Bankruptcy and Child Support Enforcement
Improved Information Sharing Possible without Routine Data Matching Gao ID: GAO-08-100 January 23, 2008Recognizing the importance of child support, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 requires that if a parent with child support obligations files for bankruptcy, a bankruptcy trustee must notify the relevant custodial parent and state child support enforcement agency so that they may participate in the case. The act also required GAO to study the feasibility of matching bankruptcy records with child support records to assure that filers with child support obligations are identified. GAO therefore (1) identified the percent of bankruptcy filers with obligations nationwide, (2) examined the potential for routine data matching to facilitate the identification of filers with child support obligations, and (3) studied the feasibility and cost of doing so. GAO interviewed child support enforcement and bankruptcy officials at the federal level and in six states. GAO also conducted a nationwide test data match and reviewed national bankruptcy filings for people with support obligations in Texas for an indication of whether filers are failing to provide this information.
Nationwide, about 7 percent of individuals who filed for bankruptcy between October 17, 2005, and October 17, 2006--the first year of the bankruptcy act implementation--were noncustodial parents with child support orders. They, in turn, represented about one-half of 1 percent of the 9.9 million noncustodial parents with orders to pay child support. While these proportions are small, they represented 45,346 adults and at least as many children. Routine data matching might identify individuals who have not reported their child support obligations. However, GAO estimated from a random sample file review that 98 percent of noncustodial parents nationwide with orders in Texas had volunteered this information when they filed. (The results could be higher or lower in other states.) Another potential benefit would be to reduce the workload for state child support agencies by providing positive identification of bankruptcy filers with orders under the states' purview by comparing the full social security numbers (SSNs) of individuals in both bankruptcy and child support databases. This would help address the current situation state agency officials described, in which significant numbers of the notices they receive from bankruptcy trustees included only partial SSNs of the named person, imposing additional work on staff to make a positive identification in their databases. For bankruptcy case trustees participating in the U.S. Trustee Program, we found this to be the case, even though program guidance--covering 84 of the 90 bankruptcy districts--calls for case trustees to provide full SSNs in notices sent to state agencies. These notices are not part of any public record and trustee program officials said this use of the full SSNs is consistent with executive branch policies designed to guard privacy. For the remaining six districts, administered under a separate program, no guidance has been developed. A data matching system is technically feasible, but it would be a complex and costly undertaking, and would involve addressing some statutory and policy considerations. Regarding notifying state agencies of the match results, federal child support enforcement officials said that their national automated system could disseminate this data after modifications to federal and state systems. However, a data matching system would not offer a comprehensive alternative to the trustee notification system, because it would not transmit information to custodial parents. Regarding cost, bankruptcy and child support enforcement officials said that the development and implementation of an automated interface between two separate databases is a complex and costly undertaking, requiring modifications to each, with many steps required to assure that the matching system is developed and deployed without critical flaws and allowing for the secure exchange of data. Also, bankruptcy officials cited some statutory and policy considerations to releasing their own data or to performing a data match. It would also duplicate a portion of the current trustee notification process. In view of these findings, instituting a data matching system may not be warranted, especially if the case trustees can provide full SSNs of bankruptcy filers when notifying state agencies.
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Director: Team: Phone:GAO-08-100, Bankruptcy and Child Support Enforcement: Improved Information Sharing Possible without Routine Data Matching
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Report to Congressional Committees:
United States Government Accountability Office:
GAO:
January 2008:
Bankruptcy And Child Support Enforcement:
Improved Information Sharing Possible without Routine Data Matching:
GAO-08-100:
GAO Highlights:
Highlights of GAO-08-100, a report to congressional committees.
Why GAO Did This Study:
Recognizing the importance of child support, the Bankruptcy Abuse
Prevention and Consumer Protection Act of 2005 requires that if a
parent with child support obligations files for bankruptcy, a
bankruptcy trustee must notify the relevant custodial parent and state
child support enforcement agency so that they may participate in the
case. The act also required GAO to study the feasibility of matching
bankruptcy records with child support records to assure that filers
with child support obligations are identified. GAO therefore (1)
identified the percent of bankruptcy filers with obligations
nationwide, (2) examined the potential for routine data matching to
facilitate the identification of filers with child support obligations,
and (3) studied the feasibility and cost of doing so.
GAO interviewed child support enforcement and bankruptcy officials at
the federal level and in six states. GAO also conducted a nationwide
test data match and reviewed national bankruptcy filings for people
with support obligations in Texas for an indication of whether filers
are failing to provide this information.
What GAO Found:
Nationwide, about 7 percent of individuals who filed for bankruptcy
between October 17, 2005, and October 17, 2006”the first year of the
bankruptcy act implementation”were noncustodial parents with child
support orders. They, in turn, represented about one-half of 1 percent
of the 9.9 million noncustodial parents with orders to pay child
support. While these proportions are small, they represented 45,346
adults and at least as many children.
Routine data matching might identify individuals who have not reported
their child support obligations. However, GAO estimated from a random
sample file review that 98 percent of noncustodial parents nationwide
with orders in Texas had volunteered this information when they filed.
(The results could be higher or lower in other states.) Another
potential benefit would be to reduce the workload for state child
support agencies by providing positive identification of bankruptcy
filers with orders under the states‘ purview by comparing the full
social security numbers (SSNs) of individuals in both bankruptcy and
child support databases. This would help address the current situation
state agency officials described, in which significant numbers of the
notices they receive from bankruptcy trustees included only partial
SSNs of the named person, imposing additional work on staff to make a
positive identification in their databases. For bankruptcy case
trustees participating in the U.S. Trustee Program, we found this to be
the case, even though program guidance”covering 84 of the 90 bankruptcy
districts”calls for case trustees to provide full SSNs in notices sent
to state agencies. These notices are not part of any public record and
trustee program officials said this use of the full SSNs is consistent
with executive branch policies designed to guard privacy. For the
remaining six districts, administered under a separate program, no
guidance has been developed.
A data matching system is technically feasible, but it would be a
complex and costly undertaking, and would involve addressing some
statutory and policy considerations. Regarding notifying state agencies
of the match results, federal child support enforcement officials said
that their national automated system could disseminate this data after
modifications to federal and state systems. However, a data matching
system would not offer a comprehensive alternative to the trustee
notification system, because it would not transmit information to
custodial parents. Regarding cost, bankruptcy and child support
enforcement officials said that the development and implementation of
an automated interface between two separate databases is a complex and
costly undertaking, requiring modifications to each, with many steps
required to assure that the matching system is developed and deployed
without critical flaws and allowing for the secure exchange of data.
Also, bankruptcy officials cited some statutory and policy
considerations to releasing their own data or to performing a data
match. It would also duplicate a portion of the current trustee
notification process. In view of these findings, instituting a data
matching system may not be warranted, especially if the case trustees
can provide full SSNs of bankruptcy filers when notifying state
agencies.
What GAO Recommends:
To improve the current trustee notification system, the executive and
judicial branch entities responsible for bankruptcy case trustees
should take steps to address the needs of state agencies for full SSNs
to better identify bankruptcy filers; these entities agreed.
To view the full product, including the scope and methodology, click on
[hyperlink, http://www.GAO-08-100]. For more information, contact Kay
E. Brown at (202) 512-7215 or BrownKE@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
About 7 Percent of Those Who Filed for Bankruptcy Have Orders to Pay
Child Support and Most Are Part of the CSE Program:
A Routine, National Data Match Might Identify Filers Who Do Not Report
Their Support Obligations and Reduce the Workload Associated with the
Current Process:
Although a Data Match Is Technically Feasible, There Would Be
Substantial Start-Up Costs as well as Some Policy Considerations:
Conclusion:
Recommendations for Executive and Judicial Branch Action:
Agency Comments and Our Evaluation:
Appendix I: Objectives, Scope, and Methodology:
Appendix II: Comments from the Department of Justice:
Appendix III: GAO Contact and Staff Acknowledgments:
Table:
Table 1: Comparison of Bankruptcy Filers Who Are Noncustodial Parents
with Orders with All Bankruptcy Filers:
Figures:
Figure 1: Overview of Bankruptcy System:
Figure 2: Current Court and Bankruptcy Case Trustee Notification
Processes:
Figure 3: Federal Parent Locator Service:
Abbreviations:
CSE: Child Support Enforcement:
DSO: Domestic Support Obligation:
EOUST: Executive Office for U.S. Trustees:
HHS: Department of Health and Human Services:
OCSE: Office of Child Support Enforcement:
SSN: Social Security Number:
TANF: Temporary Assistance for Needy Families:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
January 23, 2008:
Congressional Committees:
Millions of parents nationwide do not live with one or more of their
minor children. For many of these children and the households they live
in, child support payments from noncustodial parents can be an
important source of income. In fiscal year 2006 alone, almost $24
billion in child support payments was collected and distributed through
the federal/state child support enforcement (CSE) program. In
recognition of the importance of child support to these families, the
Bankruptcy Abuse Prevention and Consumer Protection Act (also known as
the Bankruptcy Reform Act)--which was signed into law in April 2005 and
addresses, among other things, certain factors viewed as contributing
to an escalation in bankruptcy filings--included new provisions to help
better ensure that child support is given a high priority in
bankruptcy.
