TABLE 1


H.R. 3150 Conference Report Compromises
New Protection to Help Debtors and Their Children
Exemption for Retirement SavingsNarrow provision protecting some pension fund and retirement savings programs.Yes
Sweeping protection for virtually any retirement savings plan that is exempt from taxation, including state pension funds and rollover funds that are not well protected today.
Postsecondary Education Accounts for ChildrenNo provisionYes
Postsecondary education accounts are protected from creditor claims to the extent they do not exceed $50,000 per child or in the aggregate $100,000.
Child Support
Use of bankruptcy to evade child support is stopped.Some provisionsStronger Provisions
1. Child support placed in first priority.DYesDYes
Provisions clarified and strengthened.
2. Debtors must continue to pay child support when they file bankruptcy. DYesDYes
Provisions clarified and strengthened.
3. Bankruptcy will not discharge the debtor's debts until child support is brought current.DYesDYes
Provisions clarified and strengthened.
New Consumer Protections
Debtor's Bill of RightsYesYes
For the first time requires that consumers be informed about what to expect in bankruptcy and protected from the unscrupulous practices of those who “low ball” the price for a bankruptcy and then extract high fees after the case is filed to defend bankruptcy litigation.
ReaffirmationsNo provisionYes
Even if a debtor is represented by an attorney, reaffirmations of “wholly unsecured” debt will not be legal unless the creditor gives new disclosures when the debtor signs, and the reaffirmation is reviewed by a bankruptcy judge. The debtor can waive the hearing if the debtor chooses to do so.
Pressuring Debtors After DischargeNo provisionYes
Violations of the post discharge injunction result in a penalty of $1,000, collectible only in individual actions, plus actual damages and attorneys fees.
Abusive Reaffirmation PracticesNo provisionYes
Creditor failure to follow the procedures for a reaffirmation agreement if that failure injures the debtor results in a penalty of $1,000, collectible only in individual actions, plus actual damages and attorneys fees.
Refusal to Credit Plan Payments ProperlyNo provisionYes
Willful creditor failure to credit payments received under a plan in chapter 11, 12 or 13 “in the manner required by the plan” results in a penalty of $1,000, collectible only in individual actions, plus actual damages and attorneys fees.
Unjustified Dismissal Motions under 707(b)YesYes
If creditors bring unjustified actions against debtors claiming their chapter 7 cases should be dismissed, or do so to coerce the debtor into a reaffirmation, they will be liable for the attorney's fees and costs.
Excessive ClaimsNo provisionYes
A court may decrease a creditor's claim by up to 20% if a credit counseling agency has made a good faith offer to the creditor within 60 days of the petition for 60% of what was owed and the creditor refused it unreasonably.
Automatic StayNo provisionYes
Actual damages and attorneys fees can be recovered in an automatic stay action.
Bank and other creditor practices
Cutting Off CreditNo provisionYes
The Truth in Lending Act is amended to provide that a credit card company, or any other open end creditor, cannot terminate a customer's account solely because the debtor has not incurred finance charges on the account.
Credit Card Minimum Payment PracticesNo provisionYes
New Truth in Lending disclosures are required for open end credit. These new disclosures affect the initial and periodic statement disclosures, and require a new annual disclosure. The Board is to provide model disclosures. The Board is also to study whether consumers have enough information about borrowing and financial difficulties, and the Board can issue new regulations.
1. Initial Disclosures.DNo provisionDYes
A statement warning that the minimum statement may increase the finance charges paid or the length of time it takes to repay the loan.
2. Periodic Statement Disclosures.DNo provisionDYes
A statement warning that the minimum payment will increase the amount of interest and length of time to pay off the obligation must be made on each statement.
3. Annual Disclosures.DNo provisionDYes
The same disclosure will be provided existing customers once a year, together with a worksheet to determine the consumer's household income and debt obligations.
Overextension to College StudentsNo provisionYes
The Comptroller General of the United States is to conduct a study whether the extension of credit to college students is excessive. The report must be provided within one year.
Debit CardsNo provisionYes
The Federal Reserve Board will study whether the existing procedures for limiting consumer liability with debit cards are sufficient. The Board is authorized to issue regulations.


















