Potential Effect of Bankruptcy Abuse Prevention and Consumer Protection Act on Child Support Payments Cannot Be Determined because Data Needed for Study Are Not Available
Gao ID: GAO-08-148R October 26, 2007Between 2001 and 2004, an average of more than 1.5 million people annually filed for personal bankruptcy protection. In April 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act (Reform Act) was enacted, in part, to address certain factors viewed as contributing to an escalation in bankruptcy filings. Described as representing the most comprehensive set of reforms in more than 25 years, the Reform Act, among other things, requires those filers with the ability to pay some of their debts from future earnings to enter into repayment plans under Chapter 13 of the Bankruptcy Code instead of liquidating their assets under Chapter 7 and granting the debtor a discharge from eligible debts. Individuals usually file for bankruptcy under one of two chapters of the Bankruptcy Code. Under Chapter 13, filers submit a repayment plan to the court agreeing to pay part or all of their debts over time, usually 3 to 5 years. Under Chapter 7, the filer's eligible assets are reduced to cash and distributed to creditors in accordance with distribution priorities and procedures set out in the Bankruptcy Code. A large majority of cases filed under Chapter 7 have no assets available for liquidation, and thus no funds are available to pay creditors. Upon the successful completion of both Chapter 7 and 13 cases, the filer's personal liability for eligible debts is discharged at the end of the bankruptcy process, which means that creditors may take no further action against the individual to collect the debt. Bankruptcy filers may choose to reaffirm a debt, often for those debts secured by collateral, such as a home or a car. A reaffirmation agreement, generally filed under Chapter 7, formalizes this arrangement, whereby a filer with debts secured by collateral retains the collateral and continues to make debt payments to a creditor. Congress has expressed interest in learning whether the Reform Act has had or is likely to have an effect on bankruptcy filers who have a child support obligation and their ability to make these payments. Obligation refers to an amount owed or promised for payment, whereas payment refers to the act of paying or state of being paid. Child support obligations can be for past due child support, current support, or medical support. Past due child support refers to a debt owed by a noncustodial parent to, for example, a custodial parent or guardian for past child support owed but not paid. In contrast, current child support obligations reflect ongoing child support obligations. In the bankruptcy filing documents, a filer is to report past due child support and current child support expenses. Unpaid child support obligations are not discharged through bankruptcy. To request relief from debt, individuals file a petition, financial statements, and schedules (including information about child support obligations), among other things, with the bankruptcy court. In this report, we refer to all documents filed with the court as bankruptcy filing documents. Congressional interest stemmed from concerns that amendments made by the Reform Act that require certain debtors to enter into Chapter 13 repayment plans or potential pressure from creditors to reaffirm debts might affect the ability of bankruptcy filers to pay past due child support or ongoing child support obligations. This report discusses issues related to our inability to assess the potential impact of the Reform Act on child support payments as well as information on bankruptcy filers who have child support obligations. Specifically, this report addresses (1) difficulties in determining the potential effect of the Reform Act on an individual's ability to pay child support and (2) an agency proposal regarding the use of data-enabled forms--documents with embedded, invisible data tags that facilitate the extraction of data for analysis--to alleviate some of these difficulties.
After exploring the data available and the limitations of those data, we found that it was not possible to determine the potential effects of pertinent child support-related provisions of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 on filers' child support obligations and payments for two principal reasons. First, current federal laws do not require this particular universe--- bankruptcy filers who also have child support obligations--to be identified on a recurring basis, and the federal judiciary and the Executive Office for U.S. Trustees do not separately identify filers who have these obligations. The information contained in the data systems used by the federal judiciary and regional U.S. Trustees cannot be searched for bankruptcy cases that contain child support obligations. Therefore, we tested a case study approach to identify these filers. At our request, 33 case trustees who manage individual bankruptcy cases in the Eastern and Northern Districts of Texas identified 495 cases filed between October 2005 and August 2006 in which the bankruptcy filer reported a child support obligation. The case trustees perceived this task as one that required extra effort and added to their case management responsibilities. To do a national study would require making a similar request of the other 20 regional U.S. Trustees and a statistically representative sample of their 1,342 case trustees. Second, in our review of a nongeneralizable sample of 60 cases, we found that the information provided by filers and their attorneys contained in the case files had data limitations--including missing information and data that were inconsistently reported--that limited any analysis that could be done. For example, the bankruptcy documents that filers are required to complete did not show what portion of a payment for a child support obligation is applied to current support versus past due child support. According to Health and Human Services officials, state child support data would be needed to determine the details regarding the amounts of child support payments and the payment status of cases; those data are complex and available only through the individual states. State child support enforcement officials in one state told us that providing child support payment information would involve a time-consuming and resource-intensive process because the data come from several sources within the state's data system. Thus, data limitations, the need to examine individual bankruptcy case files, and the need to work with each state child support enforcement agency combined to make examining the issues of child support and bankruptcy very expensive and time-consuming, and the conclusions that could be drawn from such an examination uncertain.
