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Abstract:
This paper explores the financial impact of medical problems, using data from Phase III of the Consumer Bankruptcy Project, a survey of 1,974 individual bankruptcy petitioners conducted during the first quarter of 1999 in eight federal judicial districts. Although the questionnaire covered a variety of topics, this paper focuses on debtors' identification of illness or injury as a reason for filing, medical debts, and health insurance coverage. One out of four debtors, or an estimated 326,441 families in 1999, identified an illness or injury as a reason for filing for bankruptcy. One third of the debtors said that they had substantial medical bills, i.e., that they had incurred $1,000 or more in medical bills not covered by insurance. Combining those identifying medical reasons with those indicating substantial medical debts (an overlapping but not perfectly coextensive group), the financial consequences of medical problems were a factor in the bankruptcy cases of an estimated 596,198 families in 1999. Health insurance coverage was sparse for the group, with one in five debtors reporting that they had no health insurance for any family member. The absence of insurance, however, did not correlate with a debtor's identifying a medical problem. Those who had insurance and those who did not were about equally distributed among those who identified a medical problem and those who did not.

The data were re-analyzed by separating the responses of single filing men, single filing women, and joint filing married couples. Households without a male present were nearly twice as likely to file for bankruptcy giving a medical reason or identifying a substantial medical debt as households with a male present. The proportion of debtors providing medical reasons for filing also varied with the debtors' age. Of debtors 65 or older, 47.6 percent listed a medical reason, as compared with 7.5 percent of debtors under 25. Previous studies considering medical problems and bankruptcy in the United States are summarized, although the methods used and results obtained are not directly comparable with the current findings.

Abstract:
Public investment in and promotion of homeownership and the home mortgage market often relies on three justifications to supplement shelter goals: to build household wealth and economic self-sufficiency, to generate positive social-psychological states, and to develop stable neighborhoods and communities. Homeownership and mortgage obligations do not inherently further these objectives, however, and sometimes undermine them. The most visible triggers of the recent surge in subprime delinquency have produced calls for emergency foreclosure avoidance interventions (as well as front-end regulatory fixes). Whatever their merit, I contend that a system of mortgage delinquency management should be an enduring component of housing policy. Furtherance of housing and household policy objectives hinges in part on the conditions under which homeownership is obtained, maintained, leveraged, and - in some situations - exited. Given that high leverage or trigger events such as job loss and medical problems play significant roles in mortgage delinquency independent of loan terms, better origination practices cannot eliminate the need for delinquency management.

One function of this brief essay is to identify an existing rough framework for managing delinquency. Legal scholarship should no longer discuss mortgage enforcement primarily in terms of foreclosure law and instead should include other debtor-creditor laws such as bankruptcy, industry loss mitigation efforts, and third-party interventions such as delinquency housing counseling. In terms of analyzing this framework, it is tempting to focus on its impact on mortgage credit cost and access or on the absolute number of homes temporarily saved, but my proposed analysis is based on whether the system honors and furthers the goals of wealth building, positive social psychological states, and community development. Because those ends are not inexorably linked to ownership generally or owning a particular home, a system of delinquency management that honors these objectives should strive to provide fair, transparent, humane, and predictable strategies for home exit as well as for home retention. Although more empirical research is needed, this essay starts the process of analyzing mortgage delinquency management tools in the proposed fashion.

mortgages, bankruptcy, loss mitigation, foreclosure, debt collection

Abstract:
In 1999, Professors Jacoby, Sullivan, and Warren undertook an empirical study of bankruptcy filings to understand better the circumstances that brought middle-class families to a state of financial collapse. The information gathered in the study, known as Phase III of the Consumer Bankruptcy Project, revealed that an estimated more than half a million middle-class families turned to bankruptcy courts for help after illness or injury that year. The findings of the study illustrate how bankruptcy files document the economic problems families encounter when bills mount and incomes fall in the aftermath of a medical problem. In this Article, Professors Jacoby, Sullivan, and Warren present the data from their study to illustrate that hundreds of thousands of middle-class families in the United States are devastated economically each year under the current health care finance system. Their data indicate that focusing on the presence or absence of health insurance alone would lead to an incomplete solution. Instead, the authors suggest that since bankruptcy effectively serves as part of the health care payment system, bankruptcy policy should be included in any comprehensive review of health care financing policy.