TABLE 2


TABLE 1: PERCENTAGE OF DEBTORS PASSING H.R. 3150'S* TESTS
DISTRICT CASES % PASSING   MEDIAN INCOME TEST % PASSING PROJECTED MONTHLY NET INCOME TEST % PASSING 20% TEST
CA15033.33.333.33
CO14916.86.046.04
GA14717.02.721.36
MA14727.93.403.40
NE14916.15.374.03
NC15018.06.703.33
WI14915.45.373.36

*As passed by the House of Representatives on June 10, 1998.

















TABLE 3


TABLE 2: THE MEDIAN INCOME TEST—WEIGHTED BY TOTAL
DISTRICT CASES # PASSED % PASSED TOTAL CH. 7 FILINGS IN 95 ESTIMATED # PASSED
CA1505033.317,3475,777
CO1492516.810,4431,754
GA1472517.08,4801,442
MA1474127.911,2403,136
NE1492416.12,931472
NC1502718.01,151207
WI1492315.43,210494
TOTAL1,04121520.754,80213,282


















TABLE 4


TABLE 3: MEANS-TESTING AND MOTOR VEHICLES
DEBTOR AGE OF CAR AT FILING AGE AFTER 60-MONTH CH. 13 PLAN CAR DEBT AT FILING 60-MONTH OWNERSHIP DEBT REPAYMENT AND OWNERSHIP ALLOWANCE
E&Y* IRS CFS C&W**
A1 month5 years$30,000$30,000$20,100$30,000
B8 years13 years$0$0$20,100$20,100

*E&Y allows debtors to retire pre-petition car debt only—no allowance for replacing during plan.

**C&W allow debtors to retire debt and, if that is less than 60-month IRS CFS allowance, use balance to repair/replace vehicle.

















TABLE 5


TABLE 4: THE PROJECTED MONTHLY NET INCOME TEST—WEIGHTED BY TOTAL CHAPTER 7 NON-BUSINESS FILINGS
DISTRICT CASES # PASSED % PASSED TOTAL CH. 7 FILINGS IN 95 ESTIMATED # PASSED
CA15053.3317,347578
CO14996.0410,443631
GA14742.728,480231
MA14753.4011,240382
NE14985.372,931157
NC15066.701,15177
WI14985.373,210172
TOTAL1,041454.3254,8022,228


















TABLE 6


TABLE 5: THE 20% OF UNSECURED DEBT TEST—WEIGHTED BY TOTAL CHAPTER 7 NON-BUSINESS FILINGS
DISTRICT CASES # PASSED % PASSED TOTAL CH. 7 FILINGS IN 95 ESTIMATED # PASSED
CA15053.3317,347578
CO14996.0410,443631
GA14721.368,480115
MA14753.4011,240382
NE14964.032,931118
NC15053.331,15138
WI14953.363,210108
TOTAL1,041373.5554,8021,945


















TABLE 7


TABLE 7: DISTRIBUTION OF GROSS INCOME AND NON-PRIORITY UNSECURED DEBT
FILERS NOT IMPACTED ALL FILERS IMPACTED FILERS
GROSS INCOME
25TH QUARTILE
$13,458$13,800$41,064
MEDIAN20,68821,26452,080
75TH QUARTILE30,03631,99860,558
NON-PRIORITY
UNSECURED DEBT
25TH QUARTILE
$11,692$11,816$16,608
MEDIAN20,30320,58133,526
75TH QUARTILE35,88336,38049,988


















TABLE 8


TABLE 8: MEDIAN SECURED, PRIORITY AND UNSECURED DEBT OF SAMPLE DEBTORS
DEBT ALL SAMPLE DEBTORS REAL   PROPERTY OWNERS* RENTERS SINGLE   FILERS JOINT   FILERS
Secured$7,000$70,0001,498$3,690$23,362
Priority$0$0$0$0$0
Unsecured$20,581$25,121$18,706$18,972$24,711
Total Debt$38,662$103,013$26,048$31,164$62,167

*Includes mobile homeowners.

