GAO-08-148R, Potential Effect of Bankruptcy Abuse Prevention and Consumer Protection Act on Child Support Payments Cannot Be Determined because Data Needed for Study Are Not Available
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United States Government Accountability Office:
Washington, DC 20548:
October 26, 2007:
The Honorable Christopher B. Cannon:
Ranking Member:
Subcommittee on Commercial and Administrative Law:
Committee on the Judiciary:
House of Representatives:
The Honorable Melvin L. Watt:
The Honorable Adam B. Schiff:
House of Representatives:
Subject: Potential Effect of Bankruptcy Abuse Prevention and Consumer
Protection Act on Child Support Payments Cannot Be Determined because
Data Needed for Study Are Not Available:
Between 2001 and 2004, an average of more than 1.5 million people
annually filed for personal bankruptcy protection. In April 2005, the
Bankruptcy Abuse Prevention and Consumer Protection Act[Footnote 1]
(Reform Act) was enacted, in part, to address certain factors viewed as
contributing to an escalation in bankruptcy filings. Described as
representing the most comprehensive set of reforms in more than 25
years, the Reform Act, among other things, requires those filers with
the ability to pay some of their debts from future earnings to enter
into repayment plans under Chapter 13 of the Bankruptcy Code instead of
liquidating their assets under Chapter 7 and granting the debtor a
discharge from eligible debts.
Individuals usually file for bankruptcy under one of two chapters of
the Bankruptcy Code. Under Chapter 13, filers submit a repayment plan
to the court agreeing to pay part or all of their debts over time,
usually 3 to 5 years. Under Chapter 7, the filer's eligible assets are
reduced to cash and distributed to creditors in accordance with
distribution priorities and procedures set out in the Bankruptcy Code.
A large majority of cases filed under Chapter 7 have no assets
available for liquidation, and thus no funds are available to pay
creditors. Upon the successful completion of both Chapter 7 and 13
cases, the filer's personal liability for eligible debts is discharged
at the end of the bankruptcy process, which means that creditors may
take no further action against the individual to collect the debt.
Bankruptcy filers may choose to reaffirm a debt, often for those debts
secured by collateral, such as a home or a car. A reaffirmation
agreement, generally filed under Chapter 7, formalizes this
arrangement, whereby a filer with debts secured by collateral retains
the collateral and continues to make debt payments to a creditor.
You have expressed interest in learning whether the Reform Act has had
or is likely to have an effect on bankruptcy filers who have a child
support obligation and their ability to make these payments. Obligation
refers to an amount owed or promised for payment, whereas payment
refers to the act of paying or state of being paid. Child support
obligations can be for past due child support, current support, or
medical support. Past due child support refers to a debt owed by a
noncustodial parent to, for example, a custodial parent or guardian for
past child support owed but not paid. In contrast, current child
support obligations reflect ongoing child support obligations. In the
bankruptcy filing documents, a filer is to report past due child
support and current child support expenses. Unpaid child support
obligations are not discharged through bankruptcy. To request relief
from debt, individuals file a petition, financial statements, and
schedules (including information about child support obligations),
among other things, with the bankruptcy court. In this report, we refer
to all documents filed with the court as bankruptcy filing documents.
Your interest stemmed from concerns that amendments made by the Reform
Act that require certain debtors to enter into Chapter 13 repayment
plans or potential pressure from creditors to reaffirm debts might
affect the ability of bankruptcy filers to pay past due child support
or ongoing child support obligations. This report discusses issues
related to our inability to assess the potential impact of the Reform
Act on child support payments as well as information on bankruptcy
filers who have child support obligations. Specifically, this report
addresses (1) difficulties in determining the potential effect of the
Reform Act on an individual's ability to pay child support and (2) an
agency proposal regarding the use of data-enabled forms--documents with
embedded, invisible data tags that facilitate the extraction of data
for analysis--to alleviate some of these difficulties.
To develop an assessment methodology and determine whether we would be
able to implement it, we reviewed pertinent Bankruptcy Code provisions,
including those relating to child support that were amended by the
Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, as
well as studies, analyses, and other relevant literature covering
bankruptcy, in general, and how these intersect with the child support
system, specifically. In addition, we reviewed and analyzed the
processes and procedures used for both bankruptcy and child support
cases, including the federal bankruptcy and child support data systems,
to determine which systems, if any, might be used to identify a
national universe of individuals who filed for bankruptcy and paid
child support obligations. To understand the various federal court,
bankruptcy, and child support databases, we interviewed officials and
analyzed documentation from the Administrative Office of the U.S.
Courts (AOUSC), the Department of Justice's Executive Office for U.S.
Trustees (EOUST), and the Department of Health and Human Services'
(HHS) Office of Child Support Enforcement.
In addition, we interviewed officials and collected documentation from
4 of 90 bankruptcy courts (Northern District of Alabama, Central
District of California, Northern District of Texas, and Southern
District of West Virginia); the regional U.S. Trustees and case
trustees who manage cases for the districts of Central California,
Northern Texas, and Southern West Virginia; and the bankruptcy
administrator for the Northern District of Alabama.[Footnote 2] These
districts were selected based on specific criteria, namely that the
selected courts' proportion of cases filed by Chapter 7 or 13 varied,
and that rural and urban locations were represented. Using the courts'
electronic public access service, we reviewed a nongeneralizable sample
of about 60 bankruptcy cases filed in the Eastern and Northern
Districts of Texas to gain a better understanding of how child support
obligations were reported in practice. These cases were selected based
on our knowledge of cases containing a child support obligation, as
reported by the case trustees who manage cases for both the Eastern and
Northern Districts of Texas. Case trustees are individuals who are
typically appointed by the regional U. S. Trustees to administer
individual bankruptcy cases. To further our understanding of state
child support processes and the data systems used by states, we
interviewed officials and collected documentation from selected states'
child support enforcement agencies, those of Alabama, California,
Illinois, New York, Texas, and West Virginia. We chose these six states
for the diverse geography, caseload sizes, and administrative
structures. Our work was conducted in accordance with generally
accepted government auditing standards from May 2006 through September
2007.
