Saving up for bankruptcy

Georgetown Law Journal

Volumn 98, Issue 2, 2010, Pages 289-339

  Mann, Ronald J ^b   Porter, Katherine ^a  

^a Columbia Law School ^*  (United States)

^b UNIVERSITY OF IOWA COLLEGE OF LAW   (United States)

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EID: 77749289267     PISSN: 00168092     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Article

References (202)

1. The premise of the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) was that the number of bankruptcy filings in the 1990s and first years of the 2000s was unacceptably high. Robert M. Lawless et al., Did Bankruptcy Reform Fail? An Empirical Study of Consumer Debtors, 82 AM. BANKR. L.J. 349, 351-52 (2008).
2. Although filings dropped immediately after BAPCPA's effective date and remain lower than the all-time high, the number of filings has been trending steadily upward for several years now. See Administrative Office of the U.S. Courts, Bankruptcy Statistics, http://www.uscourts.gov/bnkrpctystats/ statistics.htm#quarterly (last visited Nov. 24, 2009).
3. See Michelle J. White, Why Don't More Households File for Bankruptcy?, 14 J.L. ECON. & ORG. 205, 206 (1998).
4. For example, the Mortgage Bankers Association reports that about 4,590,000 foreclosures were initiated during me fourth quarter of 2008. See MORTGAGE BANKERS ASS'N, NATIONAL DELINQUENCY SURVEY: Q408 (Mar. 2009) (copy on file with authors). During that same quarter, the Administrative Office of the U.S. Courts reported 236,982 nonbusiness bankruptcy filings. See ADMIN. OFFICE OF THE U.S. COURTS, QUARTERLY FILINGS: MARCH 2008, http://www.uscourts.gov/bnkrpctystats/ statistics.htm# quarterly.
5. See ANDREW COHEN & CAROL PRYOR, IN DEBT BUT NOT INDIFFERENT: CHAPTER 58 AND THE ACCESS PROJECT'S MEDICAL DEBT RESOLUTION PROGRAM 21 (2008), available at http://www.accessproject.org/ adobe/InDebtButNotIndifferent.pdf;
6. MARK RUKAVINA, HEARING ON WORKING FAMILIES IN FINANCIAL CRISIS: MEDICAL DEBT BANKRUPTCY 4 (2007) (report of Mark Rukavina, Executive Director of The Access Project, submitted to the Subcommittee on Commercial and Administrative Law of the House Committee on the Judiciary), available at www.accessproject.org/adobe/rukavina-testimony-July-2007.pdf.
7. In the 2007 Consumer Bankruptcy Project sample, 95.1% of the 1612 Chapter 7 cases were denominated on the debtors' petitions as "no-asset" cases. See 2007 CONSUMER BANKR. PROJECT, SURVEY DATA (on file with Katherine Porter);
8. see also Ed Flynn et al., Bankruptcy by the Numbers: Chapter 7 Asset Cases, AM. BANKR. INST. J., Dec. 2002-Jan. 2003, at 22 (reporting, based on June 2001-June 2002 filings, that 96% of Chapter 7 cases are closed without any funds collected and distributed to creditors).
9. The relevant class of families is not those without any assets at all, but those whose assets are exempt from execution under applicable state law and thus cannot be taken by a creditor through coercive process to satisfy a judgment. Although those exemptions vary considerably from state to state, they often are sufficiently expansive to cover substantially all of the assets of a typical bankrupt family. See ROBERT J. HOBBS, FAIR DEBT COLLECTION 267-94 (Supp. 2006) (summarizing each state's exemption laws);
10. see generally 14 ALAN N. RESNICK & HENRY J. SOMMER, COLLIER ON BANKRUPTCY (15th ed. 2008) (describing variations in state exemption laws).
11. See Richard Hynes, Why (Consumer) Bankruptcy?, 56 ALA. L. REV. 121, 159-62 (2004);
12. Samuel A. Rea, Jr., Arm-Breaking, Consumer Credit, and Personal Bankruptcy, 22 ECON. INQUIRY 188, 193 & n.13 (1984).
13. See Barry Adler et al., Regulating Consumer Bankruptcy: A Theoretical Inquiry, 29 J. LEGAL STUD. 585, 609-10 (2000).
14. White, supra note 2, at 229; see Michelle J. White, Why It Pays to File for Bankruptcy: A Critical Look at Incentives Under U.S. Bankruptcy Laws and a Proposal for Change, 65 U. CHI. L. REV. 685, 708-09 (1998).
15. See Edith H. Jones & Todd J. Zywicki, It's Time for Means-Testing, 1999 BYU L. REV. 177, 206;
16. Todd J. Zywicki, An Economic Analysis of the Consumer Bankruptcy Crisis, 99 NW. U. L. REV. 1463, 1526 (2005).
17. TERESA A. SULLIVAN ET AL., THE FRAGILE MIDDLE CLASS: AMERICANS IN DEBT 77-79 (2000).
18. Id. at 183.
19. Id. at 145-46.
20. See David U. Himmelstein et al., Illness and Injury as Contributors to Bankruptcy, HEALTH AFFAIRS, Feb. 2, 2005, at 63, available at http://content.healthaffairs.org/cgi/content/full/ hlthaff.w5.63/DC1.
21. See ELIZABETH WARREN & AMELIA WARREN TYAGI, THE TWO-INCOME TRAP: WHY MIDDLE-CLASS MOTHERS AND FATHERS ARE GOING BROKE 6 (2003).
22. See id. (reporting that married couples with children are more than twice as likely to file bankruptcy as childless couples and that an unmarried woman with children is nearly three times as likely to file for bankruptcy as a woman without children).
23. Cf. RONALD J. MANN, CHARGING AHEAD: THE GROWTH AND REGULATION OF PAYMENT CARD MARKETS 49-51 (2006) (stating that financial distress imposes "substantial costs on third parties," including externalities such as a decline in the mental and physical health of family members).
24. See, e.g., Ronald J. Mann, An Empirical Investigation of Liquidation Choices of Failed High-Tech Firms, 82 WASH. U. L.Q. 1375, 1377-79 (2004);
25. Edward R. Morrison, Bargaining Around Bankruptcy: Small Business Workouts and State Law (The Ctr. for Law & Econ. Studies, Columbia Univ. Sch. of Law, Working Paper No. 320, 2008), available at http://papers.ssrn.com/sol3/papers.cfm?abstract-id=1065543.
26. See DAVID T. STANLEY & MARJORJE GIRTH, BANKRUPTCY: PROBLEM, PROCESS, REFORM 47 (1971) (reporting threats of legal action as immediate cause for filing in 43% of personal bankruptcy cases).
27. See id. at 48 (finding that 18% of debtors named actual legal action as reason why they filed bankruptcy). Richard Hynes's recent study of garnishment suggests that the role of garnishment may have declined considerably since the 1960s. See Richard M. Hynes, Bankruptcy and State Collections: The Case of the Missing Garnishments, 91 CORNELL L. REV. 603, 626-30 (2006) (reporting that although bankruptcy rates have risen over a period of a dozen or more years, garnishment rates declined in Cook County, Illinois and remained flat in the Commonwealth of Virginia).
28. HERBERT JACOB, DEBTORS IN COURT: THE CONSUMPTION OF GOVERNMENT SERVICES 56-57 (1969).
29. Id. at 64.
30. See MARTIN RYAN, THE LAST RESORT: A STUDY OF CONSUMER BANKRUPTS 153 (1995).
31. Id. at 145.
32. Id. at 153-54.
33. Id. at 161.
34. TERESA A. SULLIVAN ET AL., AS WE FORGIVE OUR DEBTORS: BANKRUPTCY AND CONSUMER CREDIT IN AMERICA 344-45 (1989).
35. Id. at 354 n.1.
36. Teresa A. Sullivan et al., Consumer Debtors Ten Years Later: A Financial Comparison of Consumer Bankrupts 1981-1991, 68 AM. BANKR. L.J. 121, 148 (1994).
37. For example, in Massachusetts, mortgagees typically file a complaint as an initial step to obtain a judgment that the mortgagor is not subject to the Servicemembers Civil Relief Act, which provides additional debtor protections to military personnel. See 50 U.S.C. app. §§ 532-33 (2009). This procedural step in Massachusetts Land Court, see MASS. LAND CT. R. 12, adds a delay of several weeks to the nonjudicial process that follows.
38. The foreclosures per capita rankings for the five states are: Georgia (second); Massachusetts (third); Nevada (fourth); Texas (seventh); and Iowa (twenty-fourth). The information in this paragraph relies on population estimates from the Census Bureau, foreclosure data from the Mortgage Bankers Association, and bankruptcy filing rates from the Administrative Office of the U.S. Courts, all as of 2007 (the latest data available when we selected the jurisdictions for our study).
39. See HENRY J. SOMMER ET AL., CONSUMER BANKRUTPCY LAW AND PRACTICE app. J (Supp. 2008) (summarizing each state's exemption laws).
40. See supra note 31. We calculated these ourselves, specifically using the bankruptcy filing rates from the Administrative Office of U.S. Courts.