Abstract:
As part of an exchange on the financial crisis generated from a roundtable discussion at the University of North Carolina School of Law, this commentary observes the sharp shift in public discourse on, and regulatory interest in, the federal bankruptcy system, financially distressed homeowners, and judicial discretion, presumably brought about by the changed financial climate. That shift is reflected in stark differences between the 2005 amendments to the Bankruptcy Code (BAPCPA) and pending proposals to enable home mortgage modification in chapter 13 bankruptcy cases. I identify several challenges associated with using bankruptcy law to pursue current housing and economic policy goals and offer suggestions on how to manage those challenges, including the repeal of BAPCPA.

Bankruptcy, foreclosure, homeownership, financial crisis, judicial discretion

Abstract:
Illness and injury have a significant financial impact on families, but recent news media reporting and lawmaker responses have framed these issues in terms of hospital mistreatment of the uninsured. In this article, we argue that the hospital misbehavior model imposes artificial parameters on a much broader health care finance problem. We demonstrate this empirically, using new data from the Consumer Bankruptcy Project to show that even insured families experience a wide range of direct and indirect financial consequences of illness or injury, including income loss. We also engage in a positive analysis of debtor-creditor law to challenge the assumption that hospitals misbehave when they engage in routine debt collection. Our health care finance system depends in part on self-pay obligation, and lawmakers in some states have given medical providers enhanced collection powers and incentives to be diligent beyond those given to other creditors. When hospitals engage in regular types of collection activity within the boundaries set by debtor-creditor law, they are playing out the role assigned to them by the health care finance system. We recognize that some hospitals have engaged in wrongdoing, and we cannot rule out the possibility that proposed changes in response to the hospital misbehavior model will have positive effects for some uninsured patients. Yet, we suspect that the negatives will outweigh the positives. If lawmakers believe they have solved the health care finance problem by imposing new limits on hospital behavior, they are less likely to tackle the larger issues that leave millions of responsible people struggling financially after a serious medical problem. The hospital misbehavior model also imposes costs on hospitals that hospitals may be ill equipped to bear, and it may lead to further reduction of necessary services at not-for-profit facilities. We recommend replacing the hospital misbehavior model with an expanded vision of health care finance issues that includes all forms of medical debt, direct non-medical costs, third-party payers, and lost income and opportunity - a full range of the economic fallout from a serious medical problems.

health, bankruptcy, debtor-creditor, insurance, hospitals

Abstract:
The personal bankruptcy system is part of a larger system of household risk management. Much of the discussion of personal bankruptcy has focused on bankruptcy's insurance role with respect to unsecured obligations like credit cards and medical bills. In this symposium contribution, I redirect the analysis by evaluating the bankruptcy system, and particularly chapter 13, as a mortgagor protection law. In particular, I explore how bankruptcy might be encouraging and prolonging unsustainable homeownership. I then consider the impact of two recent revisions to the Bankruptcy Code relating to credit counseling and repeat filers. I conclude that these revisions may improve the system modestly by enabling sorting based on homeownership sustainability.

