Not Available for Download

Taking the New Consumer Bankruptcy Model for a Test Drive: Means-Testing Real Chapter 7 Debtors

Posted: 7 Feb 2000  

Marianne B. Culhane

Creighton University School of Law

Michaela M. White

Creighton University - School of Law

Multiple version iconThere are 2 versions of this paper

Abstract

Several bills pending in Congress would apply means-testing to Chapter 7 debtors, requiring those with apparent ability to repay to be dismissed from Chapter 7, leaving Chapter 13 as their main route to a discharge. Chapter 13 would require repayment over 5 years to prebankruptcy creditors.

The authors applied one proposed means-testing formula to a sample of 1043 Chapter 7 cases from seven states across the country. They found that only 3.6% of the debtors emerged as "can-pays" who would be barred from Chapter 7, and that unsecured creditors could expect to collect much less from such debtors than industry-sponsored studies have claimed. Further, the paper shows how predictable avoidance behavior, such as increasing secured debt and/or charitable contributions, could further reduce the number of "can-pays." Thus, the paper casts doubt on the efficacy of imposing burdensome additional requirements on all Chapter 7 debtors in order to bar 3.6% of those debtors from that chapter.

Suggested Citation

Culhane, Marianne B. and White, Michaela M., Taking the New Consumer Bankruptcy Model for a Test Drive: Means-Testing Real Chapter 7 Debtors. American Bankruptcy Inst. Law Review, Vol. 7, Spring 1999. Available at SSRN: https://ssrn.com/abstract=168834

Marianne B. Culhane (Contact Author)

Creighton University School of Law ( email )

2500 California Plaza
Omaha, NE 68178
402-280-3154 (Phone)
402-280-2244 (Fax)

Michaela M. White

Creighton University - School of Law ( email )

2500 California Plaza
Omaha, NE 68178
United States
402-280-5515 (Phone)
401-280-2244 (Fax)

Paper statistics

Abstract Views
6,741