report LFLOWDV negative cash flow over the past six months DERATIO Filer debt to equity ratio LDERATIO Natural log of DERATIO DISABLED Dummy variable identifying disabled filers RETIRED Dummy variable identifying retired filers UNEMP Dummy variable identifying unemployed filers SELFEMP Dummy variable identifying self-employed filers Number of years the primary filer has been FYRSEMP employed Number of Observations 344 Table I also shows the distribution of filers according to their general area of residence. There are 20 counties in the District, which for purposes of policy analysis and public administration, are generally condensed into five major 5

6 economic regions: South-Central Washington, North-Central Washington, Benton and Franklin Counties, Spokane County, and Rural Eastern Washington (www.ofm.wa.gov). The majority of filers are located in Spokane County (30.5 percent) and South-Central Washington (29.1 percent). These two counties also contain two of the District s three largest population centers: Spokane and Yakima, respectively. These variables enter into the model specification as dummy variables, with values of one indicating a filer lives in a particular region. In this specification, South-Central Washington is the omitted category (reference group), and all included dummies are measured relative to this category. The remaining variables identify various economic and cultural characteristics of filers. Perhaps most importantly, filers are required to self-report cash flows (or income) net of expenses over the six months prior to filing for bankruptcy. This variable can be used as a proxy for the application of the means test. BAPCPA requires filers to provide substantial documentation to corroborate self-reported net cash flows. Unfortunately, the legislation is not sufficiently stringent to guarantee that every filer self-reports completely accurate and precise information. This variable likely contains measurement error. To alleviate the potential that self-reporting bias will skew the results, a dummy variable (LFLOWDV) that only identifies whether these self-reported values were negative is created. As shown in Table I, more than 51 percent of filers report negative net cash flow over the six months prior to filing. This is very likely the reason that nearly 80 percent of filings in the District fall under Chapter 7. The District has two judges that preside over the cases contained in this sample. Thirty-four percent of these cases were seen by Judge 1, and the remainder was seen by Judge 2. Over 35 percent of filings are joint, and over 23 percent of the single filings list a male as the primary filer. This also implies that 42 percent of filers are single females. Exactly 9 percent of the sample has previously filed for bankruptcy. Over 17 percent of the sample is unemployed, 2 percent are self-employed, 4.7 percent are retired and 2.9 percent are disabled. Of those that are employed, the average length of current employment is just over 3 years. The mean debt to equity ratio of filers in the sample is 9.47, and this ratio varies tremendously, ranging from to To help adjust for this excess volatility (and alleviate the potential for heteroskedasticity), the natural log of this variable (LDERATIO) is included in the empirical analysis instead of the original debt-to-equity ratio. Examining the distribution of filers debts and assets, 59 percent of all debt is unsecured. Nearly 55 percent (54.9) of filers report unsecured medical debt; however, this debt accounts for only 7.6 percent of all unsecured debt. Lastly, only 4.6 percent of all reported debt is non-dischargeable. As a result, the incentive to file under Chapter 7 is very high, since, if successful, most of that debt will be effectively erased. B. Regression Results The main parameter estimates and marginal effects are presented in Table II. This analysis yields a number of interesting results. First, as Table II shows, geography matters. Filers in the North-Central, Rural-Eastern and Benton-Franklin areas of Washington State are significantly more likely to file a Chapter 7 petition than individuals in South-Central Washington (i.e., Yakima). This simultaneously implies that filers in South-Central Washington are more likely to file under Chapter 13. The greater Yakima area has a disproportionally agriculturally-based economy. For many in this area, employment is seasonal, pays low wages and is dependent upon farm and orchard production. As of 2006, Yakima had the third highest percentage of Hispanics in Washington State, at percent (www.ofm.wa.gov). Consequently, one might expect this result to be due to ethnicity. However, Franklin County (52.06 percent) and Adams County at (48.67 percent) have higher proportions of Hispanic populations, with no similar rise in Chapter 13 filing. Legal culture, an oft-cited default category encompassing the preferences of community lawyers for or against Chapter 13, may explain this geographic influence on chapter choice. This is consistent with the contribution of Bermant (1999) who identifies legal culture as a significant determinant in the chapter choice decision. A more likely explanation for this result is the specification of the means test. The test uses a median income amount defined at a very aggregate level; namely at the level of the state in which the petition is filed. The majority of Washington State s residents live in the western half of the State, and in a different Federal Bankruptcy Court district. Western Washington also has higher income levels, skewing the median income standard for the means test higher. This, in turn, potentially allows certain groups of people in Eastern Washington (those living in poorer, rural communities) an opportunity to file a disproportionately large number of Chapter 7 petitions. This problematic issue is relevant across the United States, as a vast majority (if not all) of the States have a mix of urban and rural, and by extension high wage and low wage, geographic areas. The disposable monthly income calculations outlined in the BAPCPA guidelines may not adequately adjust for the variations in the costs of living across Eastern Washington, particularly in the North Central, Rural-Eastern and Benton-Franklin areas. It is entirely 6