bankruptcy, homeownership, foreclosure, social insurance

Abstract:
Academic support for American-style corporate reorganization has been at an all-time high, or, at least, calls for the repeal of chapter 11 have been at an all-time low. Critics of chapter 11 now say, approvingly, that the process has become faster, cheaper, more creditor-controlled, and more integrated with market forces. World-renowned economists have looked to modern chapter 11 as the foundation of proposals to improve sovereign debt restructuring internationally. Endorsement of the modern chapter 11 is by no means universal, however. In Courting Failure: How The Competition for Big Cases is Corrupting the Bankruptcy Courts, Professor Lynn LoPucki, a well known academic with deep expertise in bankruptcy, portrays the bankruptcy system in a state of crisis. In this book, we learn that nearly half of the largest firms emerging from chapter 11 as publicly held companies are filing another bankruptcy petition in just a few years. LoPucki attributes the high repeat filing rate to the judges who compete for cases by appeasing case placers, the parties who guide a firm's decision regarding venue selection. A high repeat filing rate first afflicted two magnet venues, the District of Delaware and the Southern District of New York, then spread nationwide as other judges have tried to attract cases to their own courts. Courting Failure's policy prescription is to eliminate inter-venue competition by restricting firms' venue choice. Since the release of Courting Failure, LoPucki has convinced a prominent Senator to introduce legislation accomplishing exactly that. Courting Failure is rich with systematic empirical data, anecdotes, law, theories, allegations, and controversies, as would be expected from a researcher who has made critical contributions to our understanding of corporate reorganization for over two decades. Plenty of academics, lawyers, and judges are examining myriad aspects of Courting Failure, including whether LoPucki oversteps by characterizing the bankruptcy system as corrupted, whether a significant repeat filing is per se undesirable, whether LoPucki uses the ideal parameters to measure repeat filings and failure in bankruptcy, and how all of this affects the international market for judicial services.

By contrast, I highlight other aspects of Courting Failure's ambitious thesis that ultimately cannot be sustained. First, Courting Failure cannot tell us enough about the pathways through which competition contributes to failed reorganizations for us to rely on the competition thesis to fuel policy change. Courting Failure's repeat filing data and his examples of competitive practices do not match up temporally or substantively, particularly with respect to the striking increase in repeat filings among firms emerging in 1997 and thereafter. Second, Courting Failure implicitly relies on an account of the drivers of court practices that does not square with the growing body of theoretical and empirical interdisciplinary research on the determinants of judicial politics and behavior. Others in the legal academy share LoPucki's assumption of judicial competition for large bankruptcy cases, although they have different views of its merits. Even if some judges do compete for large bankruptcy cases, however, the broader literature casts doubt that competition or the lack thereof is the dominant shaper of judicial practices in the way that Courting Failure suggests. In particular, Courting Failure takes insufficient account of the rise of the transactional model of chapter 11 and how the increasing recognition of this model might affect the evolution of judges' practices.

corporate reorganization, bankruptcy, corporate law, courts

Abstract:
This paper presents original empirical evidence on financial interactions between medical providers and their patients who go bankrupt. We use a nationally representative sample of people who filed for bankruptcy in 2007 to compare two popular but hotly contested methods of measuring medical burden. By applying both methods to the same filers, we find that nearly four out of five respondents had some financial obligation for medical care not covered by insurance in the two years prior to filing as measured by the survey method. The court record method paints a different picture, with only half of the cases containing identifiable medical debt, and of substantially more modest amounts. We test several theories to explain the discrepancy and find we can account for it to a significant extent by filers’ methods of managing medical bills that make it difficult or impossible for the court record method to detect them. For example, we find the highest rates of mortgage and credit card use for medical bills among respondents with the largest discrepancies between the survey method and the court record method. Respondents who report medical bills as a reason they filed for bankruptcy mortgaged their homes for medical bills at nearly four times the frequency of other filers, and were about a third more likely to use credit cards for medical bills. We also find disparities by age, sex, race, and housing tenure that skew the court record measure. Our findings suggest that the advice offered by experts in “medical practice management” reduces providers’ financial exposure from patient liabilities. One implication of this “success” is that the court record method of measuring medical bills should not be used on a standalone basis to measure the impact of medical bills on financially distressed families. Also, the court record method should not be used to refute survey estimates of medical burden in debates over health care or bankruptcy reform.

bankruptcy, health care, medical care, medical practice management, reluctant creditors, consumer law, credit cards, home equity loans, chapter 7, chapter 13

Abstract:
In recent years, scholars skeptical about American corporate reorganization have commented favorably on developments that make the system faster, cheaper, and more creditor controlled. By contrast, in his new book Courting Failure, Professor Lynn LoPucki announces that the new chapter 11 is in crisis. Nearly half of the largest chapter 11 filers that emerge from bankruptcy as publicly held companies return to bankruptcy again in just a few years. In addition, a disproportionate number of these ill-fated reorganizations have taken place in two popular venues closely associated with corporate law and finance: the District of Delaware and the Southern District of New York. LoPucki claims that judges adopt lenient practices to cater to the self-interest of professionals, firm managers, and major lenders because these parties choose where to file the cases. Attributing the high rate of ill-fated reorganizations to judicial competition, LoPucki advocates restricting venue choices, thus restricting judicial competition. He has convinced a prominent United States Senator to introduce a bill to strip Delaware and New York of most big cases and send them to the venue of corporate headquarters.