41. To collect the court-record data, we used the PACER service of the Administrative Office of the U.S. Courts and received data collected from those public records from a private company, AACER, which generously provided us with assistance. Although we are primarily interested in consumer filings, we did not distinguish between business and nonbusiness filings because the share of filings by individuals is such a high share of overall filings in the jurisdictions we examined that business filings are a trivial share of total filings.
42. For a preliminary discussion of the effects of BAPCPA on filing rates, see Ronald J. Mann, Bankruptcy Reform and the "Sweat Box" of Credit Card Debt, 2007 U. ILL. L. REV. 375, 397-401.
43. Although we collected the data by aggregating PACER records of individual filings, we analyzed the data only at the level of state jurisdictions. None of our hypotheses suggests important variations at levels below the state level.
44. The research team includes law professors, sociologists, and medical doctors. Katherine Porter is one of the investigators in the Consumer Bankruptcy Project.
45. For a detailed discussion of the methodology of the 2007 Consumer Bankruptcy Project, see Lawless et al., supra note 1, at 391-97.
46. AACER is a provider of bankruptcy data. AACER Home Page, http://www.aacer.com (last visited Nov. 24, 2009).
47. The choice to sample in the first quarter of 2007 was difficult because it is impossible to discern precisely when the immediate effects from the enactment of BAPCPA had diminished and a new "normal" pattern of filings had been reached. Of course, we now know that a more recent sample would have risked contamination by the unusually adverse economic conditions of the ensuing season.
48. A few hundred questionnaires were returned as undeliverable. Investigators drew another random sample to replace these households and repeated the same procedures used for the initial sample. An additional eighty-three households responded to the questionnaire by affirmatively refusing to participate. Thus, responses were received (whether returned completed, returned incomplete, or refused via phone or letter) from 2521 households, an overall response rate of 50.7%.
49. This does not prove that the sample is void of response bias. Respondents and nonrespondents may have differed, for example, on criteria such as race or existence of health insurance, which are not available from the public court records and thus cannot be obtained for nonrespondents.
50. The Consumer Bankruptcy Project also coded hundreds of pieces of data from each debtor's bankruptcy court records, which were matched on a debtor-by-debtor basis with the questionnaire and telephone interview data.
51. For further details on the telephone interview methodology, see Lawless et al., supra note 1, at 396-97 & n.177.
52. The telephone interviews comprised up to five sections: general, medical, housing, small business, and military, depending on whether the debtor met eligibility criteria such as owning a home or having performed military service.
53. For a general discussion of sampling methods for hidden and hard-to-reach populations, see Douglas D. Heckathorn, Respondent-Driven Sampling: A New Approach to the Study of Hidden Populations, 44 SOC. PROBS. 174, 174-80, 190-97 (1997).
54. One subject declined to be recorded but allowed the principal investigator to take contemporaneous notes. Additionally, for the sake of preserving the anonymity of the interview subjects, we have omitted identifying details such as names and city locations when citing their interview responses. As an alternative, we identify each with a descriptive title such as "Iowa Consumer Attorney Three," which corresponds to our records on file.
55. Because they have the most direct contact with bankruptcy debtors and with those who consider but ultimately do not file for bankruptcy, problems in the representativeness of our attorney sample are most important in assessing the reliability of our findings.
56. The initial contact is usually made by a "dunning" letter that notifies the debtor of the debt. See ROBERT J. HOBBS, FAIR DEBT COLLECTION 4 (2006). The debt collection industry contacts millions of consumers and makes over one billion contacts per year. See FED. TRADE COMM'N, ANNUAL REPORT 2006: FAIR DEBT COLLECTION PRACTICES ACT 3 (2006), available at http://www.ftc.gov/os/2006/04/P0648042006FDCPAReport.pdf (noting that millions of Americans are contacted by debt collectors);
57. Robert M. Hunt, Collecting Consumer Debt in America, BUS. REV., 2d Quarter 2007, at 11 (stating that debt collectors contact consumers over one billion times a year).
58. See, e.g., U.C.C. § 9-609 (2000) (permitting self-help repossession after default); GA. CODE ANN. § 18-4-20 (2004) (permitting wage garnishment); IOWA CODE § 626.1 (2007) (permitting execution following judgment); id. §§ 626.26, 642.1-.20 (permitting garnishment of wages); MASS. GEN. LAWS ANN. ch. 235, § 31 (West 2000) (permitting execution by creditors after default); NEV. REV. STAT. § 21.090(1)(g) (2007) (permitting wage garnishment); TEX. CIV. PRAC. & REM. CODE ANN. § 31.002 (Vernon 2008) (allowing execution of judgments).
59. On the horizontal axis, Day 1 is the first day of a calendar month, with negative numbers representing the days before the first day of a month.
60. See, e.g., Fair Debt Collection Practices Act, 15 U.S.C. § 1692c (2006); GA. CODE ANN. § 7-3-25 (2004); IOWA CODE § 537.7103 (West Supp. 2009); MASS. GEN. LAWS ANN. ch. 93, § 49 (West 2006); NEV. REV. STAT. §§ 649.370, .375 (2007); TEX. FIN. CODE. ANN. § 392 (Vernon 2006).
61. TEX. PROP. CODE ANN. § 51.002 (Vernon Supp. 2008).
62. See GA. CODE ANN. § 9-13-161 (2006) (requiring foreclosure sales to be held between 10:00 a.m. and 4:00 p.m. on the first Tuesday of every month).
63. See Telephone Interview with National Credit Card Executive 4 (Nov. 5, 8 & 12, 2007) (transcript for this and all subsequent interviews on file with authors). [W]e have another set of scores that if the account does go delinquent[,] we score it. So we kind of continuously monitor[,] and then we have treatment strategies and decision engines that are fed the score as activity changes to make a determination that would decide the appropriate course of action for different accounts. So that generally is how the industry, and certainly how we, operate[,] and you know those models are technological property of the banks. They are so critical . . . . Id.; see also Telephone Interview with Iowa Creditor Attorney Two 7 (Sept. 16, 2008) ("Some of our clients use modeling to help us make decisions. They will give us a score to determine the collectability of the person.").
64. See Telephone Interview with Iowa Creditor Attorney Two, supra note 55, at 6 (describing variation in creditor clients between those who have very specific collection guidelines and internal determinations and those who permit the collection attorney to exercise his professional judgment); Telephone Interview with Ga. Creditor Attorney One 11 (Sept. 26, 2008) (noting that every lender has a different set of criteria for instituting litigation).
65. We use the term "debt collector" here because that is how the Consumer Bankruptcy Project survey question was worded, but we see little reason to expect that respondents interpreted the term narrowly to apply only to third-party debt collectors as defined in the FDCPA. See 15 U.S.C. § 1692a(6)(F) (2006). Instead, we believe respondents were more likely to use the term in its ordinary sense to include any person who is asking them to pay an outstanding obligation.
66. 2007 CONSUMER BANKR. PROJECT, TELEPHONE INTERVIEW ques. DC01 (2007) (on file with Katherine Porter) (n = 1032).
67. Id. at ques. DC02 (2007) (on file with Katherine Porter) (n = 1032).
68. See Telephone Interview with Ga. Consumer Attorney One 7 (Sept. 12, 2008) ("[A] lot of people say[,] 'I just don't answer my cell phone[,]' but when it goes to the job, I do think it crosses a line, yes.");
69. see also Interview with Iowa Consumer Attorney One 10 (Sept. 17, 2007) (identifying calling a neighbor or calling at work as two debt collection techniques that prompt bankruptcy filings because debtors cannot tolerate them). The FDCPA prohibits debt collectors within its scope from contacting a debtor's employer if the collector knows that the employer forbids such communication. See 15 U.S.C. § 1692c(a)(3). The burden is on the debtor, however, to inform the collector, a request that consumers are unlikely to think to make until collectors have already contacted their employers.
70. See 2007 CONSUMER BANKR. PROJECT, supra note 58, at ques. DC03 (on file with Katherine Porter) (n = 826; standard deviation = 18.7). We excluded two responses as outliers.
71. The collection activity itself may not prompt bankruptcy filings because consumers are adept at developing coping mechanisms to mitigate the effects of the dunning calls. See Ronald Paul Hill, Bill Collectors and Consumers: A Troublesome Exchange Relationship, 13 J. PUB. POL'Y & MARKETING 20, 27-28 (1994) (describing how consumers alter their telephone use and go on the offensive in response to collection harassment);
72. Deborah Thorne & Leon Anderson, Managing the Stigma of Personal Bankruptcy, 39 SOC. FOCUS 77, 86 (2006) ("In the face of unrelenting harassment, almost 90 percent of debtors developed strategies - such as the use of caller ID - for avoiding interaction with bill collectors."); Telephone Interview with Nev. Credit Counselor 9 (Feb. 6, 2009) (describing counseling of debtors, often unsuccessful, to change their telephone numbers).