Specifically, to help ensure that child support payments are made to
custodial parents, bankruptcy filers are to disclose their support
obligations on certain bankruptcy forms. The act amended the Bankruptcy
Code to require bankruptcy case trustees--generally private individuals
who are appointed by the federal government to administer individual
bankruptcy cases--to notify child support claimants, such as custodial
parents to whom support payments are owed by an individual filing for
bankruptcy, as well as state CSE agencies that might be involved. This
is designed to allow custodial parents and state CSE agencies to have
an opportunity to be party to any bankruptcy proceedings. Nationwide,
most parents with child support orders receive child support
enforcement services through state CSE agencies while the remainder
rely on private arrangements.
The ability to identify bankruptcy filers who have child support
obligations is essential for many of the new provisions in the act to
work. While the federal bankruptcy system and the CSE program have
national databases, none identify bankruptcy filers who owe or pay
child support. The Bankruptcy Reform Act, therefore, required that we
study and report on the feasibility, effectiveness, and cost of
identifying such filers through database matching of bankruptcy records
with child support enforcement records.[Footnote 1] (The names of
addressees are listed at the end of this letter.)
To respond to this statutory requirement, we addressed the following
questions: (1) What percent of bankruptcy filers are parents who have
orders to pay child support? (2) In what ways, if any, might matching
of national bankruptcy and child support enforcement data on a routine
basis facilitate the identification of bankruptcy filers with orders to
pay child support? (3) What is the feasibility and estimated cost of
conducting such a data match on a routine basis?
To address these objectives, we used several different methodologies.
To identify the percent of bankruptcy filers with orders to pay child
support, we worked with the U.S. Department of Health and Human
Services' (HHS) Office of Child Support Enforcement (OCSE)--the entity
overseeing state CSE agencies[Footnote 2]--to match its national child
support enforcement data with a national extract of data on bankruptcy
filers that we obtained from the Administrative Office of the United
States Courts (Administrative Office). The Administrative Office
provides support for federal courts and is supervised by the Judicial
Conference of the United States. The HHS data comprised all parents in
its national-level database with current orders to pay child support as
of June 29, 2007, and the Administrative Office data comprised all
individuals that filed for consumer bankruptcy between October 17,
2005, and October 17, 2006,[Footnote 3] the first year of
implementation under the Bankruptcy Reform Act.[Footnote 4] For more
information on scope and methodology, see appendix I.
To determine in what ways matching bankruptcy and child support data
might facilitate the identification of bankruptcy filers with child
support obligations as well as to assess the feasibility and estimated
costs of matching on a recurring basis, we interviewed officials in
both the federal/state CSE program and bankruptcy system. We
interviewed officials at OCSE as well as officials at state agencies in
Alabama, California, Illinois, New York, Texas, and West Virginia. We
chose these six states for their diverse geography, caseload sizes, and
administrative structures. More specifically, to illustrate whether a
routine match could facilitate the identification of bankruptcy filers
who fail to report their child support obligations, we conducted a
match of national bankruptcy filings with child support enforcement
data from the Texas state CSE agency to identify all bankruptcy filers
between October 17, 2005, and October 17, 2006, who had a child support
order in Texas open at any time during this same time period.[Footnote
5] Using the matched results, we then reviewed publicly accessible
bankruptcy files of a simple random sample of 100 to determine whether
they had reported their child support obligation in their bankruptcy
filing. The results of this case study cannot be generalized
nationwide; however, they can be generalized to the population of 1,931
noncustodial parents who filed for bankruptcy nationwide and also had
child support orders in Texas.
We assessed the reliability of both the bankruptcy and child support
enforcement data by reviewing documentation about the systems that
produced them, interviewing agency officials knowledgeable about the
data, and performing electronic testing of the relevant data elements.
Because HHS conducted the test match of the bankruptcy data and
national child support enforcement data itself, we were unable to
conduct electronic testing as a part of our data reliability
assessment. However, HHS performed the analysis to meet certain
specifications we provided and included some information to allow us to
assess the work performed. We determined that these data were
sufficiently reliable for the purposes of this report.
Additionally, we interviewed officials of the executive branch's United
States Trustee Program at the Department of Justice and the judicial
branch's Bankruptcy Administrator Program, which share responsibility
for bankruptcy case trustees. For the U.S. Trustee Program that covers
bankruptcy districts in all but two states, we talked with officials
from the Executive Office for U.S. Trustees (EOUST) and 5 regional U.S.
Trustees as well as 15 bankruptcy case trustees participating in this
program in five of the states we selected. Separate from the U.S.
Trustee Program, the judicial branch Bankruptcy Administrator Program
has bankruptcy administrators who operate in the remaining two states
(Alabama and North Carolina) who perform duties similar to those of the
U.S. Trustees, including maintaining a panel of private bankruptcy case
trustees. In Alabama, we interviewed one bankruptcy administrator and
one case trustee who reports to this bankruptcy administrator.
We conducted this performance audit from December 2006 to January 2008
with generally accepted government auditing standards. Those standards
require that we plan and perform the audit to obtain sufficient,
appropriate evidence to provide a reasonable basis for our findings and
conclusions based on our audit objectives. We believe that the evidence
obtained provides a reasonable basis for our findings and conclusions
based on our audit objectives.
Results in Brief:
A data match between bankruptcy and child support data found that about
7.2 percent of the 628,537 individuals who filed for bankruptcy
nationwide between October 17, 2005, and October 17, 2006, the first
year of the Bankruptcy Reform Act's implementation, were noncustodial
parents with orders to pay child support. They, in turn, represented
about one-half of 1 percent of the 9.9 million noncustodial parents
with orders to pay child support. While these proportions are small,
they nevertheless represented 45,346 adults and at least as many
children. About three-quarters (33,958) of these noncustodial parents
received services through the CSE program in various states and the
remainder relied on private arrangements. Of the bankruptcy filers with
child support orders served through the CSE program, at least one-half
were past due on their child support payments.
A national bankruptcy and child support data match conducted on a
recurring basis might facilitate the identification of additional
filers with child support orders than through the current notification
process and reduce the state agency workload associated with processing
paper notices received from bankruptcy case trustees. Based on our
review of a random sample of national bankruptcy filings involving
child support cases in Texas, we estimate that 2 percent (the 95-
percent confidence interval ranges from less than 1 percent to 7
percent) may not have reported their child support obligations in their
bankruptcy paperwork. (The results could be higher or lower in other
states.) This suggests that matching between bankruptcy and child
support data could provide a check on filers' child support status when
not self-reported, although in this particular case we found that
almost everyone had reported their obligation. In addition, the results
of a data match would reduce the workload for state agencies by
providing positive identification of bankruptcy filers with child
support orders under the states' purview by comparing the full SSNs of
individuals in both databases. This step would allow state agencies to
more quickly and accurately identify relevant individuals in their
records. Officials at the six state agencies we reviewed said the
notices they receive from bankruptcy case trustees do not always
include the full 9-digit SSNs of the bankruptcy filers. In three of
these states, officials estimated that about half or more of the
notices they received contained only partial SSNs. According to state
officials, this results in more work for staff to locate the
individuals in their databases that use SSNs as key identifiers. The
regional U.S. and case trustees as well as a bankruptcy administrator
we spoke with said that some case trustees do not provide the full
number for a variety of reasons, a few related to privacy. For case
trustees participating in the U.S. Trustee Program, we found this to be
the case, even though EOUST guidance--covering 84 of the 90 bankruptcy
districts--calls for case trustees to provide the full SSN in notices
sent to state agencies. EOUST officials told us they do not have
authority to directly require individual case trustees to provide the
number in full, but that they did develop trustee guidance for doing so
following their discussions with OCSE about the importance of the full
SSN for effective processing of notices by state agencies. The EOUST
officials noted that the use of full SSNs in these notices, which are
not part of any public record, is consistent with executive branch
policies designed to guard privacy. For the judicial branch Bankruptcy
Administrator Program in the remaining six bankruptcy districts, which
are in Alabama and North Carolina, some case trustees also do not
provide the full SSN of filers in the notices to the state agency.
Neither the Judicial Conference nor the Administrative Office has
developed guidance for these case trustees on notifications.