TABLE 9


TABLE 9: MEAN SECURED, PRIORITY AND UNSECURED DEBT OF SAMPLE DEBTORS
DEBT ALL SAMPLE DEBTORS REAL   PROPERTY OWNERS* RENTERS SINGLE   FILERS JOINT   FILERS
Secured$36,370$93,975$10,223$25,786$57,175
Priority$2,346$3,092$2,008$2,237$2,560
Unsecured$35,613$42,310$32,573$33,573$39,623
Total Debt$74,329$139,377$44,803$61,597$99,358
Percent of Total Debt
Secured
48.9%67.4%22.8%41.9%57.5%
Priority3.2%2.2%4.5%3.6%2.6%
Unsecured47.9%30.4%72.7%54.5%39.9%

*Includes mobile homeowners.

















TABLE 10


TABLE 10: STANDARD DEVIATIONS FROM THE TABLE 8 MEANS
DEBT ALL SAMPLE DEBTORS REAL   PROPERTY OWNERS* RENTERS SINGLE   FILERS JOINT   FILERS
Secured$76,255$104,916$35,736$66,615$88,814
Priority$14,827$20,205$11,593$12,963$17,954
Unsecured$62,477$65,770$60,728$68,037$49,616
Total Debt$108,197$138,279$74,611$100,992$117,299

*Includes mobile homeowners.

















TABLE 11


Appendix 2.
Trend in Non-Business Filings by Chapter (1989-1998)
Year Chapter 7 Chapter 11 Chapter 13 Total Non-Business Ch. 7 %   Increase Ch 11 %   Increase Ch 13 %   Increase Total %   Increase
1989439,1271,970175,109616,206
1990506,9402,501208,666718,10715%15%15%15%
1991617,3593,195251,883872,43722%22%22%22%
1992643,5383,198254,138900,8744%4%4%4%
1993568,4153,018241,464812,897-12%-12%-12%-12%
1994537,5512,265240,639780,455-5%-5%-5%-5%
1995597,0481,369276,225874,64211%11%11%11%
1996779,1281,170343,9871,124,28530%30%30%30%
1997956,6071,071391,8321,349,51023%23%23%23%
19981,007,922862389,3981,398,1825%5%5%5%
5-year Avg
(1994-1998)
775,6511,347328,4161,105,41517%17%17%17%
10-year Avg
(1989-1998)
665,3642,062277,334944,76010%10%10%10%

Source: American Bankruptcy Institute.

















TABLE 12


Appendix 3.
Five-Year Projection for Non-Business Bankruptcy Filings
Based upon 1994-1998 Average Growth Rate
Year Chapter 7 Chapter 11 Chapter 13 Total
19991,183,573685440,6111,624,870
20001,389,836545498,5591,888,940
20011,632,043433564,1292,196,605
20021,916,461344638,3232,555,128
20032,250,444273722,2742,972,991
5-Year Total8,372,3582,2802,863,89611,238,534


















TABLE 13


Appendix 7.
Comparative Summary of Culhane and White (1998) and Ernst & Young
(March 1998)
Culhane and White Ernst & Young
H.R. 3150
Monthly Income Test
Current monthly income must exceed 100% of national median income adjusted for family sizeCurrent monthly income must exceed 75 % of national median income adjusted for family size
Sample Size1,043 cases2.142 cases
Sample Year19951997
Sample District7 districts*National (90 district courts)
Sample Selection1.  Stratified random selection of 400 docket numbers (incl. both Chapter 7 and Chapter 13) from 7 district courts
2.  Select first 150 cases on each list meeting three qualifications
3.  7 cases with high debt amount (over $1 million in total debts) excluded from the sample
1.  Stratified random selection of 500 Chapter 7 petitions from 90 district courts
2.  Self-weighted random sampling based upon monthly total chapter 7 petitions per district
3.  Over-sampled asset-case Chapter 7 petitions
4.  Sample totals adjusted to the population totals to reduce coverage and non-response bias and variance effects
Transportation Allowance1.  Ownership costs (subtracting vehicle debt repayment) and Operating expenses for car owners
2.  Operating expenses for non-car owners
Operating expenses
Priority Unsecured DebtNo interest allowance made for back taxes10% annual interest applied to back taxes
Administrative Expenses1.  Chapter 13 Trustee's fee on secured debt and priority claims (5.6%) and attorney fee subtracted from monthly available income
2.  Trustee's fee on non-priority unsecured debt repayment deducted from monthly net income in 20% repayment test
Not included
% Impacted3%15%
(95% probability of falling between 13.1% to 16.9%)
Debt repayable over 5 years by impacted filersSecured non-housing
# of Chapter 7 filers   impacted (1998)**30,238151,188
Estimated total debts held by Chapter 7 filers   impacted (1998)***$2.3 billion$11.3 billion
Estimated total debts   repayable by Chapter 7   filers impacted (1998)$1.6 billion$6.8 billion

