Stability and Change in Chapter 13 Activity (1990-1999)

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Nov 2000

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In this article we show that some features of the disbursements to chapter 13 creditors, aggregated at the
national level, remained remarkably stable during the years 1990-1999. Even while filings grew from fewer
than 200,000 in 1990 to more than 350,000 in 1999, and disbursements by chapter 13 trustees more than
tripled in the same period,2 the proportions of disbursements to the major creditor types remained constant
within a few percentage points. We also discuss the two main factors controlling the amounts disbursed
every year. Changes in total disbursements from year to year can arise from changes in the caseload or
changes in the average disbursements for cases terminating in each year.

Table 1 summarizes some of the information reported annually to the Executive Office for U.S. Trustees
by the chapter 13 trustees. In these annual reports, total disbursements comprise payments to secured,
priority and unsecured creditors; clerks' fees; ß503(b) awards; payments in plans to debtors' attorneys; fees
transferred to the trustees' expense funds for various purposes; and payments of ongoing mortgages and
child support for which no trustee fee was assessed. The table shows dollar amounts for each creditor type
and the percentage of the total disbursement contained in each of these categories.

During the decade, total disbursements tripled from $1.0 billion to $3.2 billion. During each year of this
period of great growth, however, secured creditors received between 53 and 57 percent, priority creditors
between 9 and 12 percent, and general unsecured creditors between 18 and 22 percent of the total. This shows
that, at the national level, the structure of the debt repaid by chapter 13 debtors is quite independent of the
amount of money flowing through the system.

Two factors, which seemingly are logically independent of each other, can contribute to the growth of
disbursements: (1) an increase in the number of chapter 13 filings, and (2) an increase in the amount of debt
repaid in the average case.

<h3>Growth of Filings</h3>

Figure 1 shows two measures of filings growth during the decade. One is the annual filing number (for
years ending Sept. 30), and the other is the average number of filings for the given year and four preceding
years—i.e., a rolling five-year average of filings. The third line in the graph shows the growth of total
disbursements (expressed in millions). The rolling average is a more meaningful measure of case load for
chapter 13 because the cases can have lifetimes of up to five years (though of course many do not). The
smoothing effect of averaging allows us to see an orderly relationship between the number of cases in the
system and the money flowing through it to creditors. The two lines remain roughly parallel over the
10-year period. Where they diverge in their slopes, we might look for an explanation in the other
contributing factor (i.e., the amount of debt repaid by the average filer).

<h3>Payments per Case (Average Disbursement)</h3>

The definition of average disbursement, which is the same as payment per case over its lifetime, is the
annual disbursement divided by the appropriate five-year filing average. The value can be calculated for
total disbursements or for the portion going to one or more classes of creditors. It can be calculated for the
nation or for any circuit, U.S. Trustee Program (USTP) region, state, district or trustee. In an earlier article,
we presented data showing great variability among states for per-case payments to unsecured creditors
during Fiscal Year 1998.3 A full explanation of the definition is now available on the U.S. Trustee web site
at <a href="http://10.173.2.10/ust/press/articles/articles.htm" target="window2">http://10.173.2.10/ust/press/articles/articles.htm</a>. What we show here, in Table 2, is how the national
average total disbursement varied during the decade.

These values represent the average disbursements over the lifetimes of cases that terminated in the year
shown. Cases terminating in 1993, for example, had disbursed from them $8,519, on average, from first
payment to last.

Note that you can calculate the percentage of these disbursements going to each creditor type by
multiplying the value in the table by the appropriate percentage shown in Table 1. For example: 20 percent
of $8,519, which is $1,704, went to unsecured creditors from the average case terminating in 1993.

When the disbursement curve in Figure 1 moves closer to or farther from the five-year average filing
curve, those changes are reflected in (and are in fact the same thing as) increases or decreases in the
percentage change, year to year, of average disbursements. From 1996 to 1998, for example, Figure 1 shows
that disbursements grew rapidly relative to filings, and then stayed even from 1998 to 1999. This is reflected
in the year-to-year percentage growth changes in average disbursements shown in Table 2, as follows: 96/95 = 3.25%, 97/96 = 6.05%, 98/97 = 8.69%, 99/98 = 0.60%.

<h3>Conclusions</h3>

We believe that placing year-by-year changes in the context of a decade of activity can guard against
over-interpretation of chapter 13 data. Consider, for example, that disbursements to unsecured creditors in
1999 increased by 17.5 percent over 1998 while total disbursements grew less than 10 percent (see Table
1). Without the benefit of the longer view provided in Table 1, this kind of change might be cause for an
interpretation or advocacy related to some pressing legislative or policy point. In context, however, the
virtue of restraint in moving to judgment is quite clear.

The consistent proportions of disbursement shown in Table 1 represent a degree of stability in chapter
13 that strikes us as interesting and somewhat surprising. We do not know yet whether the national
numbers reflect similarly stable proportions in many states or are instead a relatively artificial composite
of much state-by-state variability. We will report in a subsequent article on the stability of the proportions
across states and districts over time.

<hr>
<h3>Footnotes</h3>

<a name="1">1</a> All views expressed in this article are those of the authors and do not necessarily represent the views of the Executive Office for
U.S. Trustees. We thank Sandra Forbes, Martha Hallowell and their colleagues in the Office of Review and Oversight, Executive Office for U.S. Trustees, for these data and their help. <a href="#1a">Return to article</a>

<a name="2">2</a> References to filings and disbursements at the national level do not include Alabama and North Carolina, which are not administered by
the U.S. Trustee Program. <a href="#2a">Return to article</a>

<a name="3">3</a> Bermant, Gordon and Flynn, Ed, "Measuring Performance in Chapter 13: Comparisons Across States," ABI Journal, July/August 2000. <a href="#3a">Return to article</a>

Journal Authors

Edward M. Flynn

Gordon Bermant

Journal Date

Wednesday, November 1, 2000 - 12:00