Outcomes of Chapter 11 Cases U.S. Trustee Database Sheds New Light on Old Questions
Here we present a brief first look at data obtained from the Fee Information and Collection System (FICS) database maintained by the Executive Office for U.S. Trustees (EOUST) to support the U.S. Trustee Program’s collection of quarterly fees from chapter 11 cases.3 The FICS database is the most reliable and comprehensive single source of basic infor-mation about chapter 11 cases that we have seen. The FICS database is updated monthly with case information transmitted from each region. We anticipate that analyses of the data in FICS will be of considerable utility in answering a number of practical questions about chapter 11 issues.
We have begun to compare the data in FICS with the same fields in the bankruptcy data compiled by the Administrative Office of the United States Courts (AOUSC). The congruence of the two data sources has been encouraging. For example, FICS contains data on 131,089 chapter 11 filings between January 1, 1989 and December 31, 1995. The AOUSC data show 129,304 chapter 11 cases for the same period, excluding filings from Alabama and North Carolina.4 Part of this 1.4 percent difference is due to the inclusion in FICS of cases that were converted into chapter 11 from other chapters.
Heretofore, the most comprehensive source of information on national confirmation rates of cases of all sizes was a 1989 report by the AOUSC on cases filed in 15 judicial districts between 1979 and 1986.5 Two salient facts about confirmation rates emerged from that study: first, the estimated annual confirmation rate over the sampled period was 17 percent. Second, a trend of increasing annual confirmation rates was apparent between 1982 (13 percent) and 1986 (22 percent). This led to the prediction that confirmation rates would continue to rise during the 1980s.
We are now able to continue the time series of annual confirmation rates using FICS data. The graph in Figure 2 shows the rates from the AOUSC study for 1979/80-1986 and from FICS for 1989-1995.6 The national trend evident in the AOUSC data has been sustained in the FICS data. The average annual confirm-ation rate over the period measured in FICS, approximately 27 percent, is about twice the rate that was achieved in the early 1980s. The data for 1989-1995 include minor adjustments to include expected future confirmations of cases that are still open and closed cases for which FICS did not report the disposition.
Intervals from Filing to Confirmation
In addition to a higher than expected con-firmation rate, the FICS data show a clear trend toward faster con-firmations in chapter 11 cases. Figure 3 displays the 20th, 50th and 80th percentiles of the distribution intervals from filing to confirmation for cases that were confirmed from 1989 to 1997. Viewed from this national perspective, the greatest changes have taken place among the cases slowest to confirm, e.g., those at the 80th percentile of each annual distribution. While intervals at the 20th percentile have decreased by approximately 18 percent, and intervals at the 50th percentile (median) by about 27 percent, intervals at the 80th percentile have decreased by about 37.7
The increasing speed to confirmation on the national level needs to be disaggregated in several ways. We need to know, for example, how con-firmation speed varies with the size of the case; there are good reasons to believe that larger cases are more likely to confirm and also more likely to confirm quickly than are smaller cases.8 We also need to study how confirmation rates and intervals vary among judicial districts, U.S. Trustee regions, and by assigned bankruptcy judge to assess the influence of local practices and to identify best practices wherever they may be found.9 For example, preliminary analysis shows that the confirmation rates range from 13 to 38 percent among the 21 U.S. Trustee regions, and from 7.4 to 59.2 percent among the bankruptcy judges who handled at least 200 chapter 11 cases between 1989 and 1995. Further, the average time from filing to confirmation varied from 478 days to 860 days among the U.S. Trustee regions, and from 292 days to 1,092 days among the judges who have confirmed more than 100 chapter 11 cases since 1989.
Intervals from Filing to Dismissal or Conversion
(Comparison of Cases Terminated in Calendar Years 1989 and 1997)
| Termination Percentile | |||
|---|---|---|---|
| confirmed | converted | dismissed | |
| 20th | 18% | 23% | 47% |
| 50th | 27% | 23% | 44% |
| 80th | 37% | 20% | 41% |
The graphs and summary table show unequivocally that terminations of all types, particularly dismissals, now occur faster than they did eight years ago. This is a national trend that no doubt has many local variations. Attributions of causality for these reductions in any district, as have been published recently, need to be evaluated in light of the larger national trend.10
Footnotes
1All views expressed in this article are those of the authors, and do not necessarily represent the views of the Executive Office for United States Trustees. [Return to Text]
2For recent examples see Report of the National Bankruptcy Review Commission (1997), at 308-309, 610-614, 646-649; Jennifer C. Frasier, Caught in a Cycle of Neglect: The Accuracy of Bankruptcy Statistics, 101 Com. L.J. 307 (1996). [Return to Text]
3Great credit is due to Santal Manos and others withing the EOUST for creating FICS during 1996 and 1997 from data previously unavailable in a single source. Many data sources that serve administrative purposes do not achieve their research potential, generally because the data are either incomplete or are archived from the database. [Return to Text]
4FICS does not contain information on cases filed in the six judicial districts in North Carolina and Alabama, which are not within the U.S. Trustee Program but rather are served by Bankruptcy Administrators. [Return to Text]
5Ed Flynn, Statistical Analysis of chapter 11 (October 1989). [Return to Text]
6We omitted FICS data for 1987-1988 because information was missing on a substantial number of cases filed in those years. Note that all percentages are based on raw filings; substantive and administrative consolidations are not accounted for. This has the effect of increasing the confirmation percentages across the board, because large cases, which are more likely to comprise multiple filings, are also more likely to confirm. See n. 8 below. [Return to Text]
7Small proportions of open cases in recent filing years will confirm and thereby cause the median and 80th percentile numbers for these years to increase slightly. These confirmations will not significantly change the trends or percentage changes displayed in the graph. [Return to Text]
8Larger cases are likely to have more experienced counsel, are more likely to have active creditors’ committees, may be able to present truly feasible plans, and are much more likely to be pre-negotiated or pre-packaged. For reasons expressed in text and the next note, these factors need to be considered also in light of "local legal culture," i.e., salient traditions of the bankruptcy bench and bar in different districts. [Return to Text]
9The difference in speed to confirmation for very large cases is quite striking when, for example, New York Southern is compared with Delaware (the primary venues of very large cases). Some but not all of this difference is due to the greater prevalence of pre-negotiated and pre-packaged bankruptcies in Delaware. See Gordon Bermant, Chapter 11 Venue Choice by Large Public Companies, Federal Judicial Center (1997). [Return to Text]
10 See, e.g., Samuel L. Bufford, Chapter 11 Case Management and Delay Reduction: An Empirical Study, 4 Am. Bankr. Inst. L. Rev. 85 (1996); Marcy J.K. Tiffany, A Study of Chapter 11 Confirmation Statistics; Central District of California, Los Angeles Division for Cases Filed in 1994 (unpublished study on file with the EOUST). [Return to Text]