Courting Failure implicitly invites an inquiry into whether the fast, cheap, and creditor-controlled system has unintended consequences. In terms of its principal claim, however, Courting Failure does not articulate the pathways through which competitive court practices contribute to ill-fated reorganizations. In addition, identifying competition as a principal driver of court practices is a seductive claim that evokes the inter-state corporate charter competition debates, but may not offer a complete account of judicial decisionmaking in the bankruptcy context. The practices Courting Failure recounts are consistent with a transactional model of chapter 11 that respects party autonomy and is open to market influences. An initial look at the scholarly research on the determinants of judicial behavior suggests a range of potential explanations of judicial behavior that includes but is not limited to competition for future cases. To the extent significant system change is desired, restricting venue may not be the answer, or at least not a comprehensive answer.

bankruptcy, corporate reorganization, judicial behavior, corporate

Abstract:
Since the 1950s in the United States, fame has increasingly been treated as a commodity rather than purely as a personal attribute. States, encouraged by entertainers, sports figures and their families, have created a new form of intellectual property interest called the right of publicity, a right to exploit one's identity for commercial purposes. Not only does the publicity right permit famous people, and increasingly their heirs and legatees, to control how their names and faces are used in a wide variety of settings, and to demand payment for approved uses, but the right is freely alienable; it can be transferred to third parties in whole or in part. Most of the scholarship examining this form of intellectual property has concentrated on the justifications for giving famous people this kind of control over (and right to profit from) the commercial use of their identities, and on the First Amendment ramifications of the interest. In other words, the scholarship has focused on the pros and cons of creating a property interest that advantages a celebrity, her heirs and assigns. But the legal assignment of property status to an interest can, under some circumstances, decrease, rather than increase, the control that the owner has over the valued asset. That darker side of the equation has received almost no attention either in the literature or in the case law dealing with publicity. In this article, we examine the right of publicity as an asset in the context of the debtor-creditor system. Whereas personal rights in one's privacy or reputation are generally unavailable for creditor seizure and sale, the transformation of the persona of an individual into a commodity logically should make it vulnerable to seizure by an unsatisfied creditor, permitting the control over how the right is exploited to be transferred by sale to the highest bidder. The right of publicity presents some complexities in the debtor-creditor context because the property interest may in some cases need to be disentangled from its residual overlay of personal rights, and because the use of property to satisfy a creditor's claims in insolvency must be handled in a way that respects the debtor's right to the benefits of her future labor. Our examination of the issues leads us to conclude that the complexities presented by treating publicity rights as property in the debtor-creditor context are resolvable, and indeed are similar to those presented by other types of property that are currently recognized in the debtor-creditor system and used to satisfy unpaid debts; the complexities do not militate against treating the right of publicity as an asset in the debtor-creditor system.

Abstract:
Two important developments in the personal bankruptcy system unfolded over the course of the last several years: lawmakers considered and ultimately passed an omnibus bankruptcy bill, and researchers began to delve more broadly and deeply into medical-related financial distress among bankruptcy filers. Drawing on prior scholarship, this brief article contributes to a University of Missouri-Columbia symposium on Interdisciplinary Perspectives on Bankruptcy Reform by considering what, if anything, these developments have to do with one another.