73. See, e.g., Interview with Iowa Chapter 7 Trustee 5 (Sept. 24, 2007) ("I don't see a lot of emergency filings."); Interview with Iowa U.S. Trustee 7-8 (Aug. 10, 2007) (noting that emergency filings by "quality" lawyers are rare because good lawyers recognize that they need time to advise their client); Telephone Interview with Ga. Consumer Attorney One, supra note 60, at 13 ("So now we are turning away people who call the Thursday or Friday before foreclosure on Tuesday. I usually give them the number to one of the big firms who has 20 attorneys or something like that."); Telephone Interview with Nev. Credit Counselor, supra note 62, at 6 (saying that emergency filings "don't seem to be much of an issue" with people seeking mandatory prebankruptcy credit counseling); Telephone Interview with N.J. Debtor Attorney 3 (May 4, 2009) ("Most of my . . . clients come to me well in advance of a major problem that would shut them down. There are some notable exceptions[,] but most of them are smart enough to seek counsel well in advance."); Telephone Interview with Tex. Consumer Attorney Three 16 (Sept. 24, 2008) (confirming that emergency petitions are relatively rare).
74. See Interview with Iowa Consumer Attorney One, supra note 60, at 3; Telephone Interview with Mass. Consumer Attorney Three 2 (Oct. 9, 2007); Telephone Interview with Mass. Creditor Attorney Two 4-6 (Oct. 24, 2007); Telephone Interview with Nev. Consumer Attorney One 4 (Oct. 23, 2007); Interview with Nev. Creditor Attorney 2 (Oct. 29, 2007); Telephone Interview with Tex. Bankruptcy Judge Two 1-2 (Oct. 3, 2007); Telephone Interview with Tex. Consumer Attorney One 5 (Oct. 5, 2007).
75. See Interview with Iowa Creditor Attorney One 1-2 (Oct. 17, 2007) (reporting that most consumers get a six-month delay before the foreclosure sale and estimating that only 5 to 10% of foreclosures result in a bankruptcy filing); Interview with Nev. Chapter 13 Trustee 15-16 (Oct. 26, 2007) (stating that the longer process allows for a "grieving" period, a time for a debtor to realize he cannot keep his home); Telephone Interview with Ga. Bankruptcy Judge 5 (Sept. 11, 2008) (attributing high rate of emergency filings in Georgia to speed of foreclosure process); Telephone Interview with Ga. Trustee Two 3-4 (Feb. 5, 2009) (suggesting a peak of filings in Georgia just before the first Tuesday of the month); Telephone Interview with Tex. Consumer Attorney Three, supra note 63, at 15 (stating that clients file Chapter 13 because the foreclosure process is so fast and they need time to find a place to live).
76. We considered the possibility that the lack of information about emergency filings might reflect a selection bias in the types of attorneys to whom we spoke. See Interview with Iowa U.S. Trustee, supra note 63, at 7 ("The good attorneys very seldom had as many emergency filings."). For example, it is possible that the attorneys located by our chain referral methodology were more connected to broad social networks than attorneys in general and that the clients who contact attorneys to whom they are connected through a social network may be more willing to do so without the pressure of an emergency. If that is true, then the clients who contact attorneys located solely through market information (such as advertising) might require the greater stimulus of an emergency to force them to seek formal relief. See Telephone Interview with Ga. Trustee Two, supra note 65, at 7 (suggesting that high-volume filers are more likely to attract clients through advertising, especially on television); Telephone Interview with N.J. Debtor Attorney, supra note 63, at 2 (same). We have attempted to mitigate that concern by a series of interviews with high-volume filers who rely heavily on advertising to attract clients. Those interviews suggest very little, if any, greater propensity for emergency filings than the discussions with attorneys identified through our chain referral methodology.
77. Telephone Interview with Tex. Consumer Attorney Two 5 (Nov. 7, 2007); see also Interview with Iowa Consumer Attorney One, supra note 60, at 13 ("Just because the debt collector says[,] '[I]f you do not get a payment in here on Friday, I am going to garnish your wages on Friday[,]' does not mean he is garnishing your wages on Friday. What he . . . left out in the conversation is all the things that he has to do in the meantime before he can get to that point . . . ."); Telephone Interview with Nev. Consumer Attorney One, supra note 64, at 11 (explaining that he informs his clients that if "no one has sued you" they cannot garnish your wages).
78. See Interview with Tex. Consumer Attorney Three, supra note 63, at 4 (estimating that delay from retention of his services to filing of case was four to six months for most Chapter 7 cases); Telephone Interview with Ga. Consumer Attorney One, supra note 60, at 3 (estimating that Chapter 7 cases are not filed for two to three months); Telephone Interview with Tex. Consumer Attorney One, supra note 64, at 2 (noting that Chapter 7 cases tend to be filed in batches because they are not facing any definite deadline).
79. A substantial fraction of Chapter 7 cases are filed before a creditor has completed legal action. See Interview with Iowa Chapter 7 Trustee, supra note 63, at 10 (estimating that 25% of bankruptcy debtors have judgments against them); Interview with Iowa Consumer Attorney One, supra note 60, at 13 (saying that only a very small percentage of clients have actually been garnished); Telephone Interview with N.J. Debtor Attorney, supra note 63, at 4 (suggesting that clients with substantial non-exempt assets tend to file for bankruptcy before collection actions proceed to judgment); Telephone Interview with Tex. Consumer Attorney Three, supra note 63, at 10 (stating that probably less than 20% of Chapter 7 clients have had lawsuits filed against them).
80. See supra note 5.
81. The relevant question for the family that has not yet filed for bankruptcy is what assets are exempt from execution under state law. The answer differs markedly from state to state. See generally RESNICK & SOMMER, supra note 6 (describing variations in state exemption laws).
82. Interview with Iowa Consumer Attorney One, supra note 60, at 9; see also Telephone Interview with Nev. Consumer Attorney Two 2 (Feb. 4, 2009) ("I ask, 'Well is anybody suing you? If not, then I go[,] '[A]lright well, we will just hold the creditors off again.' We do debt defense as well; that's part of the services that we offer . . . .").
83. See N.C. GEN. STAT. § 1-362 (2009) (prohibiting wage garnishment of a debtor who is supporting a family with wage income); 42 PA. CONS. STAT. § 8127 (2008) (prohibiting wage garnishment except in limited circumstances such as divorce or child support); S.C. CODE ANN. § 37-5-104 (2009) (prohibiting wage garnishment for consumer credit agreements); TEX. CIV. PRAC. & REM. CODE ANN. § 31.0025 (Vernon 2008) (prohibiting wage garnishment except for child support).
84. See Telephone Interview with Ga. Bankruptcy Judge, supra note 65, at 8 ("Now, we get a fair amount of garnishment though."); Telephone Interview with Ga. Consumer Attorney One, supra note 60, at 8 ("I think many, many, many clients are dealing with . . . [garnishment] by the time they come to see us . . . ."); Telephone Interview with Ga. Creditor Attorney One, supra note 56, at 8 (affirming that garnishment is common in Georgia and explaining that it is "very easy to garnish . . . . Georgia is a very, very, very creditor-friendly state[,] and as a result I think that's one of the reasons that our bankruptcy numbers are so high.").
85. See Telephone Interview with Ga. Debtor Attorney Two 9-10 (Jan. 23, 2009) (describing relative rapidity and limited procedural protections of Georgia's garnishment scheme compared to other states but noting that even in Georgia, it takes forty-five days to obtain a default judgment); Telephone Interview with N.J. Debtor Attorney, supra note 63, at 4 (suggesting that pace of postjudgment execution process in New Jersey motivates prejudgment bankruptcy filings).
86. See Telephone Interview with Iowa Consumer Attorney Four 2-3 (Sept. 11, 2008) (confirming that foreclosure is the most common cause of Chapter 13 bankruptcy); Telephone Interview with Mass. Consumer Attorney Three, supra note 64, at 2 (stating that, in his practice, Chapter 13 filings are triggered by foreclosures); Telephone Interview with Nev. Consumer Attorney One, supra note 64, at 5 (stating that the threat of foreclosure drives 40% of his Chapter 13 filings); Telephone Interview with Tex. Consumer Attorney One, supra note 64, at 2 (stating that the biggest day for Chapter 13 filings in Texas is the Monday before "Foreclosure Tuesday").
87. See Telephone Interview with Ga. Bankruptcy Judge, supra note 65, at 5 (reporting that largest debtors' firm in area kept its office open until 10:00 or 11:00 p.m. on the evening before the foreclosure day and advertised that accommodation); Telephone Interview with Mass. Chapter 13 Trustee 5 (Sept. 24, 2007) ("I actually spoke to a debtor this morning who is having a sale at 12 noon today.").
88. See, e.g., Interview with Iowa Chapter 7 Trustee, supra note 63, at 5 ("[V]ery rarely do you have someone come in and say, '[T]hey are going to have a sheriff sale tomorrow in my house. I've got to file today.' I mean, in fact, I don't like to take those kind of cases."); Telephone Interview with Ga. Consumer Attorney One, supra note 60, at 15 (explaining reluctance to take emergency cases because "it would be too easy for us to make a mistake and to somehow become involved in something bad").
