The 12 months ending Sept. 30, 2001 (FY 2001), were a period of continuing growth for activity in chapter 13. Filings reached a new high at 374,133.² Disbursements to creditors also continued to grow. And as we have demonstrated previously, the pattern of disbursements displayed an interesting mix of consistency and variability.³ Finally, we will report on a new finding on payment of post-petition mortgage debt that arises from more detailed reporting by the standing chapter 13 trustees.

Total Disbursements

Table 1 displays the total disbursements made by standing chapter 13 trustees during fiscal years 1998-2001. The amount for 2001 represents a 5 percent increase over year 2000 and a 12 percent increase over year 1999.

Disbursements to Secured, Priority and General Unsecured Creditors

For the nation, disbursements made to the three major creditor groups during FY 2001 displayed the proportions that by now have become expected: 57 percent to secured creditors, 7 percent to priority creditors and 22 percent to general unsecured creditors.⁴ These percentages have remained remarkably stable over the past dozen years. Over the past several years, however, there is evidence of the beginning of a trend to return relatively more to general unsecured creditors and relatively less to priority creditors.

Geographical Variation

During the previous three fiscal years, six states contributed approximately half of all returns to creditors in chapter 13 (Tennessee, Texas, Georgia, California, Florida and Ohio). The same six states also contributed 44 percent of the returns to general unsecured creditors during those years. In FY 2001, the 50 percent mark for disbursements to all creditors was crossed by the seventh state, Illinois (Table 2). Half of all disbursements to general unsecured creditors were made in eight states, shown in Table 3. In that list, Michigan joined the seven states already represented in Table 2. Tennessee continues to maintain its position as a leader in chapter 13 disbursements, a fact made particularly noteworthy given its relatively small population. Tennessee ranked 15th in population among the states in the 2000 census. The other states listed in Tables 2 and 3 range from number 1 (California) to 10 (Georgia). In bankruptcy filings per capita, however, Tennessee leads the nation.

At the other end of the distribution, 26 states contributed less than 1 percent each to the total disbursed to all creditors.

Analysis by Judicial District

Although reporting results at the state level are convenient, they can sometimes be misleading. In general, reporting by judicial district will give a truer picture of the extent of geographic variability.⁵ Table 4 shows the 20 districts that disbursed the most to all creditors beginning with the Western District of Tennessee, which disbursed the most. Also shown in the table is the rank of each of these districts in disbursements to unsecured creditors. Note first that for two states, Georgia and Tennessee, all of the districts are in the group of top 20 disbursers. But for the other states shown in Tables 2 and 3, one or two districts carry the bulk of the chapter 13 activity. There is not a one-to-one relationship to a district's rank for all creditors and its rank for unsecured creditors. For example, Tennessee Western falls from first place in total disbursements to seventh in disbursements to unsecured creditors.

A Closer Look at Secured Debt Disbursements

The annual reports of standing chapter 13 trustees to the Executive Office for U.S. Trustees include separate categories, under secured debt, for post-petition mortgage payments (also called current or ongoing mortgage payments) made through the plan as well as for mortgage arrearages. Table 5 shows how these categories contribute to the total secured debt disbursed at the national level.⁶

It may come as a surprise to see that the amount of post-petition mortgage debt disbursed by the trustees within plans is approximately twice the amount of mortgage arrearages disbursed and more than 20 percent of all secured debt disbursed. As in many aspects of chapter 13 administration, the national number represents a composite that only hints at the very interesting variation lying beneath the surface in the practices of the judicial districts.

Table 6 lists the top 20 districts sorted by the contribution of post-petition mortgage payments to the total disbursements made to all creditors. Also shown in percentage terms is the contribution of these payments to the total secured debt disbursed. Thus, in Pennsylvania Western, post-petition mortgage payments accounted for almost 70 percent of the payments made to secured creditors and well over half of the payments made to creditors of all types.

Note also that among the top 20 disbursing districts shown in Table 4, 11 also appear in Table 6: Arkansas, Florida Middle and Southern, Georgia Middle, Michigan Eastern and Western, Ohio Southern, Tennessee Eastern, Middle and Western, and Washington Western. The disbursements of these districts are significantly affected by post-petition mortgage payments.

Conclusion: How Should These Findings Be Interpreted?⁷

Improved reporting systems now used by standing chapter 13 trustees allow the wider bankruptcy community to understand the opportunities and variability that exist in post-confirmation chapter 13 case management. The information reported here is just one piece of a larger set of information that should be much more widely available for analysis and debate. For example, though we now know how much secured debt is paid, we do not know how these numbers relate to the amounts of unsecured debt that debtors brought into chapter 13 and then promised to repay through the plan. We do not know with certainty whether the payment of post-petition debt by trustees increases the debtor's likelihood of completing the plan,⁸ nor, as some suggest, whether debtors tend to move for dismissal when their secured debt is paid up. As more complete data become available, we will gain a better understanding of the myriad factors that impact chapter 13 operations, and until then, one should be very cautious about drawing conclusions from the data presented.

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Footnotes

¹ All opinions expressed in this article are those of the authors, and do not necessarily represent the views of the Executive Office for the U.S. Trustees or the Department of Justice. Return to article

² Statistics and rankings in this article do not include activity in North Carolina and Alabama, which are not served by the U.S. Trustee Program. With those states included, the national filing number was 412,272. Return to article

³ Bermant, Gordon, and Flynn, Ed, "Chapter 13 Disbursements in Fiscal Year 2000: Steady Growth," 20 Amer. Bnkry. Inst. J. (November 2001); Bermant, Gordon, and Flynn, Ed, "Sources of Variability in Chapter 13 Performance," 20 Amer. Bnkry. Inst. J. (April 2001). Return to article

⁴ The remaining 14 percent were distributed among debtors' attorneys and a number of administrative categories. Of this amount, slightly more than one-third supported the offices of the standing trustees. Return to article

⁵ In fact, for many purposes, the best unit of analysis is the single standing chapter 13 trustee and the judge or judges that the trustee serves. Return to article

⁶ The undetermined category will become negligible as the trustees' software accounting systems are all re-tooled to capture these categories. Return to article

⁷ For further description of the mortgage-paying practice, see Bermant, Gordon, and Flynn, Ed, "Chapter 13: Who Pays the Mortgage," 20 Amer. Bnkry. Inst. J. (June 2001). Return to article

⁸ See Meyer, Michael H. and McDonald, Kathleen A., The Payment of Debtors "Ongoing Mortgage Payments" by the Chapter 13 Trustee. Presented at the National Association of Consumer Bankruptcy Attorneys 10th Annual Convention, April 26-28, 2002. Return to article