Abstract:
In this contribution to the symposium Show Me the Money: Making Markets in Forbidden Exchange, I explore an under-appreciated participant in the assisted reproduction and adoption industries: consumer lenders. Through fertility clinics and other service providers, financial institutions market and distribute loans specifically to finance acquisition of treatments, drugs, and human eggs. Adoption foundations and agencies advertise for-profit loans to intended parents, while small foundations offer adoption loans that appear to be low-cost financially but may condition loan approval on intended parent characteristics such as religious observance, marital status, sexual orientation, and adherence to traditional gender roles. After discussing how these specialty loans bolster descriptive claims of a thriving market for parenthood, this article explores three flash points at which repeat-playing lenders might alter the political economy of the parenthood market in unexpected ways: adoption versus assisted reproduction; integration of unpartnered and same-sex couples; and quality control over reproductive services.

assisted reproduction, IVF, adoption, family law, commodification, reproductive markets, health care, consumer debt, bankruptcy

Abstract:
In this symposium contribution, Professor Jacoby posits that debates about medical debt need to be reframed to reflect the existence of multiple debtor-patient paradigms. Her analysis starts with a review of selected empirical studies of out-of-pocket medical expenses and medical debt in both the general and bankrupt population, which reveal a cleavage between a small segment with catastrophic expenses and a much larger and more diffuse group of people who struggle with more modest medical expenses. She next explores several arguments for how smaller medical expenses can contribute to larger financial problems, including coupling with indirect costs, failed coping mechanisms, and growing financial instability more generally. She briefly concludes that this more complicated picture of the intersection between medical problems and financial problems undercuts the foundation for well-meaning but ultimately mistaken efforts to regulate medical debt collection in particular ways, an issue she will take up more directly in future work.

Abstract:
This symposium contribution considers the implications of recently enacted bankruptcy legislation. An omnibus bankruptcy bill has substantially amended titles 11 and 28 of the United States Code, and the professionals involved with bankruptcy are working hard to prepare for the quickly approaching effective date. All of this activity suggests that something big is happening. But will bankruptcy really be so different a year from now, two years from now, five years from now? And how will these changes affect people who are candidates for personal bankruptcy? I argue one must look beyond the statutory revisions to answer these questions.

Legal and sociological research suggests that the bill's impact will be filtered through the influences of day-to-day actors in the bankruptcy system. As in the past, this filtering may mute or magnify certain statutory changes and may produce variation around the country. Assessments of the impact of formal law changes are incomplete without taking this filtering into account.

Notwithstanding this filtering, it is reasonable to predict that the changes will make bankruptcy more complicated and expensive for bankruptcy filers to some extent. Even so, the real life impact of the changes is unclear. Researchers know little about filers after bankruptcy or about how their recovery compares with that of insolvent individuals who avoid bankruptcy. If studies were to find that many filers confront serious financial trouble again two or three years after bankruptcy, then they might call into question the effectiveness of bankruptcy. Similarly, if studies were to find that non-filers with similar profiles recover equally well through non-bankruptcy means, then statutory changes that make bankruptcy more difficult may not be as consequential as they seem. Ultimately, therefore, it is difficult to characterize the impact of these changes on financially distressed individuals without knowing more about the effectiveness of bankruptcy in an absolute and comparative sense.

bankruptcy, consumer credit

Abstract:
This symposium contribution examines the starkly different values reflected in traditional legal literature on foreclosure law reform in the U.S. as compared to some more recent entries in the wake of the rise of subprime lending and high rates of residential mortgage default. I highlight economist Dean Baker’s “right to rent” proposal, which would give former homeowners leasehold rights at market rates, to illustrate a more progressive set of housing policy considerations and to challenge the assumption that ownership is essential or optimal to promoting various housing objectives.

foreclosure, homeownership, mortgages

Abstract:
Based on a lecture at a predatory lending conference at Loyola University New Orleans School of Law, this brief paper discusses the 2007 Consumer Bankruptcy Project and how the empirical study of bankruptcy law informs our understanding of the intersection of mortgages and homeownership with financial distress, and whether bankruptcy can provide meaningful redress.

bankruptcy, foreclosure, mortgages, homeownership, predatory lending

Abstract:
This paper, commissioned for a conference on Credit Markets at Harvard Business School in February 2010, argues that increasing the actual effectiveness of debtor remedies requires considerable attention to the location of such rights within a larger and multi-jurisdictional legal regime and to the power of lawyers and other intermediaries to profoundly influence the extent to which consumer debtors can actually obtain relief that formal law offers.