89. For example, the HUD foreclosure time frame table suggests a range from three months (Texas), to four months (Georgia), to six months (Nevada), to eight months (Massachusetts), to nine months (Iowa). THE NATIONAL MORTGAGE SERVICER'S REFERENCE DIRECTORY C13-14 (24th ed. 2007). In the experience of the authors, three months overstates the time required in Texas, while nine months understates the time required in Iowa.
90. See Interview Iowa Consumer Attorney Two 20 (Sept. 24, 2007); Telephone Interview with Iowa Consumer Attorney Four, supra note 76, at 3 (describing consultation right before sale as occurring "more rarely than not" and observing that "the majority by far" of homeowners facing foreclosure consult him at the beginning of that process shortly after they get served with the foreclosure petition).
91. See Telephone Interview with Iowa Consumer Attorney Four, supra note 76, at 3 (describing initial client consultations right before foreclosure sale as rare and observing that "the majority by far" of homeowners facing foreclosure consult him at the beginning of that process shortly after they get served with the foreclosure petition).
92. TEX. PROP. CODE ANN. § 51.002(b) (Vernon Supp. 2008).
93. Telephone Interview with Tex. Consumer Attorney Three, supra note 63, at 3 ("Most of them procrastinate until the last minute and come in with a week or less to go [before the foreclosure sale]."); see Telephone Interview with Ga. Bankruptcy Judge, supra note 65, at 5 (agreeing that Georgia has "lots of emergencies, a whole lot" and that filings motivated by foreclosure occur "very close in time to the sale"); Telephone Interview with Tex. Consumer Attorney Two, supra note 67, at 1.
94. Telephone Interview with Tex. Consumer Attorney Two, supra note 67, at 1.
95. See Telephone Interview with Ga. Debtor Attorney Two, supra note 75, at 8 (analogizing effect of Georgia's rapid foreclosure process to a gun to the head of homeowners and suggesting that debtors file to avoid making decisions under that immediate pressure).
96. Apparently, there is also a spectacle at debtors' law firms, as well. See id. at 7 ("You should be here on foreclosure Tuesday. We will probably have 25 or 30 people here at our office at 7 o'clock on Tuesday morning before the foreclosure.").
97. See Telephone Interview with Mass. Consumer Attorney Three, supra note 64, at 4 ("Massachusetts has effectively a four-month procedure [for foreclosure] [A] foreclosure Chapter 13 bankruptcy case, in my experience, will be filed during the last six weeks before the auction."); Telephone Interview with Nev. Consumer Attorney Two, supra note 72, at 5 ("A lot are coming in because of foreclosure. Basically they tell the story, '[H]ey I tried to do a mortgage modification[,] and they told me how to miss more payments. And now they are starting a foreclosure[,] and nobody will talk to me.' I get a lot of that."); id. at 10 (suggesting that most emergency filings are foreclosure-driven); Telephone Interview with Nev. Credit Counselor, supra note 62, at 6-7 (suggesting that "there is not an emergency filing, in my opinion," because the only "emergency" that clients usually identify is an imprudent desire to file bankruptcy to keep a home that they cannot afford).
98. Though each individual bankruptcy professional offered his or her own estimate, the main variance was between attorneys in different states. Compare Interview with Iowa Consumer Attorney One, supra note 60, at 3 (Iowa attorney opining that "probably only 15% or so of my filings are Chapter 13's[,] and of those maybe half of those, or slightly more, are driven by foreclosures"), and Interview with Nev. Chapter 13 Staff Attorney 7 (Oct. 26, 2007) (Nevada attorney saying that "not a large percent" of foreclosures that she instigated as creditors' attorney resulted in a bankruptcy filing by the homeowner), with Telephone Interview with Ga. Creditor Attorney One, supra note 56, at 8 (estimating that 70% of Chapter 13 filings can be attributed primarily to foreclosure), Telephone Interview with Mass. Chapter 13 Trustee, supra note 77, at 4 (Massachusetts trustee opining that foreclosure is "[absolutely" the most common reason for filing Chapter 13 cases), and Telephone Interview with Tex. Consumer Attorney Three, supra note 63, at 3 (estimating that foreclosure is bringing 60-70% of putative Chapter 13 debtors to consult him).
99. See Telephone Interview with Ga. Bankruptcy Judge, supra note 65, at 6 (expressing opinion that to him a "surprising" portion of Chapter 13 cases have only a car as secured debt).
100. The pattern here is a mature (often elderly) household with a steady income and important assets but medical expenses that cannot be defrayed using existing assets. See Telephone Interview with Tex. Bankruptcy Judge Two, supra note 64, at 7.
101. See Telephone Interview with Nev. Consumer Attorney One, supra note 64, at 5 (reporting that some of the 60% of non-foreclosure-driven Chapter 13 bankruptcies are people with excess income who file a Chapter 13 case because of the means test or to avoid a challenge for abuse); Telephone Interview with Tex. Consumer Attorney Two, supra note 67, at 3-4 (noting that a small percentage of bankruptcies are caused by people who cannot pass the means test but need to file a bankruptcy because of huge medical bills or tax debt). The means test requires all Chapter 7 filers to disclose their incomes for the past six months, and then a further subset must go through an expense calculation and comparison. Those whose financial position meets statutory criteria are not eligible for a Chapter 7 filing. See 11 U.S.C. § 707(b) (Supp. 2008).
102. See Telephone Interview with Tex. Chapter 13 Trustee 7 (Sept. 27, 2007) (explaining that what gets people to the door of a bankruptcy attorney on a particular day "is almost always foreclosure.... There are other reasons people file 13, but those do not really care so much about the timing."). A few professionals said that car repossession could prompt a bankruptcy, especially where a debtor was dependent on the car to travel to work, but that these filings seemed less immediate. Telephone Interview with Ga. Trustee Two, supra note 65, at 4-5 ("They may file to stop that repossession, but
103. In every recent year, Chapter 7 nonbusiness cases have outnumbered Chapter 13 cases, usually by a ratio of two to one. For the twelve-month period ending June 30, 2008, 615,748 Chapter 7 cases were filed compared to 344,421 Chapter 13 cases. Administrative Office of the U.S. Courts, supra note 1. Given that only some fraction of Chapter 13 cases are foreclosure-driven and that only a subset of these are time-sensitive cases motivated by an imminent foreclosure sale, a generous estimate of the fraction of emergency bankruptcy petitions is probably 10%.
104. Telephone Interview with Mass. Consumer Attorney One 3 (Sept. 24, 2007). In the most egregious situation of this type reported to us, one consumer apparently considered a bankruptcy filing for nearly a decade. See Interview with Iowa Consumer Attorney One, supra note 60, at 9 ("I had a client one time that took over eight years for her to finally file. She came along every couple of years and gave me a couple hundred more dollars to keep working for her and promising she was going to file in the next couple of weeks[,] and then I would not see her for about two years.").
105. Telephone Interview with Iowa Creditor Attorney Two, supra note 55, at 5.
106. See Telephone Interview with Ga. Creditor Attorney One, supra note 56, at 9 ("I mean there is almost a spiteful thing and they just don't want the lender to get the car back[,] and they don't want to have to pay on a car that they don't have. So they will give it to a family memberf[,] and then they will take it out of state and it will go to Texas[,] and then all of a sudden it ends up in Mexico.").
107. See Interview with Iowa U.S. Trustee, supra note 63, at 16 ("There is an unwillingness to recognize that financial trouble; there is an unwillingness to recognize that they are going to lose their family home.").
108. See Interview with Iowa Creditor Attorney One, supra note 65, at 14 (estimating it took people six months to two years to reach resignation of need for bankruptcy); see also Thorne & Anderson, supra note 62, at 83 ("To avoid the stigma of bankruptcy altogether, the majority of debtors reported that they postponed filing for months and even years after recognizing that their debts were unmanageable.").
109. Telephone Interview with Ga. Consumer Attorney One, supra note 60, at 21; see also Interview with Iowa Consumer Attorney Two, supra note 80, at 8 (estimating that it takes at least six months for people to realize their financial problems are irremediable without bankruptcy relief); Telephone Interview with Iowa Consumer Attorney Four, supra note 76, at 13 (reporting that people struggled a "long time" before they filed bankruptcy).
110. See Interview with Iowa Consumer Attorney One, supra note 60, at 15 ("That sort of legal explanation is not the issue. When I say[,] '[Y]ou are not going to stop the collection calls without a bankruptcy,' then they are going to file for bankruptcy...."); see also Telephone Interview with Ga. Debtor Attorney Two, supra note 75, at 4-5 ("We can sit there and counsel them and say[,] '[L]ook, you just have Social Security, they can't take anything from you.' And some of them just start crying and they say[,] 'I am so embarrassed to be here, I was always taught to pay my debts[,] but they are calling me and calling me[,] and I can't make them stop....'").
111. 2007 CONSUMER BANKR. PROJECT, WRITTEN SURVEY ques. 25 (2007) (on file with Katherine Porter) (n = 2438).
112. Id. at ques. 25 (on file with Katherine Porter) (n = 1175). Of course, some of these homeowners are current on their mortgage obligations but woefully behind on other debts. Most households that face imminent foreclosure filed Chapter 13 because of its greater home-saving potential. See Katherine M. Porter, Misbehavior and Mistake in Bankruptcy Mortgage Claims, 87 TEX. L. REV. 121, 141-42 (2008).