Results in Brief:
After exploring the data available and the limitations of those data,
we found that it was not possible to determine the potential effects of
pertinent child support-related provisions of the Bankruptcy Abuse
Prevention and Consumer Protection Act of 2005 on filers' child support
obligations and payments for two principal reasons. First, current
federal laws do not require this particular universe---bankruptcy
filers who also have child support obligations--to be identified on a
recurring basis,[Footnote 3] and the federal judiciary and the
Executive Office for U.S. Trustees do not separately identify filers
who have these obligations. The information contained in the data
systems used by the federal judiciary and regional U.S. Trustees cannot
be searched for bankruptcy cases that contain child support
obligations. Therefore, we tested a case study approach to identify
these filers. At our request, 33 case trustees who manage individual
bankruptcy cases in the Eastern and Northern Districts of Texas
identified 495 cases filed between October 2005 and August 2006 in
which the bankruptcy filer reported a child support obligation. The
case trustees perceived this task as one that required extra effort and
added to their case management responsibilities. To do a national study
would require making a similar request of the other 20 regional U.S.
Trustees and a statistically representative sample of their 1,342 case
trustees. Second, in our review of a nongeneralizable sample of 60
cases, we found that the information provided by filers and their
attorneys contained in the case files had data limitations--including
missing information and data that were inconsistently reported--that
limited any analysis that could be done. For example, the bankruptcy
documents that filers are required to complete did not show what
portion of a payment for a child support obligation is applied to
current support versus past due child support. According to HHS
officials, state child support data would be needed to determine the
details regarding the amounts of child support payments and the payment
status of cases; those data are complex and available only through the
individual states. State child support enforcement officials in one
state told us that providing child support payment information would
involve a time-consuming and resource-intensive process because the
data come from several sources within the state's data system. Thus,
data limitations, the need to examine individual bankruptcy case files,
and the need to work with each state child support enforcement agency
combined to make examining the issues of child support and bankruptcy
very expensive and time-consuming, and the conclusions that could be
drawn from such an examination uncertain.
As of August 2007, the federal judiciary is considering a request from
the Executive Office for U.S. Trustees (EOUST) for the mandatory use of
data enabled forms which may enhance the ability to search future
bankruptcy data. Data-enabled forms contain embedded data tags that are
invisible to the user. The tags allow computer systems to automatically
extract the tagged data as well as categorize it so that the
information can be analyzed. Currently, filers are not required to use
data-enabled forms. EOUST officials have requested that the federal
judiciary make the use of the data-enabled forms mandatory because,
once implemented, they believe that the data-enabled forms will
eliminate thousands of hours attributed to the manual review of forms
by EOUST staff to meet the Reform Act's mandatory data collection
requirements.[Footnote 4] EOUST's request included marking data
elements to meet new requirements under the Reform Act and other data
elements, including child support obligations. However, judiciary
officials and others have expressed concerns about the forms' mandatory
use because of technical, nontechnical, and cost issues. With regard to
technical issues, according to AOUSC officials, the data-enabled form
technology must be compatible with its current information system, and
the electronic and hard copy documents should be identical to comply
with legal requirements, applicable Federal Rules of Procedure, and
record-keeping requirements (i.e., National Archives and Records
Administration standards). With regard to nontechnical issues, the
judiciary, certain attorneys, and form vendors are concerned about the
amount of data that EOUST wants to extract and is also concerned about
the purpose for which these data would be or could be used. With
respect to cost, AOUSC officials expressed concerns about their
developmental costs and implementation costs to filers and their
attorneys.
We provided a draft of this report to the Department of Health and
Human Services and the Department of Justice (DOJ) and the
Administrative Office of the U.S. Courts for comment. The two
departments had no comments. On October 18, 2007, AOUSC provided
written comments that are presented in enclosure I. In its comments,
AOUSC notes that the report reflects how difficult it is to assess the
effects of the Reform Act in the complex area of bankruptcy and child
support. AOUSC also noted that the report should more clearly state
that additional data, or the implementation of data-enabled forms,
would not necessarily enhance the ability to assess the pre-and post-
Reform Act status of debtors' ability to pay their child support
payments after exiting bankruptcy. We recognize and agree that there
are a number of issues that affect such an analysis. Nevertheless, the
data in the bankruptcy case files is essential for analyzing the
implementation of the Reform Act and the operations of the bankruptcy
system in general. The extraordinary effort currently required to
extract data from bankruptcy case files greatly increases the time,
effort, and cost associated with any analysis of bankruptcy filers or
bankruptcy cases. Congress has a policymaking and oversight interest in
the operations of the bankruptcy system and in obtaining cost-effective
analyses that can inform congressional decisionmaking with regard to
potential changes in bankruptcy statutes and processes. We believe such
analyses cannot be efficiently accomplished unless AOUSC and the
judiciary help make bankruptcy case data more readily accessible for
analysis.
Background:
Overview of the U.S. Bankruptcy System:
Bankruptcy is a federal court procedure designed to help both
individuals and businesses address debts they cannot fully repay as
well as help creditors receive some payment in an equitable manner.
Under Chapter 7, an individual's assets are liquidated for the benefit
of creditors and the debtor's personal liability for eligible debts is
discharged. Under Chapter 13, an individual repays some or all debt
under a court-approved plan prior to a discharge.[Footnote 5] Child
support debt is not discharged under either Chapter 7 or Chapter 13.
Individual bankruptcy is designed to give debtors a "fresh start" but
is often considered a last resort, in large part because of the adverse
effect it can have on an individual's credit record. As shown in figure
1, federal courts have jurisdiction over bankruptcy cases, and
petitions can be filed in any one of the nation's 90 federal bankruptcy
courts.[Footnote 6] The figure also shows that the courts share
responsibility of administration for bankruptcy cases with regional
U.S. Trustees at the Department of Justice.