bankruptcy, secured transactions, foreclosure, law and society, local legal culture, consumer protection

Abstract:
This chapter in the book ENDEUDAMIENTO DEL CONSUMIDOR E INSOLVENCIA FAMILIAR (Matilde Cuena Casas & Jose Louis Colina Mediavilla eds., 2009), published in Spanish, offers new empirical data from the U.S. on consumer bankruptcy filers from the 2007 Consumer Bankruptcy Project, an evaluation of the two-chapter bankruptcy system, and proposals for structural reform.

bankruptcy, bankruptcy reform, medical debts, credit cards, mortgages, 2007 Consumer Bankruptcy Project

Abstract:
This symposium article briefly explores the limits of Bankruptcy Code-based lawmaking and other avenues of reform. Unlike the years preceding enactment of the Bankruptcy Code, members of Congress do not follow the technical and substantive advice of bankruptcy experts and do not seem actively concerned about the functioning of the system and deals negotiated in its shadow. I argue that even if federal legislators had a different attitude, Bankruptcy Code amendment would be an imperfect and incomplete mechanism for system improvement, and thus bankruptcy experts should embrace a more complex picture of system development. After all, not only does the bankruptcy system have many attributes that the Code simply cannot explain, but the system has evolved substantially over the last twenty-five years even as the Code has remained relatively constant. Bankruptcy professionals help change the system even as they engage in case-specific negotiations and transactions. Bankruptcy experts also participate in system change through the appellate process (whether or not they represent parties in interest in those cases), state legislatures, and even the media. In other words, Congress has the power to exclude bankruptcy experts from Bankruptcy Code deliberations but not from bankruptcy system reform.

Bankruptcy, Commercial Law, Legislation

Abstract:
For the past seven years, bankruptcy experts have watched from the sidelines as Congress has considered an enormous omnibus bankruptcy bill that many believe to be poorly drafted at best and misguided at worst. Proponents of the bill have been dismissive of these concerns and repeatedly have gathered overwhelming bipartisan support for the bill. Yet, they have had difficult actually getting the bill enacted. Although the determinants of legislative development are complex and controversial, this article considers the role of the news media in working with bill opponents to reframe the bankruptcy debates in ways that perhaps play some role in the path of this bill. Once a story of debtor irresponsibility and a permissive system, bankruptcy became framed by issues of credit industry power, loopholes for the rich, and concerns for women and children. This article describes the path of this omnibus legislation, offers an interdisciplinary analysis of the role of the news media in policymaking, and discussing these emerging frames in terms of their controversy, bill improvement possibilities, and public educational value.

Bankruptcy, Legislation, Politics, Women

Abstract:
In this article, I evaluate previously unpublished data about the use of bankruptcy, and particularly chapter 13 repayment plans, by ill and injured individuals. In chapter 13 repayment plans, the discharge of debt is generally conditioned on the completion of a repayment plan that may last up to five years. This form of bankruptcy presumably works best for those with consistent repayment ability. In addition, this form of bankruptcy is frequently thought of as a more exacting form of bankruptcy appropriate for those who bear some culpability for their debt problems (e.g., irresponsible spending). The ill and injured would seem at first blush to be questionable candidates for this form of bankruptcy. Debtors with health problems might be especially likely to have reduced or inconsistent repayment ability and are often perceived to be less culpable for their debt problems. Nonetheless, the data presented in this article reveal a rather high percentage of medical-related chapter 13 filings (48.3%) in the sample. In addition, nearly four fifths (79.5%) of those medical-related chapter 13 filers also identified a job problem, which suggests a further reduced likelihood of plan completion and discharge. These findings are consistent with the claim that neither current law, nor pending legislation, employ or value culpability or repayment ability to sort debtors into the appropriate form of bankruptcy relief, notwithstanding the heavy rhetorical use of these principles. Although perhaps questionable from a health policy perspective, the high incidence of chapter 13 use by the ill and injured may be viewed as consistent with the goal of some lawmakers and the consumer credit industry to reduce debt discharge, and the goal of debtor advocates to obtain benefits other than debt relief that chapter 13 offers their clients.