113. The exact question posed: "Was pressure from debt collectors very much, somewhat, or not at all a reason that you finally filed for bankruptcy?" 2007 CONSUMER BANKR. PROJECT, supra note 58, at ques. DC08 (2007) (on file with Katherine Porter) (n = 1032).
114. Other plausible explanations exist for the disparity in responses besides the different wording of the questions. The question about pressure from debt collectors was asked in the telephone interview as opposed to the written survey; perhaps this medium affected responses. Also, the telephone interview was conducted later than the written survey, and perhaps time affected debtors' perceptions of why they filed for bankruptcy relief.
115. Telephone Interview with Mass. Consumer Attorney Two 7 (Oct. 1, 2007); see also Telephone Interview with Mass. Consumer Attorney One, supra note 94, at 9 ("[For] my clients universally, it is the psychological pressure....There is something that is psychological and puts them over the edge...."); Telephone Interview with Tex. Consumer Attorney Two, supra note 67, at 10 ("They are gaining what I would call peace of mind because phone calls are going to stop. The letters are going to stop, which was very stressful for a lot of these people because most if not all people take this stuff very seriously.").
116. Telephone Interview with Tex. Consumer Attorney Three, supra note 63, at 12.
117. See Telephone Interview with Nev. Credit Counselor, supra note 62, at 7.
118. Interview with Iowa Consumer Attorney Two, supra note 80, at 13; see also Telephone Interview with Ga. Consumer Attorney One, supra note 60, at 7 ("[T]hey are calling multiple times a day, they are calling [the debtor's] job, they are calling [the debtor's] neighbors, they are calling [the debtor's] mom and dad... that kind of thing. That just gets unbearable[,] and the debtor says[,] 'I can't take this anymore.'"); Telephone Interview with Nev. Consumer Attorney One, supra note 64, at 10 ("As I said, there are people who are judgment proof. And they say[,] '[W]ell, I just can't stand the calls anymore.'"); Telephone Interview with Tex. Chapter 13 Trustee, supra note 92, at 10 ("What pushes them to make the filing... is that one phone call too many. They just can't stand the phone calls anymore."); Telephone Interview with Tex. Consumer Attorney Three, supra note 63, at 9 ("It's just the emotional pressure of 'I can't handle this alone[,] and I am going to call somebody.'").
119. Interview with Iowa Creditor Attorney One, supra note 65, at 13; see also Interview with Iowa Consumer Attorney One, supra note 60, at 9 (saying that when people "realize that they don't want to be putting up with that [debt collection] day in and day out, they decide to file bankruptcy").
120. See Telephone Interview with Mass. Consumer Attorney Four 3 (Oct. 17, 2007) (stating that filing is a result of a "gradual realization"); see also Telephone Interview with Mass. Bankruptcy Judge 7 (Oct. 1, 2007) ("[S]ome debtors just get worn down by the harassing phone calls[,] and they just get tired of the whole thing....").
121. See Deborah K. Thorne, Personal Bankruptcy Through the Eyes of the Stigmatized: Insight into Issues of Shame, Gender, and Marital Discord (May 2001) (unpublished doctoral thesis, Washington State University) (on file with author) (describing how couples interact during the prebankruptcy period of collection harassment).
122. See Telephone Interview with Iowa Consumer Attorney Four, supra note 76, at 7 ("Sometimes one of the parties is more driven to recognizing this is an unsolvable situation. The other wants to be more stoic about it or [is] thinking that after months and months, we will find a way to pay."); see also Interview with Iowa U.S. Trustee, supra note 63, at 16 (reporting that the marital discord that accompanies financial distress means that one person in a marriage is usually more interested in seeing an attorney).
123. Telephone Interview with Tex. Consumer Attorney Three, supra note 63, at 12; see also Telephone Interview with Ga. Consumer Attorney One, supra note 60, at 19 ("I think my gut answer would be that generally the wife recognizes the need to do something more than the husband[,] and the husband is more apt to ignore it or tell the wife that 'this is your problem, you deal with it' or something of that nature. If I can tell one of the individuals wants to file and the other does not, then, if I can make a general statement, then it's the husband who doesn't want to file."); Thome, supra note 111, at 233 ("From the managing of an unmanageable debt to the decision to actually file for personal bankruptcy, the responsibility falls primarily on women.").
124. See Interview with Iowa U.S. Trustee, supra note 63, at 21 ("The guy has learned the stoic WASP approach, you got to work harder; it is all my fault because I am not working it right[,] and so as a result he worries and the wife knows but they [the wives] do not want to bring it up too much[,] and so other parts of their relationship go to hell in a hand basket, too."); see also Telephone Interview with Ga. Consumer Attorney One, supra note 60, at 21 (explaining that men often do not come in because they get nervous or lose confidence).
125. Telephone Interview with Tex. Consumer Attorney One, supra note 64, at 11. For similar sentiments, see Interview with Iowa Consumer Attorney One, supra note 60, at 19-20 (suggesting that it is more common for debtors to have made the decision to file and need the money to do so than the reverse); Telephone Interview with Mass. Consumer Attorney One, supra note 94, at 5; Telephone Interview with Mass. Consumer Attorney Three, supra note 64, at 6 ("They tell themselves they were not [going to file for bankruptcy] when they come to see me, but I am sure that they know there is no alternative[,] and therefore the delay after they see me is always because they need time to come up with the money. It is a real sticker shock when I tell them what it costs these days."); Telephone Interview with Tex. Consumer Attorney Two, supra note 67, at 2, 4-5.
126. See supra notes 27-28 and accompanying text. The other one of us was skeptical about this hypothesis, speculating that the March peak had more to do with debtors making resolutions to deal with their financial problems in the new year.
127. See Interview with Iowa U.S. Trustee, supra note 63, at 9 (attributing "spiking" filings in February and March to tax returns).
128. Interview with Iowa Consumer Attorney One, supra note 60, at 5; see also Interview with Iowa Consumer Attorney Two, supra note 80, at 5 ("Tax refund is my primary guess...."); Telephone Interview with Mass. Consumer Attorney Three, supra note 64, at 1 (attorney asked why tax refunds might be relevant explained that "[t]hey have the money to pay me!"); Telephone Interview with Tex. Consumer Attorney Two, supra note 67, at 3 ("[I]t may be driven a lot by tax refunds coming in from January through April and May[,] and ... they have that extra income[,] and they are able to pay their filing fees and lawyer."). As a related point, a debtor that filed just before the tax refund arrived would risk losing the tax refund to general creditors if it were determined not to be an exempt asset. This arguably darker side to the timing question also encourages filers to wait until after the refund has arrived. See Interview with Iowa Consumer Attorney One, supra note 60, at 5; see also Interview with Iowa Chapter 7 Trustee, supra note 63, at 5 (explaining offhand that "I would think the people that are going to file in March probably have got their refunds back. They file with... the easy tax return and get the refunds back right away, spend it, and then file bankruptcy."); Interview with Nev. Chapter 13 Trustee, supra note 65, at 26-27 (expressing concerns that the trustee will "take" the tax refund if debtors file before they receive it).
129. Telephone Interview with Tex. Consumer Attorney One, supra note 64, at 4.
130. See Interview with Iowa Consumer Attorney Three 7 (Aug. 6, 2008) (stating that her practice is to mention potential tax refunds in consultations in October or thereafter); Telephone Interview with Iowa Consumer Attorney Four, supra note 76, at 15 (reflecting on how trustees' interest in tax refund "gets earlier every year" and now begins in September); Telephone Interview with Nev. Consumer Attorney Two, supra note 72, at 2 (suggesting that trustees watch for incoming tax refunds in Chapter 13 cases filed as early as September 15); Telephone Interview with Tex. Consumer Attorney Three, supra note 63, at 7 ("And we will bring up the issue of the tax refund and say, 'In X weeks, you normally get a tax refund, how much you expecting this year?' Well let's go out with that[,] and let's plan on putting that towards your attorney's fees....").
131. Telephone Interview with Tex. Consumer Attorney One, supra note 64, at 5; see also Telephone Interview with Mass. Consumer Attorney Three, supra note 64, at 1-2 (criticizing the "interest-free loan to the government" resulting from "intentional overwithholding so that there is a forced savings"); Telephone Interview with Tex. Consumer Attorney Two, supra note 67, at 3 (suggesting that people use overwithholding as a "poor man's saving account" and that earned income credits are not relevant). For a general discussion of this pattern of behavior, see Michael S. Barr & Jane Dokko, Paying to Save: Tax Withholding and Asset Allocation Among Low- and Moderate-Income Taxpayers (Univ. of Mich. Law Sch. Pub. Law & Legal Theory Working Paper Series, Working Paper No. 100, 2007), available at http://ssrn.com/abstract= 997866.
132. See Interview with Iowa Consumer Attorney One, supra note 60, at 6 (suggesting an upward trend during the first months of the year, though fairly constant on a quarter-by-quarter basis).
