This manuscript assesses the returns to hiring an attorney to represent an individual who holds exempt-eligible assets when filing for Chapter 7 bankruptcy. A panel of closed Chapter 7 asset case filings was collected over the years 2016-2021 from the Public Access to Court Electronic Records (PACER) system in the Eastern District of Washington State. The study results indicate that filers with an attorney of record, and who report attorney payments to the Court, can shield 83.3 percent of assets through the exemption process, compared to the overall sample mean of 68 percent. This implies a return of approximately 22.5 percent. Therefore, hiring an attorney and reporting attorney payments in a filing leads to a higher expected return. We also find statistically significant evidence suggesting that filer specific factors, such as county of residence and year of filing, influence the expected return from hiring an attorney.

Under a Chapter 7 bankruptcy filing, assets are liquidated and used to repay debts, in order of a Court-established priority. If not repaid through the liquidation process, some of these debts (especially certain types of unpaid taxes) survive the bankruptcy proceedings and must still be repaid. The U.S. Bankruptcy Code allows individuals filing under Chapter 7 to exempt certain assets from the liquidation process. More generous exemptions lead to a lower value of assets liquidated and used to repay creditors. This leads to an interesting decision problem. Do filers with exempt assets and tax debts choose to retain their exempt assets and allow the tax obligations to survive the bankruptcy process? Or do they use the liquidation process to reduce outstanding tax obligations? This manuscript empirically explores this issue. We find no statistically significant evidence suggesting that households with greater exempt assets accumulate or repay a greater proportion of tax debts. However, filers who own businesses are more likely to accumulate and repay tax debts through bankruptcy.

This manuscript presents a case study illustrating how simple, visual analytics tools can be used to longitudinally assess consumer bankruptcy filings in a single community. In doing so, it provides a template for leaders in other communities to follow in conducting their own assessments. The case study focuses on the Logan neighborhood in Spokane, WA, a blue collar neighborhood which is home to Gonzaga University. This allows for simple comparisons to assess evolutionary changes in bankruptcy filings, within the Logan neighborhood over time, as well as comparisons to other Spokane neighborhoods that have less diversity and higher mean incomes.

This manuscript conducts a simple, exploratory analysis to test whether the use of the consumer bankruptcy process fundamentally differed during the COVID-19 pandemic compared to previous years. Data were drawn from the Public Access to Court Electronic Records (PACER) database maintained by the U.S. Bankruptcy Court's Eastern District of Washington for the years 2007, 2011, 2016, and 2020. KruskalWallis tests indicate that filers in 2020 had lower average real monthly incomes than in previous years. However, household incomes were not statistically different from previous years. Filers in 2020 has significantly more debt in collections compared to 2007, but no more or less debt than in 2011 or 2016. Chi-square tests report a significantly greater proportion of filings with debts owed to collections agencies in 2020 compared to previous years. Overall, the findings suggest that the pandemic did significantly alter the use, and intensity of use, of the consumer bankruptcy process.

The undergraduate economic education literature espouses the use of critical thinking. Yet students continue to display gaps in critical thinking, and few meaningful changes have been made to teaching undergraduate economics to address this gap. This manuscript illustrates how to create a curriculum map linking foundational logical reasoning skills to an undergraduate, principles of micro-economics course. The map may be useful in identifying gaps in prerequisite logical reasoning skills and in giving a general direction to address these gaps. We find that principles of microeconomics courses require foundational logical reasoning skills comprising half of a semester-long course on logical reasoning.

: This essay argues that the economics profession must better define what critical thinking is, how it is embedded in our teaching, and how that teaching incorporates both the breadth and depth with which those topics are covered. Doing so will allow economists to: 1) identify and remediate gaps in the depth or breadth of students’ critical thinking skills as they are used in economics; 2) more effectively convey economic concepts to students in the classroom; 3) promote greater understanding and appreciation for different schools of economic thought.

Hackney, Friesner, and McPherson (2018) developed a methodology to identify the optimal distribution of discharged debts in Chapter 7 bankruptcy filings. In 2013, Oregon adopted debtor-choice status. Applying the methodology to data from Oregon immediately before, during, and after, the conversion to debtor choice status should facilitate an accurate assessment of the impact of debtor-choice status on the distribution of debt disbursements. The results suggest that the optimal proportion of assets retained by households through exemptions is between 3-4% of all disbursements, and that the legislation did not noticeably impact convergence to this optimum proportion.