Figure 1: Overview of Federal Bankruptcy System:
This figure is a flowchart showing overview of federal bankruptcy
system:
[See PDF for image]
Source: GAO.
[A] Six districts in Alabama and North Carolina do not have regional
trustees and are not under the jurisdiction of the Executive Office for
U. S. Trustees. Instead, these six districts have bankruptcy
administrators who are under the jurisdiction of the federal judiciary.
The bankruptcy administrators carry out duties similar to those of the
regional U.S. Trustees, including the administration of bankruptcy
cases, maintaining a panel of private trustees, and monitoring the
transactions and conduct of parties in bankruptcy.
[End of figure]
Overview of Federal/State Child Support Enforcement System:
Child support obligations are enforced through a federal/state
partnership. State child support enforcement agencies typically
maintain detailed information about child support cases, including the
court order for child support that specifies the amount of the
obligation and how it is to be paid; the status of payments made,
including the amount of past due child support owed, if any; and the
names and addresses of all parties involved in a child support order,
among other things.[Footnote 7] As figure 2 shows, each state regularly
transmits some of this information to HHS's Office of Child Support
Enforcement to be included in federal databases that help states
enforce child support obligations nationwide.
Figure 2: Overview of Child Support Enforcement System:
This figure is a flowchart showing an overview of child support
enforcement system.
The Department of Health and Human Services and the Office of Child
Support Enforcement are at the top at #1.
The Federal Case Registry is on the left at #2, and the Federal Offset
Program is at #3.
The bottom, state child support enforcement systems, at #4, is pointing
to #2 and #3.
1. Office of Child Support Enforcement (OCSE)”assists states in
obtaining support (both financial and medical) for children by helping
locate parents, establishing paternity and support obligations, and
enforcing those obligations through a federal/state/local partnership.
2. Federal Case Registry (FCR)”a national database that includes all
child support cases handled by state child support agencies and all
support court orders established or modified on or after October 1,
1998. The FCR assists states in locating parties who live in different
states to establish, modify, or enforce child support obligations;
establish paternity; enforce state law regarding parental kidnapping;
and establish or enforce child custody or visitation. Populated with
data from state case registries, the FCR primarily serves as a pointer
system to the state, where more detailed information about a case is
maintained;
3. Federal Offset Program (FOP)”assists states with the collection of
delinquent child support debts by intercepting tax refunds or denying
the issuance of a passport, among other things, using a database
containing individuals who owe back child support. For example, the
Federal Income Tax Refund Offset Program collects past due child
support payments from the tax refunds of parents who have been ordered
to pay child support. Under this offset program, tax refunds owed to
noncustodial parents are intercepted and sent to the state child
support agency through OCSE, to pay the noncustodial parent‘s past due
child support debt.
4. State child support enforcement systems”data from each of the 50
states and the District of Columbia, Guam, Puerto Rico, and the Virgin
Islands that includes case information about child support cases when
the state provides services and limited information about cases when
the state does not provide services (that were modified after October
1, 1998). A subset of this data is transmitted to HHS‘s FCR and FOP.
State child support enforcement systems generally contain more detailed
information than HHS‘s systems. These state systems include detailed
information
[See PDF for image]
Source: GAO.
[End of figure]
Data Limitations Restrict Analysis of the Potential Effects of the
Reform Act on Bankruptcy Filers' Child Support Payments:
Data limitations we encountered when attempting to assess the effect of
the pertinent child support related provisions of the Reform Act on
child support payments relate to identifying a sample of bankruptcy
filers with child support obligations as well as data collection and
consistency issues. These factors restricted our ability to perform an
analysis of child support payments.
Information to Identify Bankruptcy Filers with Child Support
Obligations Is Not Readily Available:
At the time of our review, it was not possible to determine the
potential effects of the Reform Act on bankruptcy filers who also had
child support obligations because there is no practical means of
reliably identifying this universe. We sought to identify a
representative sample of bankruptcy filers with child support
obligations from a national universe so that we could project an effect
of the Reform Act nationwide. Although the federal bankruptcy system
has multiple databases, as does the federal/state child support system,
none of these databases single out a universe of bankruptcy filers who
have child support obligations and their child support payment
information, as shown in figure 3. Current federal laws do not require
this universe to be identified on a recurring basis.
Figure 3: Information Contained in Bankruptcy and Child Support
Databases:
This figure is a flow chart showing information contained in bankruptcy
and child support databases:
[See PDF for image]
Source: GAO.
[End of figure]
In an effort to identify whether each database described in figure 3
contained information on either child support obligations or child
support payments, we reviewed these databases, including the systems
used by staff in the Executive Office for U.S. Trustees and the U.S.
bankruptcy courts, which manage federal bankruptcy cases. At EOUST, the
Automated Case Management System (which is based on extracts of case
management information from AOUSC) functions as an internal agency case
management system that contains the information needed by the U.S.
Trustee Program to carry out its responsibilities, including
supervising the administration of cases and case trustees. Some case
details, such as child support information, are not extracted--and this
system is not designed to provide that type of information. The case
management system contains information about bankruptcy filers in 84 of
90 bankruptcy courts. The remaining 6 bankruptcy courts are not part of
the U.S. Trustee Program, so information about bankruptcy filers in
these districts is not included in the Automated Case Management
System.[Footnote 8]
To identify a national universe of bankruptcy filers who also have
child support obligations, we reviewed two databases used by AOUSC and
the bankruptcy courts. While one of these systems--the Case Management/
Electronic Case Files System--included child support information, the
fields where this information is contained are not searchable. The
child support information is contained in filing documents as text.