133. In Chapter 13, debtors may pay their attorneys some or all of their fees through their repayment plans. Local practice, even within a jurisdiction, varies as to the amount of the initial retainer fee that attorneys require consumers to pay up-front before filing. See Telephone Interview with Ga. Trustee Two, supra note 65, at 5 ("And in most of the cases that we see, I don't see any payment of attorney's fees at all on the front of the case.").
134. See Interview with Iowa Consumer Attorney One, supra note 60, at 7; Telephone Interview with Mass. Consumer Attorney Three, supra note 64, at 3; Telephone Interview with N.J. Debtor Attorney, supra note 63, at 8; Telephone Interview with Tex. Chapter 13 Trustee, supra note 92, at 3. But see Telephone Interview with Mass. Consumer Attorney One, supra note 94, at 6 (requiring roughly half of fees up-front for Chapter 13, which is twice as expensive as the fees for Chapter 7, amounting to roughly the same payment for both Chapter 7 and Chapter 13 and thus accruing no savings either way).
135. Foreclosure extinguishes a debtor's ownership of the property, but unless a homeowner moves out voluntarily, an eviction action is necessary to obtain possession of the home. Because of liability concerns or fear of damage to an empty home, creditors prefer to evict immediately after foreclosure. Thus, a desire to avoid December evictions translates into a slow-down in foreclosure starts several weeks prior. See Interview with Nev. Chapter 13 Staff Attorney, supra note 88, at 4 (reporting that when she handled foreclosure cases in private practice, her clients would not refer foreclosures to her between the middle of November and the first week of the year); Telephone Interview with Ga. Bankruptcy Judge, supra note 65, at 10 ("[E]verybody kind of almost knows don't come in... asking for relief from the stay [to foreclose] in January and December."); Telephone Interview with Ga. Creditor Attorney One, supra note 56, at 7 (noting that firm refrained from foreclosing in November or December unless Fannie Mae or Freddie Mac foreclosure timeline guidelines mandated immediate action). Indeed, one attorney explained a peak in his state's Chapter 13 filings in September and October as a result of lenders working to close out delinquent mortgages before such a moratorium. See Telephone Interview with Ga. Trustee Two, supra note 65, at 2.
136. Telephone Interview with Tex. Bankruptcy Judge One 3 (Sept. 21, 2007); see also Telephone Interview with Ga. Trustee 2, supra note 65, at 7 (suggesting that high-volume filers are more likely to attract clients through advertising, especially on television); Telephone Interview with N.J. Debtor Attorney, supra note 63, at 2 (same); Telephone Interview with Tex. Bankruptcy Judge Two, supra note 64, at 6 ("I think the filings are higher in January, February, and March in Chapter 7 because people have gone nuts with their credit cards for Christmas gifts[,] and then they start getting their bills in January and February...."). Some (but certainly not all) of those who took this perspective made it clear that they were not speaking from personal experience but instead were simply hypothesizing about possible explanations for the pattern. See, e.g., Telephone Interview with Tex. Bankruptcy Judge Two, supra note 64, at 6; Interview with Iowa Chapter 13 Staff Attorney 9 (Sept 24, 2007) (suggesting that overspending at Christmas would explain such a pattern but noting that she had never seen such a pattern in her practice); Telephone Interview with Mass. Consumer Attorney Four, supra note 100, at 2 ("I can opine only from speculation not from study but by inclination it was people [who] have maybe gone on spending sprees before Christmas, they get the bills from their credit card companies... come January or February, and they realize they don't have even enough money to be able to make their minimum payments on the credit cards."); Telephone Interview with Tex. Chapter 13 Trustee, supra note 92, at 4 (stating that her office "ha[s] always noticed this trend" and that "post-Christmas filings" is the only explanation that has occurred to them); Interview with Iowa Consumer Attorney Two, supra note 80, at 5 (suggesting possibility of Christmas overspending after stating that tax refunds is her "primary" guess).
137. See Interview with Iowa Consumer Attorney One, supra note 60, at 5 ("We have also got in our culture, I think, the sense that. January is a time to re-evaluate and change what is wrong in your lives and such[,] and so generally I see an uptake in the interest coming in those first couple of months just like any health club would see a lot of new people signing up."); Telephone Interview with Mass. Chapter 13 Trustee, supra note 77, at 3; Telephone Interview with Mass. U.S. Trustee 3 (Sept. 26 & Oct. 16, 2007).
138. Telephone Interview with Mass. Consumer Attorney Three, supra note 64, at 2.
139. Consumer attorneys postulated a number of other theories for the phenomenon. These include the debtor's expectation that things will change for the better with the turn of the new year, see Telephone Interview with Mass. Consumer Attorney Two, supra note 105, at 3, or that people simply do not want to think about bankruptcy during the holiday season, see Telephone Interview with Mass. Consumer Attorney One, supra note 94, at 2. Finally one interview subject also pointed to seasonal employment patterns, such as construction workers who are typically laid off during winter months. See Interview with Iowa Consumer Attorney Two, supra note 80, at 5.
140. See Interview with Iowa Consumer Attorney Three, supra note 120, at 16 (explaining that delay in filing after attorney consultation results from consumers "just trying to scrape [the money] up" and that many people must "just save up" to find the money to file for bankruptcy).
141. On the horizontal axis, Day 1 is the first day of a calendar month, with negative numbers representing the days before the first day of a month.
142. See Interview with Iowa U.S. Trustee, supra note 63, at 4-5; see also Interview with Iowa Consumer Attorney One, supra note 60, at 5 ("I think that the interest level is fairly constant through the year. I think that the timing of bankruptcies is largely affected by the tax refund issue.").
143. Telephone Interview with Tex. Chapter 13 Trustee, supra note 92, at 4; see also Interview with Iowa U.S. Trustee, supra note 63, at 4; Telephone Interview with Mass. Chapter 13 Trustee, supra note 77, at 3; Telephone Interview with Tex. Consumer Attorney One, supra note 64, at 3 (attributing the timing to "people get[ting] paid a lot on the 1st or the 15th"); Telephone Interview with Tex. Consumer Attorney Two, supra note 67, at 2 (suggesting that filers "get a paycheck and they go see their lawyer and either the petition is ready to go and they file them on the 15th or 16th or the lawyer does not start until they pay and then it takes two or three days to get everything in"). As with tax refunds, there is also the related concern that a filing just before the arrival of the paycheck will result in loss of the paycheck to the general creditors of the estate. See Interview with Iowa Consumer Attorney Two, supra note 80, at 4 ("I try to file them when they are owed the least amount of wages either right after they have been paid or the week following . . . ."); Telephone Interview with Nev. Consumer Attorney One, supra note 64, at 3 (suggesting that "it behooves us best [to file] when there's no money in the bank, and it's not that you yank out money, it's just that you're very careful about the moment you file"); Telephone Interview with Tex. Bankruptcy Judge One, supra note 126, at 2 ("[Y]ou curb the time of the filing so that it's right at the point when they get the paycheck and they can pay the bills and they can buy the groceries and they don't have to worry about reporting that income to the trustee[,] but at the same time they can spend it so that they get a bit of a cushion."). A reasonable perspective is that filers often are influenced both by the desire to protect the paycheck and by the need to pay their attorney. See Interview with Iowa Chapter 7 Trustee, supra note 63, at 2-3.
144. See Interview with Iowa Consumer Attorney One, supra note 60, at 1; Interview with Nev. Chapter 13 Staff Attorney, supra note 88, at 3.
145. Interview with Iowa Consumer Attorney One, supra note 60, at 2-3; Telephone Interview with Mass. Consumer Attorney One, supra note 94, at 9-10.
146. The 2005 reforms of the bankruptcy law added the requirement of payment advices to the other paperwork that a debtor must file, see 11 U.S.C. §§ 521(a)(1)(B)(iv), (f) (2006) (requiring payment advices and tax returns, respectively), and resulted in an additional form for computation of the means test that is a required component of a bankruptcy filing, see Official Bankruptcy Form B 22C, available at http://www.uscourts.gov/ rules/BK-Forms-08-Official/B-022C-0108v2.pdf.
147. On the horizontal axis, Day 1 is the first day of a calendar month, with negative numbers representing the days before the first day of a month.
148. One of our subjects attributed the state's filing patterns to a sharp drop in filings on Tuesday and Thursday when the courts commonly have day-long calendars of consumer matters so that attorneys are busy in court on those days and concentrate their filings on Monday, Wednesday, Friday, and Saturday. See Interview with Nev. Chapter 13 Trustee, supra note 65, at 11-12.
149. Telephone Interview with Tex. Consumer Attorney Two, supra note 67, at 1.
150. Interview with Iowa Consumer Attorney Two, supra note 80, at 3; see also Telephone Interview with Tex. Chapter 13 Trustee, supra note 92, at 2 ("[B]ecause of the way 341 meetings [of creditors] are set in this jurisdiction, I think they definitely group them together and file them so they can sit one afternoon at 341 meetings instead of several afternoons . . . . In a way, they save their workflow . . . .").
151. See Telephone Interview with Tex. Bankruptcy Judge One, supra note 126, at 2; Telephone Interview with Tex. Bankruptcy Judge Two, supra note 64, at 3; Telephone Interview with Tex. Chapter 13 Trustee, supra note 92, at 2; Telephone Interview with Tex. Consumer Attorney One, supra note 64, at 2.