7 possible that the means test distorts the propensity of Chapter 7 versus Chapter 13 filings in unintended ways. By extension, other U.S. Bankruptcy Court Districts whose jurisdiction covers a wide range of social and economic clusters may experience similar unintended consequences. Consistent with the restriction on repeat filers (11U.S.C.727 provides restrictions on the availability of the Chapter 7 discharge for repeat filers), the existence of a prior bankruptcy significantly increases the likelihood of a Chapter 13 filing. Negative cash flow in the six months prior to filing also affects chapter choice. These filers are more likely to file under Chapter 13. There are several plausible explanations for this finding. For individuals with temporary Table II: Binary Logit Parameter Estimates and Marginal Effects Dependent Variable: CHPTDV Variable Coeff. Std.Err. t-ratio P-value Marginal Effect Intercept ** NCWA ** EAWA * BFWA ** SPWA JNTFILE ** MALE ** JUDGE PRIORBK ** PMEDDV PMEDICAL PNDISCH PUNSEC ** LFLOWDV ** LDERATIO DISABLED RETIRED UNEMP SELFEMP FYRSEMP Log-Likelihood Function Restricted Log-Likelihood Function Chi-Square Test Statistic Value ** Degrees of Freedom 19 Number of Observations 344 ** Indicates statistical significance at the 5 percent level * Indicates statistical significance at the 10 percent level income losses that anticipate improved income going forward, Chapter 7 would be an option. Thus, the income effect described here could be the result of unintentional job loss due to seasonal changes in industries, particularly those involved in agriculture. Alternatively, a potential filer might intentionally reduce income knowing bankruptcy is imminent. In this way, the filer may circumvent the means test and file under Chapter 7. The latter strategy is not without costs. The attractiveness of filing under Chapter 7 would lessen if the filer had (and wanted to retain control of) substantial secured obligations, including automobiles or house loans. In either case, the data are not sufficiently 7

8 detailed to allow us to precisely determine the motivations responsible for driving this parameter estimate. Future research is needed to investigate this issue. As evidenced by the insignificance of healthcare debt on the chapter choice decision, support for the evidence provided by Domowitz and Sartain (1999) is note found: medical debt is not the major determinant of bankruptcy. The results suggest that medical debt levels are relatively low in comparison to other types of debt. While the findings do not support Domowitz and Sartain, they do not disprove their work either. Small amounts of medical debt may create a tipping point at which financially distressed individuals decide to file for bankruptcy. While this may or may not be true, the findings suggest that this small amount of debt does not influence the chapter under which that bankruptcy petition is filed. VI. Conclusion A potential problem with the means test, as with any pre-defined legal criterion, is unintended consequences which distort the intent, and perhaps the effectiveness, of the legislation. With regard to the means test, the use of median income amounts defined at a very aggregate level (namely at the level of the State in which the petition is filed) is problematic because the vast majority of the states in the U.S. have a mix of urban and rural, and by extension high wage and low wage, geographic areas. High income areas also tend to have greater costs of living which offset higher wage rates and income levels, resulting in relatively equal standards of living across urban and rural areas, all else equal. If the disposable monthly income calculations outlined in the BAPCPA guidelines do not adequately adjust for these changes in the costs of living across various parts of a state, the means test may distort the propensity of Chapter 7 versus Chapter 13 filings. Although this study is preliminary in nature, examining chapter filing choice is important. Policy makers would be well advised to understand the determinants of chapter choice, as those who file under Chapter 7 transfer their financial obligations to businesses, creditors, and the society as a whole. If policy makers decide that the BPCPA-related distortions are inequitable, these distortions can be eliminated. Thus, understanding the chapter choice decision can lead to a more efficient and equitable bankruptcy process. While these results are interesting, they are not exhaustive. Further research is necessary to examine whether these findings hold true in other areas of the U.S., and at other points in time. More detailed measures of debt, income and (perhaps more importantly) a district s legal culture would provide an interesting extension of this study. In addition, examining the impact of the means test on low income filers add to the current bankruptcy literature. Providing policy makers with more information about the unintended consequences of BAPCPA can lead to reforms to enhance the efficiency and equity of the personal bankruptcy process. VII. References American Bankruptcy Institute. Statistics Resources, accessed 03/27/09. Bermant, G. (1999). Exploring the Demographics of Consumer Chapter Choice. American Bankruptcy Institute Journal, 18(4), 1-4. Dillman, D. (2000). Mail and Internet Surveys: The Tailored Design Method, 2 nd Edition. New York: John Wiley and Sons. Domowitz, I. & Sartain, R. (1999). Determinants of the Consumer Bankruptcy Decision. The Journal of Finance, 94(1), Fay, S., Hurst, E., & White, M. (2002). The Household Bankruptcy Decision. The American Economic Review, 92(3), Gross, D. & Souleles, N. (2002). An Empirical Analysis of Personal Bankruptcy and Delinquency. The Review of Financial Studies, 15(1), Lawless, R., Littwin, A., Porter, K., Pottow, J., Thorne, D., & Warren E. (2008). Did Bankruptcy Reform Fail? An Empirical Study of Consumer Debtors 82 American Bankruptcy Law Journal, Nelson, J. (1999). Consumer Bankruptcy and Chapter Choice: State Panel Evidence. Contemporary Economic Policy, 17(4),

9 Senate Congressional Report. Senate S 1779; February 26, Sullivan, T., Warren, E., & Westbrook J. (1994). Consumer Debtors Ten Years Later: A Financial Comparison of Consumer Bankrupts , 68 American Bankruptcy Law Journal 121. Sullivan, T., Warren, E., & Westbrook, J. (2003). Who Uses Chapter 13? Consumer Bankruptcy in Global Perspective, Washington State Office of Financial Management, Executive Summary, Population by Race and Hispanic Origin: 2000 and

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