According to AOUSC officials, it is difficult to isolate and extract
the relevant child support information from other text in the
documents. The second system, the U.S. Party Case Index, does not
contain any child support information.
The two federal HHS child support systems we reviewed--the Federal Case
Registry and the Federal Offset Program database--did not contain all
of the information needed for analysis. Specifically, they did not
contain detailed payment information needed for our analysis. This
information is available only at the state child support enforcement
agencies.
For a case study approach, we explored identifying bankruptcy filers
who have child support obligations at the bankruptcy court level--
specifically, in the Eastern and Northern Districts of Texas. We found
that identifying these filers required the regional U.S. Trustee (who
oversees bankruptcy cases filed in these two courts) to ask the 33 case
trustees in the region to identify, using their working files, those
cases where the filer reported owing a child support obligation. When
we made this request, the case trustees identified 495 cases filed
between October 2005 and August 2006 in which the bankruptcy filer
reported a child support obligation. However, this information was not
readily available and it took them almost 3 months to compile. Also,
the case trustees perceived this task as one that required extra effort
and added to their case management responsibilities. To do a national
study would require making a similar request of the other 20 regional
U.S. Trustees and a statistically representative sample of their 1,342
case trustees.
Missing Information and Inconsistent Data Reporting Affect Analysis of
Reform Act Impact:
Even if we were able to identify a sample of bankruptcy filers who also
have child support obligations, we noted data limitations that may
preclude the necessary analysis. Of the 495 cases identified by case
trustees as having a child support obligation, we reviewed data
provided by bankruptcy filers and their attorneys for 60 case files and
found data limitations such as missing information and inconsistent
data. In addition to data issues, we found that changes to filing
information and the characteristics of bankruptcy filers resulting from
the Reform Act affect our ability to make direct pre-and post-Reform
Act comparisons.
Missing Information Affects Data Analysis:
On the basis of our nongeneralizable case file review in the two
districts, we found that the details needed to determine how child
support payments were applied to child support debt were not available.
Specifically, the bankruptcy documents that filers are required to
complete do not show what portion of a payment for a child support
obligation is applied to current monthly support versus past due child
support. Without this information, we are unable to provide a complete
picture of how a bankruptcy filer's child support debt is structured.
Details about child support payments are available only at the state
child support agencies.
To explore how state child support enforcement agencies maintain data
regarding child support payments, we contacted child support
enforcement officials in six states. While officials in one state were
helpful in providing some child support data, these officials told us
that there were technical barriers and resource limitations to making
child support payment data easily available for our purposes. For
example, officials were able to provide summary data to us about
individuals in the system, such as whether they were custodial or
noncustodial parents. However, these officials said that providing
child support payment information involves a time-consuming and
resource-intensive process because the data come from several sources
within the state's data system.[Footnote 9] These circumstances require
preparing programming language to merge the sources and compile the
information. When the state provided the summary data, officials had to
take into consideration their existing workload in order to meet our
request as well as accommodate the needs of the state legislature,
which was in session. In addition, officials in two other states
mentioned that they would have to balance providing this type of
information with the priority of carrying out their enforcement
activities.
We also observed examples where bankruptcy data that would be needed
for determining a filer's financial condition after a Chapter 7 case is
closed were not collected. Knowing this information is important when
assessing a filer's future ability to pay child support. For instance,
under Chapter 7, bankruptcy filers are to propose in the filing
documents how they plan to address a debt secured by collateral.
Whether or not the filer took action on this proposal cannot be
determined because this information is not captured in the bankruptcy
filing documents or data systems. For example, a filer can propose to
surrender the collateral to the creditor. However, neither the filer
nor the creditor is required to provide information to the court or
trustees about whether or not this action occurred, so we have no way
of confirming that the collateral was surrendered. We also found a case
where a filer proposed to reaffirm a debt, but no reaffirmation
agreement (an agreement that formalizes the arrangement whereby a filer
retains collateral and continues to make payments to a creditor) was
filed with the court. We have no way of knowing whether or not the
filer continued to make payments to the creditor after the case was
closed. In fact, even when a reaffirmation agreement is filed, data on
the extent to which a filer was able to meet the terms specified in the
agreement (e.g., made payments as required) are likely only available,
if at all, at the individual creditor level.
Inconsistent Data Affect Analysis:
Our review raised questions about the consistency of bankruptcy filers'
data. We found instances among the nongeneralizable sample of case
files we reviewed where information in the filing documents was
reported inconsistently. For example, one case showed the total amount
of an ongoing child support obligation as a debt in the filing
documents for several years into the future (i.e., debt obligations
that are not due until a future date), whereas in another case, the
filer reported the ongoing obligation as a monthly amount, not the
total amount of the future obligation. Also, some case trustees told us
that filers (and their attorneys) sometimes complete the filing
documents differently, resulting in inconsistent information being
reported. For example, on one filing document filers may report past
due or current child support obligations without identifying which type
of obligation is being reported.
Changes to Filing Information and the Characteristics of Bankruptcy
Filers Affect Ability to Analyze the Impact of the Reform Act:
In addition to the data collection and the consistency issues we
identified, we also were unable to make direct comparisons between the
universe of bankruptcy filers who filed just before the majority of the
Reform Act provisions took effect in October 2005 and those who filed
immediately after. The ability to perform a pre-and post-Reform Act
analysis of filers is important for conducting an analysis of the Act's
impact on bankruptcy filers who also have a child support obligation.