152. See Telephone Interview with Tex. Consumer Attorney Three, supra note 63, at 4 ("[W]e hold all of our Chapter 7s and file them at once and we do that twice a month. And so we pick a day towards the beginning of the month and then a day in the middle of the month[,] and the reason we do that is because when you file the case, the court automatically schedules their creditors meeting[,] and so if you just file them as you sign the people up, you are at court every day. So we batch them[,] and I think a lot of other firms do that as well.").
153. See Interview with Iowa Consumer Attorney Two, supra note 80, at 2; see also Interview with Iowa Chapter 7 Trustee, supra note 63, at 2 (stating that filings may go up on Mondays because of attorneys working on Saturdays and Sundays, building up filings for the first day of the work week).
154. See Bankruptcy Reform Act of 1999 (Part II): Hearing on H.R. 833 Before the Subcomm. on Commercial and Admin. Law of the H. Comm. on the Judiciary, 106th Cong. 205 (1999) (statement of Henry E. Hildebrand, III, Chapter 13 Trustee, National Association of Chapter 13 Trustees) (stating that by the time individuals seek bankruptcy protection, it is too late for client counseling); id. at 134-35 (statement of Wayne Sigmon, National Association of Consumer Bankruptcy Attorneys) (noting the significant burdens that client counseling will have on debtors who file under "exigent circumstances");
155. Charles Jordan Tabb, The Death of Consumer Bankruptcy in the United States?, 18 BANKR. DEV. J. 1, 34 (2001) (opining that the credit counseling requirement would be both a "hassle and expensive").
156. See Bankruptcy Reform Act of 1999 (Part III): Hearing on H.R. 833 Before the Subcomm. on Commercial and Admin. Law of the H. Comm. on the Judiciary, 106th Cong. 23 (1999) (Joan Entmacher, Vice-President and Director, Family Economic Center, National Women's Law Center) (discussing how unsophisticated debtors may wait until the "sheriff is at the door" before seeking help).
157. The discussion below takes the view that this part of the collection process is for the most part socially wasteful. Our view is not driven primarily by fear of egregious or outrageous collection, which the law already bans. See 15 U.S.C. § 1692d (2006) (giving nonexclusive list of unacceptable collection practices). The effect that troubles us is cumulative and arises without malicious behavior from any creditor.
158. To be sure, if the subsequent communications are sufficiently harassing, they might overcome a weak desire not to pay. That effect, presumably, is one of the principal reasons for the communications.
159. The use of large, technologically integrated call centers ("bucket shops") for collection activity seems to be an unintended consequence of the do-not-call regulation, which limits the use of those facilities for affirmative marketing. See 47 C.F.R. § 64.1200(c), (f)(12) (2008) (forbidding companies from making telephone calls with the purpose of encouraging purchase, rental, or investment of goods or services to consumers who are on the do-not-call list).
160. See Telephone Interview with National Collection Attorney 10-14 (May 22, 2008) (discussing the level of expected recovery necessary to justify litigation and the rarity of bankruptcy responses).
161. Id. at 5.
162. The problem here is no different in conceptual structure than the collective action problem identified by Thomas Jackson a generation ago in his analysis of the hypothetical creditor's bargain. See Thomas H. Jackson, Bankruptcy, Non-Bankruptcy Entitlements, and the Creditors' Bargain, 91 YALE L.J. 857, 860-61 (1982).
163. See Telephone Interview with National Credit Card Executive, supra note 55, at 7-8 (describing the increasing levels of intensity with which creditors contact debtors while trying to avoid counterproductive results).
164. The scenes in MAXED OUT: HARD TIMES, EASY CREDIT AND THE ERA OF PREDATORY LENDERS (Trueworks 2006) on this subject are informative.
165. See Telephone Interview with Iowa Creditor Attorney Two, supra note 55, at 6 ("For each [creditor] . . . it's almost like it's kind of a different bucket if you will."); Telephone Interview with Mass. Chapter 13 Trustee, supra note 77, at 7 ("[P]er my experience in representing Chapter 7 [clients,] I think the pressure is that if you have one credit card company pushing you, you can further make a deal to pay those people $25 a week payments, though when you have three, and four, and five pressuring you then it just becomes overwhelming . . . .").
166. See Interview with Iowa U.S. Trustee, supra note 63, at 21 (explaining that people without any assets that creditors can reach file for bankruptcy because the other strategies do not "end the debt," and the constant burden of debt "destroys families," is "very corrosive," and just "keeps getting bigger and bigger").
167. See Telephone Interview with Iowa Creditor Attorney Two, supra note 55, at 10-11 (distinguishing between debtors whose financial setbacks were temporary and eventually can pay and those who have permanent circumstances with no solution other than bankruptcy).
168. Again, different observers will have different perspectives on the moral hazard inherent in the bankruptcy process. It has been the experience of the authors, however, mat the bankruptcy process (including, among other things, the meeting of creditors with its attendant questioning by the bankruptcy trustee) is sufficiently humiliating to render moral hazard a relatively unimportant element of sensible system design. See Thorne & Anderson, supra note 62, at 93-94 (discussing the shame, humiliation, and stigma associated with filing bankruptcy for most consumers). This is not to say that debtors do not act strategically in deciding when to file. We do think, however, that the long period of straggle (one to two years or more) that we document before households file for bankruptcy suggests mat concerns about bankruptcies of convenience are overstated. See Mann, supra note 35, at 376-77 (discussing the legislative history of BAPCPA and the concerns expressed therein about bankruptcies of convenience). We also note mat debtors threaten bankruptcy repeatedly before they actually file, and many are deterred from ever filing. See Telephone Interview with Iowa Creditor Attorney Two, supra note 55, at 7 (saying mat so many consumers threaten bankruptcy when he speaks to them to collect debts that to him "[i]t's the same as saying hello to me" but reporting that most people who threaten bankruptcy "won't do it").
169. See Interview wim Iowa Consumer Attorney One, supra note 60, at 18 (suggesting that people in financial distress who do not file for bankruptcy go into an "underground economy"). As one of us has previously discussed, it is a challenging task to identify the optimal moment for bankruptcy. See Katherine Porter & Deborah Thome, The Failure of Bankruptcy's Fresh Start, 92 CORNELL L. REV. 67, 121 (2006).
170. Arthur Leff offered a similar insight forty years ago about the collection process. As he elegantly framed it, the creditor's critical question is, "[D]o I coerce or cooperate?" He elaborated: To coerce the helpless is to waste money and effort; to cooperate with the deadbeat is to risk total loss. If, in fact, the majority of D[ebtor]s, especially consumer D[ebtor]s . . . are in the can't-pay category, then any method which takes collection out of a coercive mode (judicial coerive [sic] or informational-coercive) and into a cooperative model (where more time is given, earning potential is not interfered with and asset values are not destroyed) is likely to enhance the efficiency of the whole collection system, and benefit both C[reditor]s and D[ebtor]s. Arthur Allen Leff, Injury, Ignorance, and Spite - The Dynamics of Coercive Collection, 80 YALE L.J. 1, 37 (1970).
171. Although the increase of fees after BAPCPA is widely asserted anecdotally (frequently in our interviews), there is little quantitative data on the subject. For a recent examination of the question, see generally Robert M. Lawless & Heather A. Miller, The Rising Cost of Going Broke (2008) (unpublished manuscript, on file with authors).
172. See Interview with Iowa Consumer Attorney Three, supra note 120, at 4, 14. Although other attorneys did not conceptualize it as an explicit alternative to bankruptcy, several practitioners spread throughout our jurisdictions of inquiry told us that they allow consumers to refer creditors to them during the period after an initial fee payment and noted that many people seemed content with such a service, delaying filing bankruptcy for a long period or never filing at all. See Telephone Interview with Ga. Consumer Attorney One, supra note 60, at 9 (explaining that when a consumer makes a partial payment toward bankruptcy attorney fees, they begin taking collection calls and continue for up to ninety days without further payments); Telephone Interview with Nev. Consumer Attorney Two, supra note 72, at 10-11 ("I give them my card[,] and I just say, okay, you . . . turn all the creditors over to us."); Telephone Interview with Tex. Consumer Attorney Three, supra note 63, at 8-9 (offering consumers who make an initial payment a "free" creditor referral number that consumers may give to creditors while they consider whether to make a bankruptcy filing).
173. See Telephone Interview with Nev. Consumer Attorney Two, supra note 72, at 2 ("I am taking creditor phone calls for them. I have got files where I have had people who have seen me 18 months ago and said[,] '[O]kay, I am ready to file,' and I'm like[,] '[W]ho are you?'").
174. It is a surprising testament to the general norm of compliance by creditors that this device seems so effective from the perspective of borrowers. That is not to suggest that creditors do not find this situation frustrating. See id. at 10-11 ("We have a mantra. It's basically yes, we represent so and so, we have no filing of data at this time, we have been fully retained, we cannot disclose any further information. . . . And creditors will crab and they will say, '[W]ell you told us that 60 days ago, and we will call this again in 60 days.' I say fine, I'll probably tell you the same damn thing.").