A national data match done on a recurring basis is technically
feasible, but would be a complex and costly undertaking, and is also
accompanied by certain statutory and policy considerations. Regarding
technical feasibility, both the federal bankruptcy system and the CSE
program use full SSNs as key identifiers in their automated systems
that could be used to match bankruptcy filers with individuals who have
child support orders, as our one-time data match demonstrated. With
regard to notifying state agencies of the match results, OCSE officials
said that HHS' national automated system could disseminate this
information after modifications to federal and state systems. Although
data sharing across government agencies is not uncommon, the
modifications it requires to systems are costly, involving many steps
for effective development, implementation, and maintenance. Overall,
OCSE officials estimate that their development costs to conduct this
match would be between $2 million and $2.5 million and would take
between 15 and 18 months to implement. Another factor that could affect
cost is the possible duplication of efforts. Bankruptcy and CSE program
officials expressed concern that using an automated system for
notifying state agencies would duplicate the current Bankruptcy Code
requirement for case trustees to send notices to relevant state
agencies. In addition, there is no existing mechanism that could
readily be used or modified to notify custodial parents based on match
results; like state agencies, custodial parents currently receive
mailed notifications from case trustees. Bankruptcy officials from the
Administrative Office and EOUST also cited some statutory and policy
considerations with sharing data for matching purposes that would need
to be addressed for matching on a recurring basis to take place. For
example, officials at the Administrative Office cited a policy against
releasing and disseminating its bankruptcy data to OCSE on the grounds
that the judicial branch must remain an independent and objective
adjudicator of creditor claims.
While matching federal bankruptcy data with child support records on a
recurring basis might afford some modest improvements to the current
system, it is not clear that instituting a routine data matching system
is warranted, given the costs, efforts, and policy considerations that
would be involved. However, improved information sharing appears
possible with additional attention to the existing process for
notifying state agencies. As a result, we recommend that the Attorney
General direct the Director of the Executive Office for U.S. Trustees
to more actively encourage bankruptcy case trustees to provide state
agencies with full SSNs, while recognizing the need to do so in a
manner that preserves the security of the information. In addition, we
recommend that the Judicial Conference of the United States work with
bankruptcy administrators in the six bankruptcy court districts in
Alabama and North Carolina to examine whether case trustees should
provide state agencies with the full SSNs of bankruptcy filers. In
responding to a draft of this report, officials of the U.S. Trustee
Program at Justice and officials from the Administrative Office of
United States Courts, which work with the bankruptcy administrators in
Alabama and North Carolina, said they would take steps to address the
recommendations.
Background:
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.
Individuals usually file for bankruptcy under one of two chapters of
the Bankruptcy Code. Under Chapter 7, the filer's eligible nonexempt
assets are reduced to cash and distributed to creditors in accordance
with distribution priorities and procedures set out in 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. 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. Child
support is not a debt eligible for discharge.
The Bankruptcy Reform Act, among other things, amended the Bankruptcy
Code to require those filers with the ability to pay some of their
debts 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. During the first year of
implementation under the Bankruptcy Reform Act, about 628,537
individuals filed for bankruptcy, based on the Administrative Office
bankruptcy data we used for our national data match.
The Bankruptcy System:
The bankruptcy system is complex and involves many entities in the
judicial and executive branches of the federal government. (See fig.
1.)
Figure 1: Overview of Bankruptcy System:
[See PDF for image]
The following data is depicted:
Judicial branch[A]:
Judicial Conference of the United States;
U.S. bankruptcy courts;
Administrative Office of the U.S. Courts.
Executive branch:
Department of Justice;
Executive Office of U.S. Trustees;
U.S.Trustees.
Source: GAO analysis.
[A] While not shown in this graphic, the Judicial Branch oversees case
trustees in a small number of bankruptcy court districts.
[End of figure]
Within the judicial branch, 90 federal bankruptcy courts have
jurisdiction over bankruptcy cases. The Administrative Office is the
central support entity for federal courts, including bankruptcy courts,
providing a wide range of administrative, legal, financial, management,
and information technology services. It also maintains the U.S. Party/
Case Index, which contains information collected from all 90 federal
bankruptcy courts and allows courts to identify parties involved in
federal litigation almost anywhere in the nation. The Director of the
Administrative Office is supervised by the Judicial Conference of the
United States. The Judicial Conference also considers administrative
problems and policy issues affecting the federal judiciary and makes
recommendations to Congress concerning legislation affecting the
federal judicial system.
The bankruptcy courts share responsibility for bankruptcy cases with
the United States Trustee Program, which is part of the executive
branch's U.S. Department of Justice (Justice). In all but six
bankruptcy court districts in Alabama and North Carolina, the U.S.
Trustee Program is responsible for appointing and supervising private
bankruptcy case trustees who manage many aspects of individual
bankruptcy cases.[Footnote 6] The Executive Office for U.S. Trustees at
Justice provides general policy and legal guidance, oversees
operations, and handles administrative functions for the U.S. Trustee
Program. It also manages the Automated Case Management System, which
functions as the U.S. Trustee Program's system for administering
bankruptcy cases. Separate from the U.S. Trustee Program, the remaining
six districts have judicial branch bankruptcy administrators (referred
to as the Bankruptcy Administrator Program) who perform duties similar
to those of the U.S. Trustees, including overseeing the administration
of bankruptcy cases, maintaining a panel of private case trustees, and
monitoring the transactions and conduct of parties in bankruptcy in
those states.
The Child Support Enforcement Program:
The federal government partners with states to operate the child
support enforcement program, making available to parents a range of
child support services, including establishing and enforcing child
support orders. A child support order can be entered into voluntarily,
ordered by a court, or established by a state agency through an
administrative process. Once established, it generally legally requires
a noncustodial parent to provide financial support to a custodial
parent with at least one child.
Nationwide, almost 10 million noncustodial parents had child support
orders in place in June 2007, based on the Federal Case Registry
maintained by OCSE. This registry, part of the Federal Parent Locator
Service,[Footnote 7] contains information about individuals with child
support cases and orders administered by state CSE agencies as well as
individuals not part of the CSE program, but who had orders established
after 1998. About 78 percent of these 10 million noncustodial parents
had orders enforced through state CSE agencies; the remaining parents
are not involved with a state agency in enforcing their orders.
The CSE program makes services available, upon request, to any parent
or other person with custody of a child (custodial parent) who has a
parent living outside of the home (noncustodial parent). Parents that
receive public assistance through the Temporary Assistance for Needy
Families (TANF), Medicaid, and Foster Care programs receive CSE
services free; others are charged a nominal fee not to exceed $25. TANF
recipients are required to assign their rights to child support
payments to the state. In fiscal year 2006, the state CSE agencies
administered 15.8 million cases, providing a range of services,
including establishing paternity and support orders, locating
noncustodial parents, collecting and distributing child and medical
support, and reviewing and modifying support orders.
The majority of child support is collected through wage withholding,
but state agencies also use other methods for enforcing child support
orders. In 2006, about 69 percent of child support payments were
collected through wage withholding, which involves employers
withholding support from noncustodial parents' wages and sending it to
the appropriate state agency for distribution. Other methods include
intercepting federal and state income tax refunds; liens against
property; as well as withholding or suspending driver's licenses,
professional licenses, recreational and sporting licenses, and
passports of persons who owe past-due support. During fiscal year 2006,
total distributed collections were almost $24 billion. Program costs
for that year totaled $5.6 billion, of which $3.7 billion was federally
funded.
State agencies administer the CSE program, but the federal government
plays a major role in supporting them. At the federal level, OCSE
within the Administration for Children and Families of HHS provides a
majority of program funding. It also establishes enforcement policies
and guidance, provides state agencies with technical assistance, and
oversees and monitors state programs.
Bankruptcy Reform Act's Treatment of Child Support:
The Bankruptcy Reform Act included new provisions to help better ensure
that noncustodial parents who file for bankruptcy continue paying child
support and that child support payments are given a high priority in
bankruptcy. One of these provisions clarifies that proceedings to
establish or modify a domestic support obligation (e.g., child support)
owed to a governmental unit (e.g., state CSE agencies) are exempt from
the automatic stay. An automatic stay bars creditors from taking
measures to collect a debt pending resolution of the bankruptcy
proceeding. Another provision allows for the continued operation of
wage withholding for domestic support obligations (e.g., child
support). Further, the Bankruptcy Reform Act, for example, requires
that noncustodial parents filing for Chapter 13 bankruptcy must be
current on their child support obligations to confirm a repayment plan.
In addition, the Bankruptcy Reform Act provides child support with the
first priority for payment of unsecured claims, up from a seventh-level
priority under previous Bankruptcy Code provisions.