We were unable to compare these universes for two reasons. First, the
filers within these universes may well have been motivated to file for
different reasons than filers in prior years--reflecting, in part, the
perception that filing for bankruptcy would be more difficult after the
Reform Act, according to court officials and our analysis. Thus,
individuals who filed before the law's provisions went into effect may
have been less critically in need of bankruptcy relief than typical
filers in prior years, whereas after the law's provisions went into
effect, filers may have been more critically in need of bankruptcy
relief. We would be unable to directly attribute any differences
between these groups as resulting from the Reform Act because of the
possibility that the characteristics of the groups of filers might be
inherently different for reasons related more to behavior than changes
in Bankruptcy Code provisions.
Second, some definitional changes made to the Bankruptcy Code as a
result of the Reform Act limit our ability to make pre-and post-Reform
Act comparisons. For example, prior to the Reform Act, the term "debt
for child support" was defined as specified types of debt for
maintenance or support of a child of the debtor. The Reform Act
introduced the broader umbrella term "domestic support obligation" that
in addition to child support debt also refers to certain other types of
debts such as alimony. In addition, under the Reform Act, the
definition of domestic support obligation expanded the types of
entities that could seek to collect domestic support obligations beyond
a spouse, former spouse, or child of the debtor to include a child's
parent, legal guardian, responsible relative, or a governmental unit.
These types of definitional changes limit our ability to compare filer
universes.
As mentioned previously, reaffirmed debts are certain debts (e.g., a
mortgage or automobile loan) that a bankruptcy filer agrees to pay that
might otherwise be discharged by the bankruptcy court. The Reform Act
included changes that affected reaffirmation agreements. The Reform Act
requires that certain information, such as the amount to be reaffirmed,
be disclosed. This information was not required under federal law prior
to the Reform Act and may or may not be included in reaffirmation
agreements filed prior to the act. Furthermore, agreements made before
or after the Reform Act were not required to include information on
actual monthly payments made that would be needed to assess the impact
of such agreements on a filer's ability to pay child support.
Data-Enabled Forms under Consideration as a Method to Search Bankruptcy
Data For Filers Who Have Child Support Obligations:
As noted earlier, bankruptcy databases do not contain information that
would be needed about actual child support payments--information
available only through state child support agency data. In particular,
state child support data would be needed to determine the details
regarding the amounts of child support payments and the payment status
of cases--that is, whether child support payments are up to date or
past due child support is owed. However, if data-enabled forms were to
be used and if child support obligations were among the data fields
tagged, limited analysis could include summary information on the
number of bankruptcy filers who reported a domestic support obligation
or included ongoing child support obligations in their bankruptcy
filing documents. Data-enabled forms contain embedded data tags that
are invisible to the user but which a computer system can detect using
programming language. After a user completes the form online, the tags
allow a computer system to automatically extract the tagged data as
well as categorize it so that the information can be compared and
analyzed.
As mentioned previously, according to AOUSC officials, extracting child
support information from the current bankruptcy courts databases is
difficult. The judiciary is considering a request by EOUST to mark
certain data elements in the filing document text so it can more easily
be extracted. EOUST's request included marking data elements to meet
new requirements under the Reform Act and other data elements,
including child support obligations. The Reform Act imposed new
requirements for collecting and reporting specified data on bankruptcy
cases. The purpose of these bankruptcy statistics requirements is to be
able to gather detailed information, at the individual case level,
about bankruptcy filers, such as financial statistics and the average
period of time between case filing and closure. This information is to
be used to provide an overview of the bankruptcy filer universe (not
individual cases) annually beginning no later than July 2008. AOUSC and
EOUST both have responsibilities for collecting and reporting data as a
result of the Reform Act. For purposes of the bankruptcy data
collection, EOUST is considering data-enabled forms as one option for
meeting reporting requirements, such as the total assets and
liabilities of filers, the aggregate debt discharged by filers during
the reporting period, and trustees' final reports (which include
information about the length of time a case was pending, assets,
disbursements, and expenses, among other things). EOUST's request seeks
to include additional data elements that judiciary officials consider
unrelated to the data required by the Reform Act and unrelated to the
management of cases. Judiciary officials have expressed concerns about
the volume of data proposed to be tagged.
There are factors that affect the potential use of data-enabled forms.
According to AOUSC officials, the forms have not been used because
certain bankruptcy attorneys and the software vendor community have
raised concerns about privacy issues and the volume of data proposed to
be tagged, among others. Issues have also been raised concerning the
programming format for embedding the tags. Currently, filers are not
required to use data-enabled forms. EOUST has proposed a technology for
data-enabled forms and made a request to AOUSC that the use of data-
enabled forms be mandatory because, once such forms are implemented,
they believe that the new automated data collection process will
eliminate thousands of hours attributed to the manual review of forms
by EOUST to meet the Reform Act mandatory data collection requirements.
As of August 2007, the federal judiciary is considering EOUST's request
that data-enabled forms be mandatory. However, the federal judiciary,
certain attorneys, and form vendors have voiced concerns about the
forms' mandatory use because of technical, nontechnical, and cost
issues. With regard to technical issues, according to AOUSC officials,
the data-enabled form technology must be compatible with its current
information system, and the electronic and hard copy documents should
be identical to comply with rules of court procedures and record-
keeping standards. With regard to nontechnical issues, the judiciary,
certain attorneys, and form vendors are concerned about the amount of
data that EOUST wants to extract and are also concerned about the
purpose for which these data would be or could be used. With respect to
cost, AOUSC officials expressed concerns about their developmental
costs and implementation costs to filers and their attorneys.
At its January 2007 meeting, the Committee on the Administration on the
Bankruptcy System[Footnote 10] of the U.S. Judicial Conference decided
to study further the mandatory use of data-enabled forms. According to
AOUSC officials, in September 2007 EOUST demonstrated its technological
proposal for the use of data-enabled forms to the Bankruptcy
Committee's Subcommittee on Automation and other judiciary officials.