*Seven districts were the Northern District of California, the District of Colorado, the Northern District of Georgia, the District of Massachusetts, the District of Nebraska, the Middle District of North Carolina and the Western District of Wisconsin. The selection of these districts were at authors' discretion presumably reflecting a mix of urban and rural areas as well as the spectrum of high and low cost-of-living areas. No consideration was given for the differences in legal practices governing bankruptcies. White (1998) shows that there exist substantial differences in the high-asset debtor's incentive to file for Chapter 7 bankruptcies across the states.

**The number of Chapter 7 filers impacted in 1998 represents total Chapter 7 bankruptcy petitions filed in 1998 (1 million) multiplied by the percentage of Chapter 7 filers impacted by the means-testing as implied by the study.

***Estimated total debts held by Chapter 7 filers impacted in 1998 were derived using the adjusted weighted average debt per filer estimated by WEFA Group ($74,650).

















TABLE 14


Appendix 8
Culhane and White Sample State Exemption
State Homestead1 General   Exemption2 Major   Categories   Exemption3 Retirement   Accounts4 Motor   Vehicles Wildcard5 Federal   Exemption?
California7,500unlimited6unlimited1,2001,2001,200
Colorado30,0002,250*unlimited1,000*1,000*1,000*
Georgia5,0003,500*unlimited1,000*1,000*1,000*
Massachusetts100,000425*3,000*unlimited700*700*700*
North Carolina10,000*3,500*71,500*1,500*1,500*
Nebraska10,0001,500*unlimited8
Wisconsin40,0001,000*5,000*unlimited1,200*1,200*1,200*
Federal7,500*4,000*6unlimited81,200*1,200*1,200*

1Homestead exemption assumes debtor is head of household. Exemption does not include any exemption for property held as a tenancy by the entirety against debts owed by only one spouse.

2General exemption is an exemption applicable to any type of personal property.

3Major categories exemptions are exemptions for household furnishings, clothing, and other major categories of personal property.

4Retirement accounts are exemption for individual retirement and pension accounts.

5Wildcard exemption is applicable to any property of the debtor, including property that would be nonexempt otherwise.

6Exemption of all household furnishings, clothes, and other goods, provided debtor's interest in each item does not exceed $200.

7Plus $750 per dependent, not to exceed a total of $3,000.

8Exempt to extent necessary for support of debtor and dependents.

*If law gives exemption to extend of debtor's interest, this table assumes that the exemption may be doubled when husband and wife file jointly.

















TABLE 15


APPENDIX 9.
Culhane and White Sample Distribution
District Court Sample #* % of   Sample Chapter 7 Filings (1995) % of   Chapter 7 Sample as % of Total % of   Chapter 7 to Total Filings State Median   Income (1995-1997 3-yr   Average)
Northern District of California15014%17,34732%0.9%0.9%0.9%
District of Colorado15014%10,44319%1.4%1.4%1.4%
Northern District of Georgia15014%8,48015%1.8%1.8%1.8%
District of Massachusetts15014%11,24021%1.3%1.3%1.3%
Middle District of North Carolina15014%1,1512%13.0%13.0%13.0%
District of Nebraska15014%2,9315%5.1%5.1%5.1%
Western District of Wisconsin15014%3,2106%4.7%4.7%4.7%
Total1,050100%54,802100%1.9%1.9%1.9%

Source: American Bankruptcy Institute and U.S. Census Bureau

*Seven cases were not included in the final sample because of high total debt level (over $1 million).

