A theoretical model of U.S. consumer behavior is developed which allows the consumer to file for bankruptcy protection at different points, and on multiple occasions, over her lifespan. The model allows for conspicuous consumption, hyperbolic discounting, and random budget shocks. Findings suggest that individuals who file for bankruptcy protection multiple times may be better or worse off than those who file only once. However, repeat filers present with much more skewed consumption patterns, and evidence of much higher overspending at the time of filing, than individuals who have never filed for bankruptcy or who file for the first time. Keywords: consumer bankruptcy, financial epidemiology, conspicuous consumption

The relationship between federal bankruptcy exemptions and Chapter 7 bankruptcy outcomes are examined using spreadsheet modelling techniques. These techniques benchmark the nature (and distribution) of debts discharged in Chapter 7 assets case filings. Data from Chapter 7 asset cases in the western United States in 2010 indicate an optimal Chapter 7 asset case distribution: 9.0 percent of assets back to the debtor, 28.1 percent to unsecured creditors, 21.0 percent to secured creditors, 28.9 percent to court administrators (including trustees), 4.4 percent to creditors arising from prior bankruptcy filings, and 8.6 percent to all other creditors. The nature (and distribution) of liquidated assets allocated to creditors across debtor choice and non-debtor choice states is empirically assessed and no evidence is found to suggest debtor choice leads to a better outcome for debtors.

Y Medical bankruptcy refers to individuals with serious medical conditions who feel compelled to file for bankruptcy to seek relief from their medical debts. Noticeably lacking in the literature is a consistent, evidence-based criterion to define who may be classified as medically bankrupt. A more concrete definition would allow policy makers to understand the magnitude of the problem and allow financial counselors to better inform certain households about seeking bankruptcy protection when faced with medical bills. This study uses data drawn from the U.S. Bankruptcy Court's Eastern Washington District to create an empirical profile of bankruptcy petitioners with medical debt. We then identify those characteristics statistically associated with being "at-risk" of a medical bankruptcy to better understand and define medical bankruptcy.

Purpose The purpose of this paper is to examine whether the timing associated with the implementation of the health insurance-related provisions of the Patient Protection and Affordable Care Act (ACA) altered the presence and distribution of medical/non-medical debts accumulated by different types of bankruptcy filers. Design/methodology/approach Data were drawn from the US Bankruptcy Court’s Eastern Washington District over the years 2009, 2011 and 2014 using interval random sampling. Binary probit and Tobit analyses were used to model the existence, and distribution, of medical debts and total debts, respectively, at the time of filing. The impact of the time frame associated with the ACA was operationalized via a Chow test for structural dynamic change. Findings Chapter 13 filers in 2014 (post-ACA-based health exchange implementation) were more likely to report medical debts than Chapter 7 filers in the pre-intervention period, and were also more likely to report a larger proportion of outstanding debts owed to a single creditor. Filers claiming health insurance premium expenses in 2011 were (at the 10 percent significance level) more likely to report a more skewed distribution of medical debts. Originality/value The time frame associated with the implementation of the ACA impacts the distribution of medical debts among filers who have sufficient net disposable income to fund a Chapter 13 plan. The polarization of outstanding medical debts may indicate coverage gaps in existing health insurance policies, whose costs would be disproportionately borne by patients operating on thin financial margins.

Purpose - Medical bankruptcies occur when an individual experiences an acute or chronic health event, and the costs of care exceed the individual's ability to pay. In such cases, the individual typically files for bankruptcy. There is an extensive literature that estimates the prevalence of medical bankruptcy, but studies either select a population whose medical care is extremely expensive or chooses ad hoc thresholds for medical bankruptcy categorizations. In both cases, the prevalence of medical bankruptcy is biased. The purpose of this paper is to estimate the actual prevalence of medical bankruptcies in a manner that avoids these limitations.Design/methodology/approach - Data are randomly drawn from a single US Bankruptcy Court district. Following the literature, an ad hoc threshold of medical debts which places the bankruptcy filer "at risk" for a medical bankruptcy is postulated. Misclassification analyses are used to estimate the likelihood of a medical bankruptcy filing while adjusting for the use of ad hoc thresholds.Findings - The naive prevalence of medical bankruptcy is 23.1 percent, but exceeds 50 percent when accounting for misclassification. Many individuals are "ostensibly" medically bankrupt. They are already seriously indebted, and any outside financial shock, including but not limited to medical bills, can push these debtors into insolvency.Originality/value - Bankruptcy is an important social safety net. An improved understanding of the types and magnitudes of medical debts which precipitate a bankruptcy filing can lead to policies that improve outcomes for bankruptcy filers and reduce the social costs of bankruptcy.

The decision to file for bankruptcy, and more specifically to file for Chapter 13 bankruptcy protection, is a major financial decision that impacts the debtor's financial well-being for several years. Under financial economic theory, debtors should make informed choices, which include having clear rationale for making specific chapter filing choices. Based on those choices, expected outcomes accrue to the debtor. Moreover, rationales for the debtor's decisions should be revealed as debtors disclose their assets, liabilities, income and other salient characteristics in the filing process. The common rationales, as characterized by the outcomes accruing from making a choice to file under Chapter 13, are explored in this manuscript. Using a sample of nearly 300 Chapter 13 bankruptcy filings in the Eastern Washington Bankruptcy Court District, approximately 32 percent of all filers accrue no obvious financial benefit from filing under Chapter 13, and would be been better off financially by filing under Chapter 7. These filings are typically attributed to local norms and business practices that occur within a community, also known as “legal culture†. This analysis suggests that legal culture plays a very significant role in Chapter 13 bankruptcy chapter filing choices.