Notifying Custodial Parents and State Child Support Enforcement
Agencies of Bankruptcies:
The Bankruptcy Code requires bankruptcy filers to submit a list of
their creditors, which could include a custodial parent or state CSE
agency, in their financial disclosures. The court, in general, is to
provide listed creditors with notice of a meeting of creditors. A filer
who knowingly and fraudulently conceals a debt owed to a creditor is
subject to criminal penalties.
In addition, the Bankruptcy Reform Act amended the Bankruptcy Code to
require that child support claimants, such as custodial parents and
state agencies, be specifically notified of the bankruptcies of parents
having a domestic support obligation (DSO), a designation that includes
child support and alimony. Case trustees are to send notices of the
bankruptcy case to these parties after bankruptcy filers report in
their paperwork that they have a DSO. Figure 2 shows court and trustee
notification processes based on law, regulations, and guidelines.
Figure 2: Current Court and Bankruptcy Case Trustee Notification
Processes:
[See PDF for image]
The following data is depicted:
Filer discloses domestic support obligation in one of several places in
bankruptcy paperwork (e.g. schedules and list of creditors):
When a filer lists individuals or entities in list of creditors,
bankruptcy court is to send notice to all creditors listed;
Notice to custodial parents or state agencies, if listed on the list of
creditors, regarding important deadlines and actions for bankruptcy
case. Notice includes filer‘s SSN.
Filer discloses domestic support obligation in one of several places in
bankruptcy paperwork (e.g. schedules and list of creditors):
When a filer lists obligation in paperwork, trustee is to send notices
to custodial parent and state agency in state where custodial parent
lives;
Notice to custodial parent–informs of right to participate as creditor
in bankruptcy, as well as right to CSE services;
Notice to state agency–includes filer‘s name, SSN, and bankruptcy case
number.
Source: GAO analysis.
[End of figure]
State agencies and custodial parents benefit from knowing about the
bankruptcies of parents who owe child support. The notice to the
custodial parent provides information about the state agency and his or
her right to use its services. Knowing about the bankruptcy of a
noncustodial parent is important so that the state agency or custodial
parent can participate in and be a party to pertinent bankruptcy
proceedings. Knowing about the bankruptcy also helps state agencies
avoid violating any automatic stay that may be in place. Although the
CSE program may continue using many of its collection tools, such as
wage withholding, a few of these tools are still subject to the
automatic stay. According to a state official, agencies can face
penalties if they collect funds using tools subject to the automatic
stay.
About 7 Percent of Those Who Filed for Bankruptcy Have Orders to Pay
Child Support and Most Are Part of the CSE Program:
Our data match using the national bankruptcy and OCSE data found that
among the 628,537 individuals who filed for bankruptcy between October
17, 2005, and October 17, 2006, the first year of implementation of the
Bankruptcy Reform Act, about 7.2 percent were noncustodial parents with
orders to pay child support. This population represents just one-half
of 1 percent of the 9.9 million noncustodial parents who have orders to
pay child support. While these proportions are small, they nevertheless
represent 45,346 adults with orders to pay child support and at least
as many children.
About three-quarters (33,958) of bankruptcy filers with orders to pay
support were receiving services from CSE programs in various
states.[Footnote 8] At least half of these bankruptcy filers were past
due on their payments.[Footnote 9] While data obtained for our study
did not include the past due amounts owed by these parents, fiscal 2004
data reported by OCSE, the most recent available, show that of all
noncustodial parents with orders who are part of the CSE program, the
average total past due amount owed was about $9,400.
A greater number of noncustodial parents filed for Chapter 7 than
Chapter 13 bankruptcy. Nevertheless, proportionally more noncustodial
parents filed for bankruptcy under Chapter 13 than did all filers (see
table 1). Several experts on bankruptcy and child support as well as
officials in some state agencies said the state agency is likely to
play a role in Chapter 13 filings because under this chapter an
individual repays some or all debt under a court-approved plan prior to
a discharge. Past due child support is a debt that can be included in
the repayment plan and state agencies may opt to continue collecting
past due support through the state agency enforcement process or
through the Chapter 13 repayment plan. In contrast, a large majority of
filers under Chapter 7 have no assets available for liquidation, and
thus no funds are available to pay creditors. Regardless of which
chapter a noncustodial parent files under, collection of ongoing child
support would continue if, for example, the filer had income and a wage
withholding order in place.
Table 1: Comparison of Bankruptcy Filers Who Are Noncustodial Parents
with Orders with All Bankruptcy Filers:
Bankruptcy chapter: Chapter 7;
Bankruptcy filers who are also noncustodial parents with orders: 54%
(24,462);
All bankruptcy filers: 58% (363,321).
Bankruptcy chapter: Chapter 13;
Bankruptcy filers who are also noncustodial parents with orders: 46%
(20,884);
All bankruptcy filers: 42% (266,754).
Bankruptcy chapter: Total;
Bankruptcy filers who are also noncustodial parents with orders: 100%
(45,346);
All bankruptcy filers: 100% (630,075)[A].
Source: GAO analysis based on a match of the Administrative Office's
bankruptcy data and HHS' CSE data.
Note: The table is based on noncustodial parents who filed between
October 17, 2005, and October 17, 2006.
[A] This total double-counts the 1,538 individuals who filed for both
Chapter 7 and Chapter 13 bankruptcy in order to provide ratios for
noncustodial parents who filed for each chapter.
[End of table]
Although our study does not focus on custodial parents who are owed
child support and who filed for bankruptcy, our match showed that a
slightly higher percentage of bankruptcy filers were custodial parents
than noncustodial parents. Specifically, custodial parents represented
10 percent of all those who filed for bankruptcy while noncustodial
parents represented 7 percent.[Footnote 10]
A Routine, National Data Match Might Identify Filers Who Do Not Report
Their Support Obligations and Reduce the Workload Associated with the
Current Process:
A national match of bankruptcy data with child support enforcement data
conducted on a recurring basis might help identify filers who, for one
reason or another, fail to report their child support obligations in
their bankruptcy paperwork. The results of such a match would also
reduce the research workload for state agencies by providing positive
identification of bankruptcy filers with orders under the states'
purview by comparing the full SSNs of individuals in both databases.
This step would allow state agencies to more quickly and accurately
identify the relevant individuals in their records. Currently, some
case trustees do not include the full SSN of the filer in their
notifications to the state agencies, which imposes additional work on
the state agency staff to make a positive identification. For case
trustees in all but six bankruptcy districts in two states, guidance
calls for them to provide full SSNs in the notices they send to state
agencies.
A National Match of Federal Bankruptcy with Child Support Enforcement
Data Might Identify Some Filers Who Do Not Report a Child Support
Obligation:
Conducting a national bankruptcy and child support enforcement data
match on a recurring basis might identify some additional filers who
have orders to pay child support but who do not report this obligation,
as required, when they file for bankruptcy. In a test review of
bankruptcy filings involving orders to pay child support in Texas, we
found that an estimated 2 percent of filers who completed all of their
bankruptcy paperwork may not have reported their child support
obligations.[Footnote 11] (The results could be higher or lower in
other states.) For these and other filers who fail to report their
obligations in their paperwork, they may subsequently report these
obligations at a later stage in the bankruptcy process when case
trustees ask them under oath whether they have a domestic obligation.
Almost all of the 16 case trustees we spoke with for this review said
they always ask debtors this question under oath[Footnote 12].:
A Data Match Might Readily Provide State Agencies with Positive
Identifications and Reduce the Workload Associated with the Current
Trustee Notification Process:
A data matching process in which OCSE conveys results to state agencies
that positively identify bankruptcy filers would allow state agencies
to process the information more efficiently and accurately than the
current process, reducing state agency workload. State agency officials
reported that their staff currently take steps when they receive
notices from case trustees to determine whether the named individual is
in their agency's database.[Footnote 13] A significant portion of the
notices a state agency receives may pertain to noncustodial parents who
are not part of that state's CSE program. For example, our national
data match analysis identified about one-quarter of noncustodial parent
filers with orders not administered as part of any state agency. Match
results distributed to state agencies by OCSE would, in effect, pre-
sort the orders, only sending to state agencies the information on
bankruptcy filers whose orders are under their purview. Also, agency
staff can have difficulty distinguishing among the noncustodial parents
in their caseload with similar names when the notices do not contain
the full SSNs. Federal agencies often use full SSNs when data matching
or other information-sharing is used to help them meet program goals,
such as improving collections or minimizing fraud, as long as they take
the required steps to safeguard the personally-identifiable information
in their possession.