The Bankruptcy Committee is considering plans to conduct a survey of
vendors and bankruptcy attorneys regarding the mandatory use of data-
enabled forms. According to AOUSC officials, as of August 2007, the
Bankruptcy Committee had not set a time frame for completing its study.
In summary, obtaining the data needed to asses the impact of the Reform
Act on filers who have child support obligations is difficult and time-
consuming and requires the review of case files by us and case
trustees. Moreover, it is not clear, given the limitations of the data
available, that the extensive and expensive effort required would yield
data that could be used to reach reasonably reliable conclusions.
Agency Comments and Our Evaluation:
We provided a draft of this report to AOUSC, DOJ, and HHS for review
and comment. DOJ and HHS had no comments on the draft. AOUSC provided
written comments on October 18, 2007, which are presented in appendix
I. AOUSC also provided technical comments that were incorporated as
appropriate.
In its comments, AOUSC notes that the report reflects how difficult it
is to assess the effects of the Reform Act in the complex area of
bankruptcy and child support. AOUSC also noted that the report should
more clearly state that additional data, or the implementation of data
enabled forms, would not necessarily enhance the ability to assess the
pre-and post-Reform Act status of debtors' ability to pay their child
support payments after exiting bankruptcy, given the variations in
local economies, debtor characteristics, and other factors. We
recognize and agree there are a number of issues that affect any pre-
and post-Reform Act analysis. Nevertheless, the data in the bankruptcy
case files is essential for analyzing the implementation of the Reform
Act and the operations of the bankruptcy system in general.
To compensate for the limitations of the data available for analysis,
AOUSC suggests that we provide a more extensive legal analysis,
including expounding on the potential validity of hypotheses regarding
the effect of chapter 13 versus chapter 7 proceedings on the ability of
debtors to pay child support obligations. We, bankruptcy scholars, and
other researchers can speculate on these probable effects. However,
Congress has requested fact-based analyses. The extraordinary effort
currently required to extract data from bankruptcy case files greatly
increases the time, effort, and cost associated with any analysis of
bankruptcy filers or bankruptcy cases. The data in the case files are
essential for testing the validity of many hypotheses regarding the
operations of the bankruptcy courts and bankruptcy system. Congress has
a policymaking and oversight interest in the operations of the
bankruptcy system and in obtaining cost-effective analyses that can
inform congressional decisionmaking with regard to potential changes in
bankruptcy statutes and processes. We believe such analyses cannot be
efficiently accomplished unless AOUSC and the judiciary help make
bankruptcy case data more readily accessible for analysis.
As agreed with your office, unless you publicly announce the contents
of this report earlier, we plan no further distribution of it until 30
days from the date of this letter. We then plan to provide copies of
this report to the Director of the Administrative Office of the U.S.
Courts, the Attorney General of the Department of Justice, and the
Secretary of the Department of Health and Human Services and other
interested congressional committees and parties. We will also make
copies available to others upon request. In addition, the report will
be available at no charge on GAO's Web site at [hyperlink,
http://www.gao.gov].
If you or your staff have any questions about this report, please
contact me at (202) 512-8757 or jenkinswo@gao.gov. Contact points for
our Office of Congressional Relations and Public Affairs may be found
on the last page of this report. GAO staff contributing to this report
are listed in the enclosure II.
Signed by:
William Jenkins, Jr.:
Director Homeland Security and Justice Issues:
[End of section]
Enclosure I:
Administrative Office Of The United States Courts:
James C. Duff:
Director:
Jill C. Sayenga:
Deputy Director:
Cathy A. Mccarthy:
Deputy Associate Director:
Office of Management, Planning and Assessment:
Washington, D.C. 20544:
October 18, 2007:
Mr. William O. Jenkins, Jr.
Director, Homeland Security and Justice Issues:
United States Government Accountability Office:
441 G Street, NW:
Washington, D.C. 20548:
Dear Mr. Jenkins:
Thank you for the opportunity to provide comments on the draft report
entitled Potential Effect of Bankruptcy Abuse Prevention and Consumer
Protection Act on Child Support Payments Cannot be Determined because
Data Needed for Study Are Not Available (GAO-08-28R). Your task was
challenging and the report reflects how difficult it is to assess the
effects of the statute in this complex area. Not only does the report
point out that data are not readily available to answer the question
posed, but it also explains why it would be extremely difficult to
answer the question even with more data. Unfortunately, this important
message is not presented clearly in the critical beginning sections of
the draft report. The report's title and its primary emphasis on data
availability and the potential value of data-enabled forms in the
Results in Brief section suggest that collecting additional data would
enable GAO to answer the requesters' question. A reader might
reasonably conclude from the synopsis that the use of data- enabled
forms to collect information from bankruptcy filers would produce the
information needed. As your report notes elsewhere, this would not be
the case. A key point is made (on page 11 of the draft) that it would
be extremely difficult or impossible to establish a causal connection
between changes in the bankruptcy law and differences in the level of
payments on child support obligations, even if comprehensive and
reliable data were available. On page 12, the report explains the
limited analysis that data collected through data-enabled forms might
allow. In addition, the report notes that data currently provided by
filers (or their attorneys) contains errors or omissions, but this
important issue is not addressed in regard to describing the value of
data-enabled forms. The Results in Brief paragraph implies that data-
enabled forms that would be completed by bankruptcy filers might
provide the data needed for further analysis. It notes potential
drawbacks to this proposal, but the report does not suggest production
of electronic data through other means, such as the potential use of
data-enabled forms by case trustees. It seems to us that these
important points should be covered more clearly to avoid
misunderstanding.