TABLE 16


Table 1. First and Second Stage Sample Sizes
Chapter 7 First Stage Sample Second Stage Sample
Asset Cases  2,051  196
No-Asset Cases41,6792,024
Total43,7302,220

Note: The first stage and second stage samples were obtained as described in the text. The second

















TABLE 17


Table 2. Total and Admissible Chapter 7 Petitions by Circuit: Population and Sample Data for 1997
(Fifty States and District of Columbia Only)
Federal   Circuit BNS Count of Petitions (  Column 1) Official Count of Petitions (Column 2) Total Petitions, Excluding   Dismissals (  Column 3) Final   Selected   Sample (  Column 4) Usable Sample (Column 5)
Total925,654952,446941,2632,2202,142
First29,63233,05932,4067163
Second72,19572,74772,646167167
Third55,30461,92761,035131128
Fourth74,82179,14578,091196186
Fifth57,27658,14257,205149139
Sixth102,406107,916106,620231201
Seventh87,67293,94793,148199190
Eighth57,06957,66957,276152152
Ninth243,528241,167237,256558556
Tenth56,01656,36255,990141140
Eleventh89,73590,36589,590225220

Note: The columns are derived as discussed in the text and related footnotes. The information shown for 11 circuits includes only courts in the fifty states and the District of Columbia. For display purposes, the District of Columbia has been combined with the Fourth Circuit. For this table, the First Circuit consists of the states ME, MA,NH, and RI; the Second Circuit CT, NY, and VT; the Third Circuit DE, NJ, and PA; the Fourth Circuit Washington DC, MD, NC, SC, VA, and WV; the Fifth Circuit LA, MS, and TX; the Sixth Circuit KY, MI, OH, and TN; the Seventh Circuit IL, IN, and WI; the Eighth Circuit AR, IA, MN, MO, NE, ND, and SD; the Ninth Circuit AK, AZ, CA, HI, ID, MT, NV, OR, and WA; the Tenth Circuit CO, KS, NM, OK, UT, and WY; the Eleventh Circuit AL, FL, and GA.

















TABLE 18


Table 3. Ability to Repay Debt under H.R. 833's Needs-based Bankruptcy Provision:
1997 Chapter 7 Filers Likely Impacted by the Provision
1997 National Average
Chapter 7 Filers Likely Impacted110%
Debt Repayable over 5 yrs. by Ch. 7 Filers Likely Impacted:1
Total Debt2
55%
Secured and Priority Debt256%
Unsecured Non-priority Debt53%

Note: Repayment rates from the 1997 Visa national bankruptcy database were calculated on the basis of: petitioners' reported income; a combination of petitioners' reported expenses and IRS allowances as proposed under H.R. 833; and priority and secured debt payments. See assumptions in text, and repayment methodology described in Section 4.

1Chapter 7 filers are likely impacted by H.R. 833's needs-based bankruptcy provision if they have: income greater than the national median for families of comparable size and can repay either $5,000 or 25 percent of their unsecured non-priority debts within 5 years, after making secured and priority debt payments and paying for living expenses. The 1996 national median income data by family size were obtained from the U.S. Bureau of the Census for families with more than two members (1997a) and for families of one (1997b).

2Repayment of secured debt is shown over 60 months. For housing debt, repayment is taken as stated by the petitioner unless the outstanding balance would have been paid off in less than 60 months. All other non-housing secured and priority debt is amortized over 60 months. In practice, petitioners may continue to repay outstanding secured debts beyond the 60 month repayment plan, which would increase the share of secured and total debt repaid.

















TABLE 19


Table 4. Ability of Chapter 7 Filers to Repay Unsecured Non-Priority Debt Under H.R. 833's Needs-Based Provision
Share of Filers: Percentage of Debt Repayable in 60 Months by Actual Chapter 7   Filers Likely Impacted:
Share of   unsecured non-priority debt repayable All Chapter 7 Filers Chapter 7 filers with ability to repay > 25% or $5K over 60 months Likely   Impacted Chapter 7 Filers Total Debt Secured & Priority Debt Unsecured Non-priority Debt
Less than 25%D86%D2%D2%D7%D9%D4%
25-49.9%5%5%3%14%16%16%
50-74.9%3%3%2%8%8%8%
75-99.9%1%1%1%4%4%4%
100% or more5%5%4%22%19%19%
Total100%16%10%55%56%56%

See footnotes to Table 3.

Totals may not add up due to rounding.