Abstract Fundamental to social provisioning is ensuring that community members have access to employment opportunities that pay living wages and sustain the environment. In a previous study, two of us (Underwood, Friesner and Cross 2014) presented criteria for sustainable community economic development, a three-fold test to comparatively assess economic development policies: ecological holism, community centeredness, and institutional legitimacy. Applying this test generates an iterative, evolutionary process of economic development. Absent from these criteria is the concept of intention, as policy options are not “given,” but rather designed by self-interested groups to manipulate interpretations of these test criteria in advancement of their vested interests — outcomes which can be juxtaposed to the “interests of community.” Here, we integrate two additional principles: economic diversity and solidarity. Economic diversity emphasizes living wages in numerous industries to stabilize exogenous economic shocks. Solidarity, as a unit of socio-economic interdependence, stresses commonality of wellbeing within communities. Integrating solidarity and economic diversity into the criteria for sustainable community economic development improves policy design and outcomes that sustain the environment, while also providing living wage employment for community members.

The goal of BAPCPA is to shift bankruptcy filers from Chapter 7 to Chapter 13. The basis for this goal is the assumption that Chapter 7 filers repay much less of their debt than do Chapter 13 filers. Therefore, shifting debtors from Chapter 7 to Chapter 13 will increase debt repayment and lessen the amount of bankruptcy costs shifted to society as a whole. In order for this reasoning to be valid, it is necessary to substantiate the claim that Chapter 13 actually leads to substantial debt repayment. This paper examines the validity of this assumption using a random sample of filers from the Eastern Washington U.S. Federal Bankruptcy Court District in 2003 and 2005. The authors find that filers do, indeed, repay a substantial portion of their debts. This suggests that Chapter 13 is effective in generating debt repayment. However, Chapter 13 repayments also create major administrative costs, and frequently provide little benefit to general unsecured creditors. Moreover, the effectiveness of Chapter 13 bankruptcies is substantially reduced (by nearly a 2.5 to 1 ratio) if debtors do not successfully complete the repayment plans. As such, BAPCPA appears to miss an opportunity to further reduce the social costs of bankruptcy.

Declining economic conditions over the past several years have identified a disturbing trend; more and more households in the US are being pushed to the brink of financial insolvency. Current legal and market protections (including, but not limited to the use of collateral and mortgage insurance, consumer credit counseling and bankruptcy protection) provide relief after financial distress occurs, but do nothing to prevent the likelihood of distress. Recent research argues that the use of preventive measures are superior to ex post measures, but can only be implemented with the help of predictive models to identify at risk households. This paper uses tools drawn from evolutionary game theory, economics and public health to create a simple model of “financial epidemiology”, which illustrates the role that social dynamics play in shaping household financial decisions. The model facilitates the prediction of financial insolvency by constructing phase diagrams which illustrate “tipping points” beyond which households move down an inexorable path towards insolvency.

Filing for bankruptcy protection temporarily stays IRS collection efforts and may provide leverage in negotiations. Other debts, e.g., unsecured debts, are dischargeable in bankruptcy. Taken together, these laws may lead to a discharge of unsecured debts which otherwise would be repaid but for the IRS debt. Using PACER data from the Eastern District of Washington, we investigate whether distributions of net income, assets and liabilities are significantly different among individuals filing for bankruptcy with IRS claims and those without. Using simple hypothesis tests, we find debtors with priority IRS claims are better off financially, except when controlling for other characteristics.

The goal of BAPCPA is to shift bankruptcy filers from Chapter 7 to Chapter 13. The basis for this goal is the assumption that Chapter 7 filers repay much less of their debt than do Chapter 13 filers. Therefore, shifting debtors from Chapter 7 to Chapter 13 will increase debt repayment and lessen the amount of bankruptcy costs shifted to society as a whole. In order for this reasoning to be valid, it is necessary to substantiate the claim that Chapter 13 actually leads to substantial debt repayment. This paper examines the validity of this assumption using a random sample of filers from the Eastern Washington U.S. Federal Bankruptcy Court District in 2003 and 2005. The authors find that filers do, indeed, repay a substantial portion of their debts. This suggests that Chapter 13 is effective in generating debt repayment. However, Chapter 13 repayments also create major administrative costs, and frequently provide little benefit to general unsecured creditors. Moreover, the effectiveness of Chapter 13 bankruptcies is substantially reduced (by nearly a 2.5 to 1 ratio) if debtors do not successfully complete the repayment plans. As such, BAPCPA appears to miss an opportunity to further reduce the social costs of bankruptcy.