We found that it is not always the practice for case trustees to
include full SSNs in their bankruptcy notices to state agencies, even
though some guidance has been issued on this. In our selected six
states, state agency officials said that trustee notices did not always
contain full SSNs. In Alabama, Illinois, and New York, for example,
agency officials estimate that half or more of the trustee notices they
receive contain the filer's partial SSN. Of the 16 case trustees we
interviewed, 5 said they do not include the full SSN in the notices
they send to state agencies. Four of these five case trustees
participating in the U.S. Trustee Program expressed a variety of
reasons for not providing full SSNs, such as administrative convenience
or some concerns about privacy,[Footnote 14] despite EOUST guidance
instructing them to do so. In Alabama, where a bankruptcy administrator
rather than a regional U.S. Trustee oversees case trustees, a trustee
and the bankruptcy administrator said that their policy is to provide
only a partial SSN to the custodial parent and state agency.
In developing guidance for trustee noticing under the U.S. Trustee
Program, EOUST officials told us that they worked closely with OCSE
regarding what information to include in the notices going to state
agencies. The guidance notes that state child support agencies have
requested that the notices identify bankruptcy filers by name and SSN.
The guidance also includes sample notices that trustees can use that
indicate that the full SSN should be included for notifying the state
agencies. EOUST officials told us that OCSE officials emphasized the
importance of the full SSN for effective processing of notices. EOUST
officials also said that providing the full SSN to state agencies is
consistent with the Bankruptcy Reform Act. In addition, EOUST officials
said that they provided training about the notices to case trustees,
through the regional U.S. Trustees, as part of training on all aspects
of the new bankruptcy reform provisions and posted the guidance on
their external and internal Web sites.
EOUST officials also said they had considered executive branch policies
about privacy and security of personal identifiers and determined that
its guidance was consistent with these policies. It is important to
note that the notices from case trustees are not made available to the
public and are not part of the bankruptcy case docket, which is
publicly available. Officials from state agencies said similarly that
they do not make this information in the notices publicly available. We
have previously reported that SSNs can be useful tools to enhance
program integrity through data matching; however, government agencies
and courts need to take steps to prevent the improper disclosure of
SSNs, including limiting the use and display of SSNs in public records
(e.g., SSN truncation in all lien records).[Footnote 15]
While EOUST officials acknowledged the importance of full SSNs in
notices, they told us that they do not have authority to require case
trustees to provide them. They said that case trustees are not directly
supervised by, or employees of, EOUST. The EOUST officials also said
that case trustees are required to administer a bankruptcy estate in
accordance with applicable state laws.
For case trustees who are overseen by judicial branch bankruptcy
administrators in the six bankruptcy districts in Alabama and North
Carolina, neither the Judicial Conference nor the Administrative Office
has established an explicit policy about case trustees providing the
filer's full 9-digit SSN in the notices sent to custodial parents and
the state child support enforcement agencies.
In addition to reducing state agencies' workload, a routine data match
would have the additional advantage of identifying those parents who
may be part of the CSE program, but whose cases are administered by an
agency in another state.[Footnote 16] In some cases the notices could
go to the wrong state because the Bankruptcy Reform Act requires that
notices be sent to the state in which the child support claimant, such
as a custodial parent, lives, although some may live in a state other
than the one administering CSE services. Also, more than one state may
be involved in some case activity. For example, according to OCSE
officials, a January 2000 national analysis showed that, of
noncustodial parents with orders to pay child support, and who were
past due on their payments, 24 percent resided in a state other than
the state seeking collection of these payments.
Although a Data Match Is Technically Feasible, There Would Be
Substantial Start-Up Costs as well as Some Policy Considerations:
A national data match conducted on a recurring basis is technically
feasible, although it would require modifications to existing systems
at national and state levels, including many steps for effectively
developing and implementing data matching that are costly. Moreover,
bankruptcy and CSE program officials expressed concern about
implementing an automated system that provides notification of
noncustodial parent filers to state agencies because of potential
duplication between any new automated system and the existing trustee
notification process that was implemented as a result of the Bankruptcy
Reform Act. In addition to these costs, bankruptcy officials cited some
statutory and policy considerations to releasing their own data or to
performing a data match. Weighing these factors and concerns against
the benefits of conducting a data match is an important consideration.
A Data Match with Transmission of Results to State Agencies Is
Technically Feasible, Though It Would Not Replace Notifications to
Custodial Parents:
Officials from the Administrative Office, EOUST, and CSE agencies said
that it is technically feasible to provide information in their
databases to the other system and then match records between the two
systems on a routine basis. They also brought up legal and policy
considerations, which we discuss in more detail later. The bankruptcy
system and CSE program each have federal databases that use SSNs as key
identifiers and contain the information that potentially can be used to
identify, on a routine basis, bankruptcy filers with orders to pay
child support. Both the Administrative Office and EOUST databases
contain the full SSNs of filers for consumer bankruptcies.[Footnote 17]
The EOUST database does not include bankruptcy filers in Alabama and
North Carolina because these two states do not participate in the U.S.
Trustee Program. OCSE maintains the Federal Case Registry, a national
automated system containing limited data of noncustodial parents with
orders to pay child support that are enforced through state CSE
programs and those that are not, among other information. OCSE also
maintains the Federal Offset Program file that contains information on
individuals who owe past due child support who are part of the state
CSE programs.
Using the Federal Case Registry and its other automated systems, OCSE
currently conducts routine data matches with other entities to help
state agencies locate parents and enforce child support orders. For
example, the registry helps state agencies identify noncustodial
parents who are located or working in other states. By matching its
data with data held by other agencies, such as the Social Security
Administration, the Department of Defense, the Federal Bureau of
Investigation, and the Internal Revenue Service, it can locate the
parent's employer for state agencies, allowing them to issue income-
withholding orders, among other actions. Moreover, an OCSE analysis
estimated that its National Directory of New Hires Database matches
result in about $400 million in child support collected
annually.[Footnote 18] Typically, OCSE conducts matches with entities
that have information common among many individuals in its target
population or that are expected to yield significant results. See
figure 3.
Figure 3: Federal Parent Locator Service:
[See PDF for image]
The following data is depicted:
Federal Parent Locator Service:
National system to assist states in locating noncustodial and custodial
parties to:
* establish paternity and child support orders;
* enforce and modify orders;
* identify orders or cases involving the same parties in different
states.
Developed in cooperation with the states, employers, federal agencies
and the judiciary, and has been expanded by welfare reform to include:
* National Directory of New Hires (NDNH):
- contains individual employment, unemployment insurance, and wage data
from state directories of new hires, state workforce agencies, and
federal agencies.
* Federal Case Registry (FCR):
- Contains all state agency child support cases and all legal child
support orders established or modified on or after October 1, 1998;
- Populated with data from state agencies, the FCR is used to receive
and pass FPLS data to states.
[NDNH matches with FCR, providing the primary source for employment
data].
Interfacing with the FCR:
* State Case Registry (SCR):
- Each of 54 state agencies has statewide automated systems;
- Provides IV-D cases and Non-IV-D orders to FCR.
The following currently locate matches with the Federal Parent Locator
Service and vise versa:
Social Security Administration;
Department of Defense;
Internal Revenue Service;
Veterans Affairs;
Federal Bureau of Investigation;
National Security Agency.
Source: GAO analysis.
[End of figure]
With regard to using the results of a data match, current technical
capability differs among agencies. OCSE and some state agency officials
we spoke with said that OCSE's Federal Case Registry could disseminate
this information to the 54 state agencies after modifications to this
system and state systems. Upon receiving an electronic notification
that a noncustodial parent in their caseload has filed for bankruptcy,
state agencies would also be able to identify custodial parents in
their caseloads who are associated with these noncustodial parent
filers. However, notifying the custodial parent about the bankruptcy is
not currently part of the state agencies' or OCSE's duties. Also, these
agencies do not have much information on custodial parents who are not
part of their state CSE programs. Alternatively, case trustees could
use the match results to continue carrying out their statutorily
required duty to notify these parents. However, EOUST officials told us
they would need to build the capacity to transmit the match results
from EOUST to case trustees who participate in the U.S. Trustee
Program.
A Data Match Would Likely Involve Substantial Start-up Costs and Would
also Duplicate a Part of the Current Notification System:
Although electronic data sharing across government agencies is not
uncommon,[Footnote 19] it can be a complex and costly undertaking. Data
matching would need to be done frequently (e.g., weekly) to be useful,
according to some state agency officials, and would likely involve
developing automated interfaces to exchange data effectively on a
recurring basis. In developing such systems, to reduce the risks to
acceptable levels,[Footnote 20] following and effectively implementing
accepted best practices in systems development and implementation
(commonly referred to as disciplined processes) is important. It would
include at a minimum:
* defining the detailed requirements for the new or modified systems
and interfaces, and:
* thorough and complete testing to determine that new or modified
systems will work as intended.
Even when the agencies have effectively implemented the disciplined
processes necessary to reduce risks to acceptable levels, a framework
is needed to guide a data sharing project such as this. Specifically,
agencies generally enter into written agreements when they share
information for conducting data matches. Based on their experience,
OCSE officials estimate that developing such agreements generally
requires many months.