175. See, e.g., Jones & Zywicki, supra note 10, at 218-21 (questioning the morality of allowing can-pay debtors to escape repayment of their obligations). Even ignoring the moral hazard problem, it is supposed that the creditor cannot obtain the necessary information to determine ability to repay. See Rea, supra note 7, at 193 (arguing that although a debtor's "income is determined exogenously and depends on the state of the world," the lender is unable to determine if income has fallen).
176. The information technology available to sophisticated creditors gives them a pronounced informational advantage in assessing the likelihood that debtors will recover financial strength in the future, even if we ignore the overlapping cognitive deficits that are likely to plague self-assessment of that question.
177. 15 U.S.C. § 1692a(4), (6)(A) (1998) (excluding creditors collecting their own debts from the definition of a "debt collector").
178. The problem is exacerbated by language in the FDCPA that employs a lax standard for determining whether independent contractors can be treated as internal collectors. See id. § 1692a(6)(A) (excluding "any officer or employee of a creditor" from scope of the FDCPA); Pollice v. Nat'l Tax Funding, L.P., 225 F.3d 379, 403 (3d Cir. 2000) (stating that an assignee of debt is not generally considered a "debt collector" within the meaning of the statute if the obligation is not in default at the time of the assignment).
179. Although there are no ready statistics on the scope of debt collection, it appears that consumers perceive themselves to be suffering more pressure from collectors in recent years. According to a 2008 FTC report, more people file complaints against debt collection agencies than any other industry. See FED. TRADE COMM'N, ANNUAL REPORT 2008: FAIR DEBT COLLECTION PRACTICES ACT 4 (2008), available at http://www.ftc.gov/os/2008/03/ P084802fdcpareport.pdf.
180. The number of complaints has nearly tripled from 2000 to 2007. See Phuong Cat Le, As Consumers Owe More, the Tactics Get Aggressive: Complaints Mount About Debt Collectors, SEATTLE POST- INTELLIGENCER, Aug. 21, 2007, at A1, available at http://seattlepi.nwsource.com/local/328406-debt21.html.
181. Indeed, new debt collection technology allows debt collectors to profitably target debtors with smaller debts. See Anne Kadet, Who Profits Most From Debt? Debt Collectors, SMARTMONEY, Jan. 23, 2007, http://www.smartmoney.com/personal-finance/debt/Who-Profits-Most-From- Debt-Debt-Collectors-20685/.
182. Although many states have statutes that supplement, and in some cases extend, the coverage of the FDCPA, none of them include provisions responsive to the concerns that we address here. The most common additional protection of state debt collection restrictions is their applicability to creditors collecting their own debts rather than just third-party debt collectors. But though some states have such a provision in their state "mini"-FDCPA (Iowa, Massachusetts, and Texas), others do not (Nevada) or impose other limitations on the scope of their debt collection law that ultimately does not expand the scope of coverage beyond the FDCPA. See IOWA CODE § 527.7102 (2009); MASS. GEN. LAWS ANN. ch. 93, § 49 (West 2006); NEV. REV. STAT. § 649.020 (2009); TEX. FIN. CODE ANN. § 392.001 (Vernon 2009). Georgia's statute, for example, does not apply to banks, mortgage companies, pawnbrokers, and a host of other entities and only applies to loans of $3000 or less. GA. CODE ANN. §§ 7-3-4, -6 (2009). No state has a provision for a do-not-call system like the one that we suggest here.
183. 15 U.S.C. § 1692c(c).
184. 2007 CONSUMER BANKR. PROJECT, COURT RECORDS Tally Unsecured Creditors Sch. F (2007) (on file with Ronald J. Mann) (n = 2393). Even if a debtor undertakes that work, it can be difficult to know whether a request to a debt collector will result in the underlying creditor permanently ceasing communication. See Telephone Interview with Nev. Credit Counselor, supra note 62, at 9-10 (explaining that contacting one debt collector seeking a cessation of dunning calls is often ineffective because the absence of payments often leads to the debt being recycled to a different debt collector not aware of the previous request to stop calling).
185. See Interview with Iowa U.S. Trustee, supra note 63, at 18-19 ("[E]ven if the creditor had violated the FDCPA I did not focus on that. That was a small item. . . . You know, they are in so deep, they are under water already, so there is no sense in looking at that small violation if you are going to drown in the bigger picture."); Telephone Interview with Nev. Credit Counselor, supra note 62, at 9 (describing how the agency advises clients to send cease-and-desist letters but needs to "assure and reassure" debtors about that approach); Telephone Interview with Nev. Consumer Attorney Two, supra note 72, at 8 ("Debtors just want to get the pressure off their backs. FDCPA takes a while.").
186. Interview with Iowa Consumer Attorney One, supra note 60, at 10-11; see also Interview with Iowa Consumer Attorney Three, supra note 120, at 16. ("With the FDCPA, there is still [a] little bit of shame[,] and I think that that shame is enough to say that I just don't want to bother with it.").
187. Telephone Interview with Wis. FDCPA Attorney 3-4 (May 27, 2009).
188. Interview with Iowa U.S. Trustee, supra note 63, at 19-20. One interesting data point about the sophistication of the relevant consumer population is that the very general advertisements of the FDCPA specialist whom we interviewed (mentioning "harassing debt collectors" but not bankruptcy) for the most part produce clients who have only a small number of creditors; those with large numbers of creditors apparently respond to advertisements that include the word "bankruptcy." Telephone Interview with Wis. FDCPA Attorney, supra note 174, at 4-5.
189. One possibility would be that if the FDCPA provided more robust relief, firms specializing in providing bankruptcy relief might be more motivated man they presently are to add FDCPA specialists to their staff who could pursue statutory relief in cases in which it was appropriate, while pursuing bankruptcy relief at the same time. See Telephone Interview with Wis. FDCPA Attorney, supra note 174, at 4-5.
190. Pub. L. No. 95-109, § 813(a)(2)(A), 91 Stat 874, 881 (1977) (codified at 15 U.S.C. § 1692k(a)(2)(A)).
191. Telephone Interview with Tex. Consumer Attorney One, supra note 64, at 12; see also Interview with Iowa Consumer Attorney Three, supra note 120, at 15 ("But they still think it is just too much of a hassle for them to sue. And you know if the debt is only a couple of thousand dollars, then for a lot of people they just don't see that it's worth the effort of some kind of a lawsuit. . . . I think raising the statutory damages would help a lot"); Telephone Interview with Nev. Consumer Attorney Two, supra note 72, at 8 (suggesting that typical recovery of $1000 is not adequate motivation to justify FDCPA lawsuits because "[d]ebtors just want to get the pressure off their backs" and FDCPA takes a while).
192. See Telephone Interview with National Collection Attorney, supra note 149, at 8-9 (collection attorney stating that he initiates litigation promptly after debtors ask for termination of communication).
193. Although the effects of severe financial distress have not been carefully documented, they might include harms to the debtor's children from household stress, postponement of preventative medical care, or withdrawal of funds from retirement accounts that leave the consumer dependent on public funds later in life. For example, a debtor's financial distress may impair her ability to concentrate on her job. See Telephone Interview with Tex. Consumer Attorney Three, supra note 63, at 10 ("And I have actually had a few employers actually pay our attorney fees on behalf of their employees just because of the interruption to productivity.").
194. We thank Ed Morrison for suggesting the analogy.
195. See Interview with Iowa Consumer Attorney Three, supra note 120, at 23-24.
196. Indeed, the means test is explicitly backward-looking, relying on the inanely named "current monthly income," an average of the six months of income before the bankruptcy, to determine going-forward ability to pay. 11 U.S.C. § 101(10A) (2007).
197. One possible system would provide an immediate discharge but then recapture excess income if such funds materialized. See Jean Braucher & Charles W. Mooney, Jr., Means Measurement Rather Than Means Testing: Using the Tax System to Collect from Can-Pay Consumer Debtors After Bankruptcy, 22 AM. BANKR. INST. J., Feb. 2003, at 6.
198. The usefulness of nonbankruptcy alternatives disappears if people wait too long to seek help with their debts. See Telephone Interview with Nev. Credit Counselor, supra note 62, at 10 (estimating that because consumers "are waiting too long to find a solution to their problem[s]," less than a half dozen people among the several thousand who completed prebankruptcy credit counseling with the agency were viable candidates for debt management plans).
199. See Ronald J. Mann, A Comparative Analysis of Filing Rates and the Severity of Consumer Bankruptcy Law, in CONSUMER CREDIT, OVER-INDEBTEDNESS AND BANKRUPTCY: NATIONAL AND INTERNATIONAL DIMENSIONS (J. Niemi-Kiesiläinen et al. eds., 2009).
200. Presumably the simplified proceeding would not be available to borrowers who wish to retain assets subject to secured debt, such as houses or cars.
201. Procedures for establishing eligibility for programs like Medicaid might provide a useful analogy.
202. Bankruptcy courts must approve the fees that debtors pay attorneys, making this proposal administratively feasible if the judges were persuaded it was a desirable reform.