Financial Characteristics of Businesses in Bankruptcy

American Bankruptcy Law Journal

105 Pages Posted: 17 Nov 1999

See all articles by Elizabeth Warren

Elizabeth Warren

Harvard Law School

Jay Lawrence Westbrook

University of Texas at Austin - School of Law

Date Written: January 2000


The Business Bankruptcy Project is a five-year empirical study of about 3,200 business cases originally filed in Chapter 7, Chapter 11 and Chapter 13 in 23 judicial districts during 1994. This first report focuses on financial and demographic data, creating a statistical profile of the businesses in bankruptcy. The data reported in this paper include assets, debts, solvency, corporate or individual debtor type, classification of industries, number of employees, and reasons for filing; the data are reported in the aggregate, by chapter of filing, and by district. These data are used to test a number of hypotheses about the operation of the business bankruptcy system. The report also reveals anomalies in the system, such as certain large debtor companies that file no bankruptcy schedules at all.

The sample is marked by its diversity, which includes a large number of small businesses and a small number of large businesses. Among the business debtors are a surprising number of natural persons in Chapter 11, a procedure designed around a corporate template. Across all three chapters there is substantial overlap of consumer and business debt, with many business debtors reporting a combination of business and personal reasons as triggers for their bankruptcy filings. Financially, the sample as a whole is solvent, with more than 25% of Chapter 11 business debtors claiming balance-sheet solvency. The social impact of bankruptcy is emphasized by its effect on employees. Although many of businesses are small by most measures, extrapolation from the reported data suggest that as many as 2 million employees a year find their employers going into bankruptcy. Real estate companies are prominent in Chapter 11, and more than half of them claim to be solvent.

JEL Classification: G31

Suggested Citation

Warren, Elizabeth and Westbrook, Jay L., Financial Characteristics of Businesses in Bankruptcy (January 2000). American Bankruptcy Law Journal, Available at SSRN: or

Elizabeth Warren (Contact Author)

Harvard Law School ( email )

1575 Massachusetts
Hauser 406
Cambridge, MA 02138
United States
617-495-3101 (Phone)
617-496-6118 (Fax)

Jay L. Westbrook

University of Texas at Austin - School of Law ( email )

727 East Dean Keeton Street
Austin, TX 78705
United States
(512) 232-1303 (Phone)


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