Officials from OCSE and EOUST believe that system modifications that
would precede data sharing would involve significant costs. They said,
for example, they would need to build an exchange method that would
allow for the secure exchange of data. Overall, OCSE officials estimate
that their development costs would be between $2 million and $2.5
million and would take between 15 and 18 months to implement.
Once a matching process is established, disseminating match results
would not be a cost-free proposition. EOUST officials said that it
would take a considerable effort to establish an internal process,
either manual or automated, for disseminating the match results to the
case trustees. While state agencies could accept match results from
OCSE using an existing system, OCSE officials said that this would
require building this capability into the state agencies' respective
automated systems. States would incur some of these up-front costs,
according to these officials. Additional costs may be incurred at the
county level, with officials at one state agency saying that counties,
and not just the state, might need to modify their systems to receive
matched data.[Footnote 21]
Once the necessary interfaces and system changes have been developed
and effectively implemented, there are ongoing operation and
maintenance costs to consider. OCSE estimates annual costs of between
$35,000 and $50,000, depending on which entity conducts the match.
These costs would include computer processing time and staff resources
for managing data transactions. For example, EOUST currently employs
two full-time staffers to extract bankruptcy data weekly from the
Administrative Office's bankruptcy case database, and a data match
between the bankruptcy system and CSE program would likely involve
staffing.[Footnote 22]
Some Administrative Office, EOUST, and CSE officials expressed concern
about implementing an automated system providing notification of
noncustodial parent filers to state agencies because of potential
duplication between any new automated system and the existing paper
system, which was implemented as a result of the Bankruptcy Reform Act.
If a new system duplicates the notices that state agencies now receive
from bankruptcy case trustees, it could add to their workload. That is,
state agencies would be receiving information about bankruptcy filers
with child support obligations from both trustees and OCSE unless the
Bankruptcy Code is amended.
Overall, officials from several of the state agencies we talked with
said that while conducting electronic matching and sending the results
to their agencies could be useful to them, the costs might not warrant
such a match. Moreover, according to OCSE officials, state agency
directors they have communicated with about a potential data match have
similarly noted this trade-off.
Officials of the Administrative Office Say That Their Current Policy
Does Not Allow for a Data Match while Officials from Other Programs Say
It Could Be Acceptable:
Officials from the Administrative Office said that their current policy
does not allow a data match while officials from EOUST and OCSE said
that a data match would be acceptable if the match met specific privacy
guidelines. Officials at the Administrative Office cited a policy
against releasing and disseminating their bankruptcy data to OCSE. This
federal judiciary policy specifically bars release of the names and
SSNs of bankruptcy filers to HHS on the grounds that the judicial
branch must remain an independent and objective adjudicator of creditor
claims. Administrative Office officials also noted that data on
bankruptcy filers is available at EOUST, which is responsible for
managing bankruptcy cases and ensuring compliance with applicable laws
and procedures.[Footnote 23]
For their part, officials at EOUST stated that their policy on data
sharing is guided by the Privacy Act--the federal law governing federal
agencies' use and disclosure of records containing individuals'
personal information.[Footnote 24] The officials said that EOUST's
current policy implementing the routine use exception of the Privacy
Act does not support a match with the system of records in which the
bankruptcy data are kept, because identifying bankruptcy filers with
child support obligations is not part of its mission. However, if OCSE
requested the bankruptcy data from EOUST and EOUST determined that this
request falls within the law enforcement agency exception of the
Privacy Act, then EOUST officials said that it could share its data
with OCSE.
According to OCSE officials, it would be acceptable for OCSE data to be
matched with bankruptcy data and for OCSE to disseminate the results to
state agencies on a recurring basis. However, OCSE officials noted that
the match results could only be used for CSE program purposes. That is,
EOUST or the Administrative Office could perform a match using CSE data
and bankruptcy data and return the results to OCSE, but these entities
could not use the CSE data or match results for their own purposes,
such as sending match results to case trustees. With respect to sending
match results to custodial parents outside the CSE program, OCSE
officials said that OCSE would not be the appropriate entity to do this
because it is neither authorized nor funded to interact with these
parents in this way.
Conclusion:
While matching federal bankruptcy data with child support records might
facilitate the identification of some additional bankruptcy filers with
child support obligations and improve the current system for notifying
state agencies, these potential improvements seem modest in comparison
to the costs, efforts, and statutory and policy considerations involved
in implementing and maintaining a data matching system. As a result, it
appears that instituting a routine data matching system may not be
warranted. A relatively small percentage of bankruptcy filers have
orders to pay child support. In addition, a process is currently in
place to identify and notify custodial parents and state agencies of
bankruptcy proceedings, as called for under the Bankruptcy Reform Act.
Moreover, a data matching system with results transmitting
electronically to state agencies would not offer a comprehensive
alternative to the trustee notification system insofar as it would not
transmit information to custodial parents and would partially duplicate
the trustee notification process. Finally, legal and policy
considerations would need to be addressed to institute data matching
between these two systems.
Although these challenges are not insurmountable and data matching can
be a useful tool, in this case, there is an alternative that should
improve information sharing between case trustees and state child
support agencies within the current system of trustee notices.
Notwithstanding EOUST guidance calling for case trustees to provide the
full SSNs, some case trustees only provide partial SSNs. Although EOUST
cannot require case trustees to provide the full SSN, its examination
of the trustee notification process might identify reasons for case
trustees not providing the full SSNs as well as measures to help
encourage the provision of full SSNs in notices to state agencies.
Without EOUST more actively encouraging case trustees to provide full
SSNs, state agencies may continue to experience more difficulties than
necessary in accomplishing the child support goals of the Bankruptcy
Reform Act. While neither the Judicial Conference nor the
Administrative Office has developed similar guidance for bankruptcy
administrators, the same reasons exist for state agencies having full
SSNs, regardless of which program supervises case trustees. These
reasons warrant some examination of the trustee notification process in
the bankruptcy administrator districts.
Recommendations for Executive and Judicial Branch Action:
To help improve the bankruptcy trustee notification process for state
child support enforcement agencies called for under the Bankruptcy
Reform Act, we are making two recommendations.
First, we recommend that the Attorney General direct the Director of
the Executive Office for U.S. Trustees to more actively encourage case
trustees to provide state agencies the full SSNs of bankruptcy filers.
This could be accomplished, for example, by working with case trustees
to identify and address any issues related to implementation of the
current guidance, such as lack of clarity in the guidance or concerns
about preserving the security of SSNs.
Second, we recommend that the Judicial Conference of the United States
work with bankruptcy administrators in the six bankruptcy court
districts in Alabama and North Carolina not subject to EOUST guidance
to examine whether case trustees should provide state agencies with the
full SSN of bankruptcy filers. This might be done in the following
ways:
* Inform bankruptcy administrators and the bankruptcy court judges in
those six districts about the importance of including the full SSN, how
this information would be used by state agencies if provided, and to do
so in a way that preserves the security of the information.
* Work with the bankruptcy administrators and bankruptcy court judges
in those six districts to identify and if possible, address any issues
or concerns, including the security of the information, related to the
use of full SSNs in the notices.
Agency Comments and Our Evaluation:
We provided Justice, the Administrative Office, and HHS with a draft of
this report for their review and comments. The U.S. Trustee Program at
Justice said that it supported the recommendation and would continue to
work with the private case trustees, including through their national
associations, to identify and address impediments to ensuring that full
SSNs are provided to state CSE agencies. Its written comments are
included in appendix II. Officials from the Administrative Office, in
commenting orally on the draft, said that in light of our
recommendation, they would review--in the bankruptcy districts in
Alabama and North Carolina--the entire process in place for notifying
state CSE agencies to see if the process is working correctly and take
action as needed. They also provided technical comments that we
incorporated as appropriate. In addition, HHS provided technical
comments that we incorporated as appropriate.
We are sending electronic copies of this report to the directors of the
Administrative Office of United States Courts and the Executive Office
for U.S. Trustees at the Department of Justice; the Secretary of Health
and Human Services; appropriate congressional committees, and other
interested 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]. Please contact me at
(202) 512-7215 if you have any questions about this report. Contact
points for our Offices of Congressional Relations and Public Affairs
may be found on the last page of this report. Other major contributors
to this report are listed in appendix III.
Signed by:
Kay E. Brown:
Acting Director, Education, Workforce, and Income Security Issues:
[End of section]
List of Congressional Committees:
The Honorable Robert C. Byrd:
President Pro Tempore:
United States Senate:
The Honorable Nancy Pelosi:
Speaker of the House of Representatives:
The Honorable Max Baucus:
Chairman:
The Honorable Charles Grassley:
Ranking Member:
Committee on Finance:
United States Senate:
The Honorable Patrick J. Leahy:
Chairman:
The Honorable Arlen Specter:
Ranking Member:
Committee on the Judiciary:
United States Senate:
The Honorable John Conyers, Jr.
