Alexandria, Va. — An article in the September ABI Journal examines nearly 650,000 chapter 7 cases filed from 2007-16 to uncover some of the statistical characteristics of the debtors. Though chapter 7 activity is down by 58 percent from its most recent peak in September 2010, Ed Flynn, a coordinating editor at ABI with more than 30 years of previous experience at the Executive Office for U.S. Trustees and the Administrative Office of the U.S. Courts, discovered a few important trends emerging from chapter 7 debtors in his article “The Changing Profile of Chapter 7 Filers.”
A chapter 7 bankruptcy involves the bankruptcy trustee gathering and selling the debtor's nonexempt assets and using the proceeds of such assets to pay holders of claims (creditors) in accordance with the provisions of the Bankruptcy Code. Some of the characteristics of chapter 7 debtors that Flynn highlighted in his article include:
- Pro Se Debtors: The percentage of chapter 7 cases filed pro se (without an attorney) has increased in recent years. "The pro se rate among solo filers has risen from about 7 percent to approximately 11 percent. Pro se chapter 7 debtors are nearly 10 times as likely to have their cases dismissed or their discharges denied than debtors with attorneys."
- Prior Filings: The percentage of chapter 7 debtors who have filed in the past has increased over the last decade. "About 5 percent of chapter 7 debtors who filed from 2007-09 reported a prior filing. Since 2013, about 9 percent of chapter 7 debtors have filed at least once in the past."
- Payment of Filing Fees: "Over the last decade, the percentage of chapter 7 debtors who do not pay their filings fees in full at the time they file their cases has tripled, now accounting for nearly one in five chapter 7 cases."
- Fee Waivers: "While still relatively infrequent, the percentage of cases with fee waivers has doubled over the course of the last decade."
- Unsecured Debt: "Unsecured debt levels among chapter 7 debtors are down by about nearly 20 percent since peaking in 2010."
- Secured Debt: "Most secured debt listed by debtors is mortgage and automobile debt. Because of the decline in the percentage of debtors who are homeowners, it is not surprising to see a corresponding increase in the percentage that report having no secured debt."
While the causes of these trends in chapter 7 filings was beyond the scope of his article, Flynn discusses a number of concerns that the trends will have on the judicial system. “Fewer debtors with less assets means that the number of asset cases is likely to continue to decline substantially in the coming years, even if filing levels stabilize,” Flynn writes, highlighting that the trends do not bode well for chapter 7 trustees.
"Increases in pro se filings will all cause additional work for the bankruptcy judges, clerks, U.S. Trustees and Bankruptcy Administrators,” Flynn added.
The House Judiciary Subcommittee on Regulatory Reform, Commercial and Antitrust Law will hold a hearing on Sept. 26, 2018, to examine H.R. 3553, the Bankruptcy and Administrative Improvement Act. The bill aims to amend the Bankruptcy Code to increase the amount of compensation paid to chapter 7 bankruptcy trustees for services rendered. Ariane Holtschlag of the Law Office of William J. Factor, Ltd. (Chicago) will provide a statement at the hearing on behalf of ABI's Commission on Consumer Bankruptcy.
Click here to obtain a copy of “The Changing Profile of Chapter 7 Filers” from the September edition of the ABI Journal. To request an interview with Mr. Flynn, please contact ABI Public Affairs Manager John Hartgen at 703-894-5935 or firstname.lastname@example.org.
ABI is the largest multi-disciplinary, nonpartisan organization dedicated to research and education on matters related to insolvency. ABI was founded in 1982 to provide Congress and the public with unbiased analysis of bankruptcy issues. The ABI membership includes nearly 11,000 attorneys, accountants, bankers, judges, professors, lenders, turnaround specialists and other bankruptcy professionals, providing a forum for the exchange of ideas and information. For additional information on ABI, visit www.abiworld.org. For additional conference information, visit http://www.abi.org/education-events.