The report indicates that a data-centered approach to this issue offers
limited potential because there are numerous confounding factors in
evaluating the effect of the statute on child support payments. Some of
these factors are noted in the report and some are not. For example,
BAPCPA broadened the category of nondischargeable debts to include
"domestic support obligations" such as alimony, in addition to child
support. The report notes that the characteristics of pre- and post-
BAPCPA debtors are likely to be different. Changes in the economy and
local variations in the effectiveness of state agencies in collecting
child support obligations are other relevant factors. It seems that
these fundamental problems should be given more prominence at least
equal to the extended discussion of difficulties in data collection.
To compensate for the challenges of data analysis, a useful alternative
would be to provide a more robust legal analysis of the potential
effects of BAPCPA on the level of child support payments. Page 2 of the
letter to the requesters states that this study was requested because
of "concerns that amendments made by the Reform Act that require
certain debtors to enter into Chapter 13 repayment plans or potential
pressure from creditors to reaffirm debts might affect the ability of
bankruptcy filers to pay a past due child support or ongoing child
support obligations." This concern seems to stem from an underlying
assumption that debtors will repay more in chapter 13 than in chapter
7. The reasoning seems to follow that, if chapter 13 debtors repay more
than in a chapter 7, there would be less available for domestic
(including child) support creditors. The report does not examine the
validity of this hypothesis. It may be more likely that a debtor with
nondischargeable domestic support obligations would propose a chapter
13 plan that would favor the domestic support creditor at the expense
of general unsecured creditors holding dischargeable debt.
We understand that GAO prefers to conduct data analysis, but in this
situation it might be useful to provide information to address the
requesters' underlying concern based on the expertise of individuals
who operate within the bankruptcy system. The report indicates that the
GAO team interviewed bankruptcy trustees and bankruptcy court officials
in the course of this study, but it is not clear whether the hypotheses
described above were explored during those interviews. It appears the
team did not consult with bankruptcy attorneys for this study.
We hope you find these comments constructive. Technical corrections are
provided as a separate enclosure.
Sincerely,
Signed by:
Cathy A. McCarthy:
Enclosure:
[End of section]
Enclosure II: GAO Contact and Staff Acknowledgments:
GAO Contact:
William O. Jenkins, Jr., Director, GAO Homeland Security and Justice
Issues, (202) 512-8757 (jenkinswo@gao.gov):
Acknowledgments:
Other key contributors to this report were Linda Watson, Assistant
Director; and Amy Bernstein; Cynthia Grant; Geoffrey Hamilton; Gale
Harris; Susan Higgins; Ron La Due Lake; Sara Pelton; Peter Singer;
Jamie Whitcomb; Tracy Williams; and Ellen Wolfe.
[End of section]
Footnotes:
[1] Pub. L. No. 109-8, 119 Stat. 23, (2005).
[2] Six district bankruptcy courts in Alabama and North Carolina are
not under the jurisdiction of the Executive Office for U.S. Trustees.
These six districts are the Northern, Middle, and Southern Districts of
Alabama and the Eastern, Middle, and Western Districts of North
Carolina. These districts have bankruptcy administrators who oversee
bankruptcy cases and are under the jurisdiction of the federal
judiciary. Pursuant to the Bankruptcy Judges, United States Trustees,
and Family Farmer Bankruptcy Act of 1986 (Pub. L. No. 99-554, 100 Stat.
3088 (1986)), the Judicial Conference established the bankruptcy
administrator program in these two states as a part of the federal
judiciary.
[3] Pursuant to a statutory mandate, GAO is performing a one time study
to assess the feasibility, effectiveness, and cost of requiring
trustees or the bankruptcy courts to provide the Health and Human
Services Department's Office of Child Support Enforcement with
bankruptcy debtor information to allow the office to determine whether
such debtors have outstanding child support obligations.
[4] The Reform Act imposed new requirements for collecting and
reporting data on bankruptcy cases. The purpose of these bankruptcy
statistics requirements is to be able to gather detailed information,
at the individual case level, about bankruptcy filers, including
financial statistics and the average period of time between case filing
and closure. This information is to be used to provide an overview of
the bankruptcy filer universe (not individual cases) annually,
beginning no later than July 2008.
[5] Because businesses do not pay child support obligations, the scope
of this report is limited to individual bankruptcies.
[6] There are 94 judicial districts, but only 90 federal bankruptcy
courts because the Eastern and Western Arkansas judicial districts are
served by a single bankruptcy court and bankruptcy cases in Guam, the
Virgin Islands, and the Northern Mariana Islands judicial districts are
filed in district court.
[7] While state agencies have detailed information about child support
cases they administer, HHS officials said that the states have minimal
to no information available about child support cases that are handled
outside the state child support enforcement agency, and the amount of
information varies state by state.
[8] These include the Northern, Middle, and Southern Districts of
Alabama and the Eastern, Middle, and Western Districts of North
Carolina.
[9] We worked with these state officials for over approximately 7
months to obtain the summary-level data. The officials estimated that
an additional 2 months would be required to obtain the payment
information needed for our analysis.
[10] The Judicial Conference of the United States operates through a
network of committees created to address and advise on a wide variety
of subjects such as information technology, personnel, space and
facilities, security, judicial salaries and benefits, budget, court
administration, and rules of practice and procedure. The Committee on
the Administration of the Bankruptcy System oversees the bankruptcy
system by monitoring, analyzing, and proposing legislation affecting
bankruptcy operations, including their impact on the entire judiciary,
for consideration by the Judicial Conference.
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