Chairman:
The Honorable Lamar Smith:
Ranking Member:
Committee on the Judiciary:
House of Representatives:
The Honorable Linda T. Sanchez:
Chairwoman:
The Honorable Chris Cannon:
Ranking Member:
Subcommittee on Commercial and Administrative Law:
Committee on the Judiciary:
House of Representatives:
The Honorable Jim McDermott:
Chairman:
The Honorable Jerry Weller:
Ranking Member:
Subcommittee on Income Security and Family Support:
Committee on Ways and Means:
House of Representatives:
The Honorable Adam B. Schiff:
House of Representatives:
[End of section]
Appendix I: Objectives, Scope, and Methodology:
Objectives:
The objectives of this report were to determine (1) What percent of
bankruptcy filers are parents who have orders to pay child support? (2)
In what ways, if any, might matching national bankruptcy and child
support enforcement data on a routine basis facilitate the
identification of bankruptcy filers who have child support obligations?
(3) What is the feasibility and estimated cost of conducting such a
data match on a routine basis?
Scope and Methodology:
To conduct our work we reviewed relevant laws, rules and regulations,
and guidance that affect the bankruptcy process and child support
enforcement (CSE) program, including the Bankruptcy Abuse Prevention
and Consumer Protection Act of 2005, Title IV-D of the Social Security
Act, the Personal Responsibility and Work Opportunity Reconciliation
Act of 1996, and the Privacy Act. We also interviewed bankruptcy and
CSE program officials. This information was also used to review the
national court, bankruptcy, and the CSE data systems that might be used
for a potential recurring, national data match.
To identify the proportion of parents with orders to pay child support
who filed for bankruptcy nationwide, we worked with the U.S. Department
of Health and Human Services' Office of Child Support Enforcement
(OCSE) to develop an analysis plan. This plan outlined how they would
match their national CSE data with a national extract of personal
bankruptcy filers that we obtained from the Administrative Office of
United States Courts (the Administrative Office). The national CSE data
from the Federal Case Registry, as of June 2007, contained information
about individuals who are participants of the CSE program and
individuals who are not participants of the CSE program but had orders
established after 1998 to pay child support. The national CSE data also
included data from the Federal Offset Program file, which contains only
current information about noncustodial parents that participate in the
CSE program who owe past due child support. The bankruptcy data from
the U.S. Party/Case Index included names and Social Security numbers
(SSNs) of all individuals that filed for Chapter 7 or Chapter 13
bankruptcy between October 17, 2005, and October 17, 2006, the first
year of implementation under the Bankruptcy Reform Act.
We recognize that the difference in time frames for the bankruptcy and
CSE data could mean that we over-or under-counted individuals in this
population. For example, we may have under-counted if a noncustodial
parent's order ended in May 2007, but this noncustodial parent filed
for bankruptcy on August 1, 2006. However, we determined that this was
not a significant methodological limitation for the purposes of testing
this data match and our analysis.
From the Administrative Office we received 839,597 records of
bankruptcy case data. After cleaning the data, 642,709 records were
left for our work. Records were removed for the following reasons:
missing SSN, bad SSN (more or less than nine digits), text strings
instead of SSN, duplicates, and bankruptcy chapters other than 7 and
13. We had several communications with the system administrators to
clarify our reasoning before dropping any records. We were told that
although the system has data checks there is no automatic cleaning
performed. Rather, notices are sent to the district courts and it is
left to them to correct the data.
We assessed the reliability of the respective bankruptcy and CSE data
by reviewing existing information about these data and the systems that
produced them, interviewing agency officials knowledgeable about these
data, and performing electronic testing. Because of OCSE's legal
concerns, we agreed that they would not provide us with child support
case data. Instead, they performed the test match of the bankruptcy
data and national CSE data themselves to meet certain specifications we
provided, and included some information to allow us to assess the work
performed. If we are not provided with underlying data, the ability to
conduct electronic testing as a part of the data reliability assessment
is limited. For analyses such as these, electronic testing of the data
is generally a routine part of the reliability assessment. However,
based on interviews of knowledgeable officials and reviews of relevant
documentation, and because OCSE routinely performs SSN checks with the
Social Security Administration, we have sufficient reason to believe
that the OCSE data are reliable for the purpose of this report. In
preparation for matching, we eliminated duplicate SSNs from the data
within each bankruptcy chapter, which brought our total to 630,075
individuals who filed for bankruptcy. This total double-counts the
1,538 individuals who filed for both Chapter 7 and Chapter 13
bankruptcy.
To help determine the potential benefits of data matching on a routine
basis, we conducted a match ourselves of national bankruptcy filings
with CSE data in Texas to ascertain whether bankruptcy filers
volunteered their child support obligations when they file for
bankruptcy. Among the six states we contacted, Texas was readily able
to provide us with an extract of their child support caseload. Our
universe totaled 1,931 individuals, which included noncustodial parents
with child support orders who were participating in the Texas CSE
program at some point between October 17, 2005, and October 17, 2006,
and who filed for bankruptcy between October 17, 2005, and October 17,
2006. From this universe, we then selected a simple random probability
sample of 100 noncustodial parents.[Footnote 25] With this probability
sample, each member of the study population had a nonzero probability
of being included, and that probability could be computed for any
member. Each sample element was subsequently weighted in the analysis
to account statistically for all the members of the population,
including those who were not selected.
Because we followed a probability procedure based on random selections,
our sample is only one of a large number of samples that we might have
drawn. Since each sample could have provided different estimates, we
express our confidence in the precision of our particular sample's
results as a 95 percent confidence interval. This is the interval that
would contain the actual population value for 95 percent of the samples
we could have drawn. As a result, we are 95 percent confident that the
interval ranging from less than 1 percent to over 7 percent would
contain the true percentages of our sample population who completed all
of their bankruptcy paperwork and had not reported their child support
obligations.
To conduct our review of the bankruptcy case files for the Texas
sample, we developed a data collection instrument to gather information
systematically from the selected bankruptcy files and used the
Administrative Office's electronic public access service to review all
bankruptcy filings and to record whether the child support obligation
was reported in the bankruptcy paperwork. Bankruptcy filers (and their
attorneys) can report these obligations in a number of places in the
paperwork. We did not determine whether the individuals who neglected
to report their obligations eventually did so when asked by a case
trustee. The results of this case file review cannot be generalized
nationwide; however, they can be generalized to the population of 1,931
noncustodial parents with IV-D orders on record in the automated system
of the Texas State CSE program who also filed for bankruptcy nationwide
and are intended for illustrative purposes. Moreover, it is possible
that we identified some individuals as non-reporters due to a timing
issue rather than their not disclosing a current obligation. While we
attempted to match the time frames of the bankruptcy and child support
data as closely as possible, it is possible that an individual's child
support status on the exact date they filed for bankruptcy might not
have been captured in our data match. We determined that this timing
issue was not a significant methodological limitation because we found
so few filers that did not report their child support obligations.
To help us understand the potential benefits as well as the feasibility
and cost of data matching on a routine basis, we interviewed officials
in both the bankruptcy system and the CSE program, including officials
representing federal, regional, and state entities. In interviews with
these officials, we also discussed challenges that data matching would
involve for all parties, including technical, legal, financial, and
security challenges that data matching would entail for all parties. We
spoke with officials in the Administrative Office, the Executive Office
for U.S. Trustees, and OCSE. We also interviewed officials at state
agencies in Alabama, California, Illinois, New York, Texas, and West
Virginia. We chose these six states for their diverse geography,
caseload sizes, and administrative structures. Our work at the six
state agencies focused on the notices they receive from case trustees
under the new DSO provisions of the Bankruptcy Reform Act rather than
the notices they receive from bankruptcy courts under the more general
requirement that all creditors specified in bankruptcy filings are to
be notified by the courts. Additionally, we interviewed 5 regional U.S.
Trustees and 1 bankruptcy administrator in Alabama and the 16 case
trustees who report to them in bankruptcy districts in these six
states.
We conducted this performance audit from December 2006 to January 2008
with generally accepted government auditing standards. Those standards
require that we plan and perform the audit to obtain sufficient,
appropriate evidence to provide a reasonable basis for our findings and
conclusions based on our audit objectives. We believe that the evidence
obtained provides a reasonable basis for our findings and conclusions
based on our audit objectives.
[End of section]
Appendix II: Comments from the Department of Justice:
U.S. Department of Justice:
Executive Office for United States Trustees:
Office of the Director:
Washington, D.C. 20530:
December 18, 2007:
Ms. Kay E. Brown:
Director:
Education, Workforce, and Income Security:
Government Accountability Office:
Washington, DC 20510-1501:
RE: GAO 08-100:
Dear Director Brown:
Thank you for the opportunity to review the Government Accountability
Office's draft report entitled Bankruptcy and Child Support
Enforcement: Improved Information Sharing Possible Without Routine Data
Matching. The draft report concludes that while a routine data matching
of bankruptcy data with state child support records may provide
additional benefit, it may not be warranted because of costs and policy
considerations. GAO does recommend, however, that the United States
Trustee Program (Program) more actively encourage trustees under its
supervision to provide state child support enforcement agencies with
the full Social Security numbers of debtors with domestic support
obligations. We support this recommendation.
In implementing the Bankruptcy Abuse Prevention and Consumer Protection
Act of 2005 (BAPCPA), we provided specific guidance to the private
trustees to include in their notices to the state child support
enforcement agencies the full Social Security number of debtors with
domestic support obligations. To assist the private trustees, the
Program, in consultation with the Office of Child Support Enforcement
of the Department of Health and Human Services, developed sample
notification letters which were given to the private trustees for their
use. The notifications letters were also provided to the vendors of
trustee management software for inclusion in their software so that the
private trustees could more efficiently generate the required notices.
Based upon the GAO recommendation in this report, the Program will
continue to work with the private trustees, including through their
national associations, to identify and address impediments to ensuring
that full Social Security numbers are provided to state child support
enforcement agencies. We appreciate the GAO's thorough review of this
issue and its constructive recommendation.
Sincerely,
Signed by:
Clifford J. White III:
Director:
[End of section]
Appendix III: GAO Contact and Staff Acknowledgments:
GAO Contact:
Kay E. Brown (202) 512-7215 or BrownKE@gao.gov:
Acknowledgments:
In addition to the contact named above, Denise M. Fantone, Acting
Director; Gale Harris, Assistant Director; James Whitcomb, Analyst-in-
Charge; Susan Higgins; and Sara Pelton made significant contributions
to this report. In addition, Ron La Due Lake, Cynthia Grant, and John
"Chris" Martin provided assistance in data collection and analytical
support; Linda Watson, Ellen Wolfe, and Jessikah Foulk provided
assistance in data collection; Susan Bernstein provided writing
assistance; Jim Rebbe and Geoff Hamilton provided legal assistance; and
Lise Levie provided technical assistance.
[End of section]
Footnotes:
[1] Pub. L. No. 109-8, § 230, 119 Stat. 23, 72 (2005). The Bankruptcy
Reform Act was signed into law on April 20, 2005, and most of its
provisions became effective on October 17, 2005.
[2] Each of the 50 states, the District of Columbia, Puerto Rico, the
U.S. Virgin Islands, and Guam administers a CSE program. Hereafter, we
will refer to these 54 CSE agencies as "state agencies."
[3] We determined that the differences in dates were not a significant
limitation for our purposes. See appendix I for more information about
this issue.
[4] Because businesses do not pay child support, the scope of this
report is limited to individuals filing under Chapter 7 or 13, which
are the bankruptcy chapters under which individuals usually file.
[5] Among the six states we contacted for this review, Texas was able
to provide us with a relevant extract of their child support caseload.
[6] 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.
[7] The Federal Parent Locator Service is a national system to assist
states in locating noncustodial parents and custodial parties to
establish paternity and child support orders; enforce and modify
orders; and identify orders or cases involving the same parties in
different states.
[8] The 45,346 adults are all noncustodial parents with child support
orders in the Federal Case Registry while the 33,958 represents only
those noncustodial parents with "IV-D" orders associated with parents
receiving services from the CSE program, which is administered under
Title IV-D of the Social Security Act.
[9] This figure is based on the 17,146 filers identified in a separate
match HHS conducted for us with the Federal Offset Program file, which
only includes noncustodial parents with IV-D orders who owe past due
child support. This file only includes parents with arrearages that
meet minimum threshold amounts.
[10] We also found that of all custodial parents with child support
orders in place that establish their legal right to child support, 0.7
percent filed for bankruptcy compared with about 0.5 percent for
noncustodial parents. Moreover, of all custodial parent bankruptcy
filers with orders, 80 percent are part of the CSE program compared
with 78 percent for noncustodial parents. Finally, of all custodial
parent bankruptcy filers with orders, 56 percent filed for Chapter 7
while 44 percent filed for Chapter 13.
[11] The 95 percent confidence interval for this estimate ranges from
less than 1 percent to over 7 percent, which means we are 95 percent
confident that this interval contains the true values in the study
population. It is possible that we identified some individuals as non-
reporters due to a timing issue rather than their not disclosing a
current obligation. While we attempted to match the time frames of the
bankruptcy and child support data as closely as possible, it is
possible that an individual's child support status on the exact date
that they filed for bankruptcy might not have been captured in our data
match.
[12] Administrative Office officials told us that in the event that a
filer has for some reason initially not listed a creditor and the case
trustee has knowledge of this, the case trustee should require the
filer to amend the bankruptcy paperwork.
[13] Our work at the state agencies focused on the notices they receive
from case trustees under the new DSO provisions of the Bankruptcy
Reform Act rather than the notices they receive pursuant to the more
general requirement that a bankruptcy court send a notice of a meeting
of creditors to all creditors specified in bankruptcy filings.
[14] Regarding administrative convenience, one trustee noted that she
relied on one pre-formatted letter for sending the notifications to
custodial parents and state agencies. This letter was formatted for
custodial parents, who are not to receive the bankruptcy filer's full
SSN. This was considered easier than having two separate letter
formats--one for custodial parents and another for state agencies--
although it resulted in the full SSN not being provided to state
agencies.
[15] For a fuller discussion of these issues, see the following GAO
products: Social Security Numbers: Federal and State Laws Restrict Use
of SSNs, yet Gaps Remain, GAO-05-1016T (Washington, D.C.: Sept. 15,
2005); and Social Security Numbers: Federal Actions Could Further
Decrease Availability in Public Records, though Other Vulnerabilities
Remain, GAO-07-752 (Washington, D.C.: June 15, 2007).
[16] A routine data match could also help state agencies locate
noncustodial parents identified by custodial parents but for whom a
child support order has not yet been established. While this would
provide useful information for child support enforcement, these parents
would not have formal child support obligations to report when they
file for bankruptcy.
[17] The Administrative Office's database is the U.S. Party/Case Index.
EOUST's database, the Automated Case Management System, is based on
extracts of case management information from the Administrative Office.
[18] Fiscal Year 2004 Annual Report to Congress, U.S. Department of
Health and Human Services. In addition to the Federal Case Registry,
the Federal Parent Locator Service includes the National Directory of
New Hires: a central repository of employment, unemployment insurance,
and wage data from State Directories of New Hires, State Employment
Security agencies, and federal agencies. Person data in the registry
are matched daily against employment data in the National Directory of
New Hires.
[19] See The Challenge of Data Sharing: Results of a GAO-Sponsored
Symposium on Benefit and Loan Programs, GAO-01-67 (Washington, D.C.:
Oct. 20, 2000).
[20] These risks involve developing and deploying automated systems
with critical flaws (e.g., it does not satisfy the needs of the end
user and does not operate as intended), resulting in significant
schedule slippages or increased cost or both. For a discussion of risk,
see GAO, DOD Business Transformation: Preliminary Observations on the
Defense Travel System, GAO-05-998T (Washington, D.C.: Sept. 29, 2005);
and DOD Business Systems Modernization: Billions Continue to Be
Invested with Inadequate Management Oversight and Accountability, GAO-
04-615 (Washington, D.C.: May 27, 2004).
[21] Thirteen states have county-operated programs, and five other
states reported having a combination of state-and county-operated
programs.
[22] Costs for development and maintenance would also be incurred by
bankruptcy entities, although estimates of these potential costs were
not developed for us.
[23] As noted previously, EOUST's database does not include bankruptcy
filers in Alabama and North Carolina. In addition, its database is
based on extracts of case management information from the
Administrative Office.
[24] Under the Privacy Act of 1974 (5 U.S.C. 552a), a federal agency is
prohibited from disclosing any record that is contained in a system of
records to another agency without the prior written consent of the
individual to whom the record pertains. There are 12 exceptions to this
"no disclosure without consent" rule. The two pertinent to our
discussion are the routine use and law enforcement agency exceptions.
The routine use exception allows an agency to disclose information if
its disclosure is compatible with the purpose for which the information
was collected, and if the routine use was published in the Federal
Register. The law enforcement exception allows an agency to disclose
information upon a written request by the head of an agency for a civil
or criminal law enforcement activity authorized by law.
[25] For our analysis, we included only 94 of the 100 bankruptcy filers
with obligations who completed all of the required bankruptcy
paperwork.
[End of section]
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