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It has become crucial to have an early prediction model that provides accurate assurance for users about the financial situation of consumers. Recent studies have focused on predicting corporate bankruptcies and credit defaults, not personal bankruptcies. Due to this situation, the present study fills the literature gap by comparing different machine learning algorithms to predict personal bankruptcy. The main objective of the study is to examine the usefulness of machine learning models such as SVM, random forest, AdaBoost, XGBoost, LightGBM, and CatBoost in forecasting personal bankruptcy. The study relies on two samples of households (learning and testing) from the Survey of Consumer Finances, which was conducted in the United States. Among the models estimated, LightGBM, CatBoost, and XGBoost showed the highest effectiveness. The most important variables used in the models are income, refusal to grant credit, delays in the repayment of liabilities, the revolving debt ratio, and the housing debt ratio. [ABSTRACT FROM AUTHOR]

Medical expenses have been associated with a large proportion of consumer bankruptcies in the United States. The objective of this study is to examine the relationship between the Medicaid expansion implemented in the context of the Affordable Care Act and consumer bankruptcy, overall and by chapter filing. We used a longitudinal study design with a study period of 2008–2017. We tested three approaches: difference‐in‐differences, fixed effect panel linear regression, and triple difference. We constructed a panel dataset from 2008 to 2017 with states' data using data from various sources on insurance, bankruptcy filings, and characteristics that may affect bankruptcy, such as income and ethnicity. The outcomes were the annual rates of consumer bankruptcies overall and by chapter at the state level. Between 2008 and 2017, the overall unadjusted bankruptcy filing rate fell from 0.36% to 0.24%. We found that the expansion was associated with a decrease in overall consumer bankruptcy varying between 0.035 and 0.039 percentage points and that the intensity of the effect was modulated by the intensity of the treatment. Results were consistent across models and suggest that the Medicaid expansion had a significant negative effect on overall bankruptcy filings and specifically on Chapter 7 filings. [ABSTRACT FROM AUTHOR]

Increased electronic filing, or e-filing, of nonprofit data in the United States and abroad quickens public availability, eliminates dependence on third-party proprietary datasets, and broadens access to information offering insight into previously neglected topics. On the other hand, increasingly open data require researchers to independently ensure data quality, understand limitations, and consider how data availability shapes research questions. As electronic filing becomes mandatory in the United States and more widespread elsewhere, this research considers how expanded e-filer data impact nonprofit research approaches and opportunities while assessing the generalizability and limits of existing e-filed data in the United States. While the data suggest increasing compliance with e-filing, analyses show that older nonprofits with greater capacity and sophisticated financial characteristics are historically more likely to e-file. Further, particular subsectors are more likely to e-file than others. Therefore, using existing e-filed IRS Form 990s for panel data analysis presents some generalizability concerns, although this will improve over time. Moving forward, e-filing and machine-readable access requirements bode well for both quantitative and qualitative nonprofit research, while the United States' experience provides helpful lessons for other research settings. [ABSTRACT FROM AUTHOR]

We exploit state-level changes in the amount of personal wealth individuals can protect under Chapter 7 to analyze the effect of debtor protection on the financing structure and performance of a representative panel of U.S. startups. The effect of increasing debtor protection depends on the entrepreneur's level of wealth. Firms owned by mid-wealth entrepreneurs whose assets become fully protected suffer a reduction in credit availability, employment, operating efficiency, and survival rates. We find no such negative effects for low-wealth and high-wealth owners. Our results are consistent with theories that predict that asset protection in bankruptcy leads to a redistribution of credit. [ABSTRACT FROM AUTHOR]

Individuals incur legal expenses in many business and personal transactions. Legal expenses may be legitimate tax deductions or nondeductible personal expenses. Legal expenses are nondeductible when incurred for issues that are personal in nature such as divorce or bankruptcy. A deduction is available for legal expenses that are incurred for business or investment reasons. This article provides a framework to assist financial advisors in identifying deductible legal expenses. [ABSTRACT FROM AUTHOR]

To predict the effect of bankruptcy laws on entrepreneurial activity, we exploit the 2005 and 2011 staggered state‐level increases in exemptions for the amount of personal wealth protected under Chapter 7 bankruptcy in the United States. We focus on three types of outcomes—firm establishments, entrepreneurship quality, and individual self‐employment. Using state‐, cross‐border‐county‐neighbor‐pair‐, and individual‐level data, the additional state‐level exemptions do not affect any of the three types of entrepreneurial activities, and in cases where the association is statistically significant, the effect sizes are negligible. Our results are inconsistent with theories that predict that asset protection in bankruptcy improves entrepreneurial activity. [ABSTRACT FROM AUTHOR]

This article examines the administrative structure of Chapter 7 bankruptcy to better understand the neoliberal welfare state. Studying the administrative workings of the bankruptcy system offers a clear example of the consequences that follow from delegating governance of state social programs to non-state—in this case private, profitseeking—actors. In consumer bankruptcy, considerable authority is delegated to private trustees and private attorneys incentivized to work in their own interests and those of creditors, rather than prioritizing the possibility of a "fresh start" allegedly offered by the bankruptcy system. Drawing on interviews and an original survey of the front-line workers of the bankruptcy system, I argue that consumer bankruptcy's structure aligns with creditors rather than debtors, exposes debtors to asset extraction by profit-oriented administrators, and relies on private attorneys in ways that both limit access and often hurt low-income debtors. [ABSTRACT FROM AUTHOR]

The article examines barriers to filing of bankruptcy in the U.S. when faced with civil or criminal court fines and fees to deal with that debt, be discharged from it, and avoid incarceration. Topics discussed are accessibility of civil courts, importance of race when accessing benefits of the consumer bankruptcy system, differences of filing bankruptcy under Chapter 7 and Chapter 13, and regional disparities in the choice of chapter filings depending on legal and financial circumstance.

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 represents the largest overhaul of the Bankruptcy Code in more than 25 years. This article examines major changes and provisions of the new law that would impact the decision of a financially distressed client regarding the bankruptcy option. An understanding of these issues is also important when working with clients who are evaluating the economic fallout of bankruptcy for parties with whom they have a financial relationship such as tenants or other family members. This article also examines other important "non-Code" issues that must be considered in the decision to elect bankruptcy. [ABSTRACT FROM AUTHOR]

Who files for bankruptcy in the United States is not well understood. Previous research relied on small samples from surveys or a small number of states from administrative records. Using over ten million administrative bankruptcy records linked to the 2000 Decennial Census and the 2001–2009 American Community Surveys, I document who files for bankruptcy. Compared to the US population, bankruptcy filers are middle income, more likely to be divorced, more likely to be black, more likely to be veterans, less likely to be immigrants, and more likely to have a high school degree or some college. Filers are more likely to be employed. The bankruptcy population is aging faster than the US population as a whole. Lastly, using pseudo‐panels I study what happens in the years around bankruptcy. Individuals are likely to get divorced in the years before bankruptcy and then remarry. Income falls before bankruptcy and rises after bankruptcy. [ABSTRACT FROM AUTHOR]

Across the criminal and civil justice systems, research regarding procedural justice shows that people's positive perceptions of legal processes are fundamental to the legal system's effectiveness and to the rule of law. Approximately one million people file bankruptcy every year, making the consumer bankruptcy system the part of the federal court system with which the public most often comes into contact. Given the importance of bankruptcy to American families and the credit economy, there should exist a rich literature theorizing and investigating how people's perceptions of consumer bankruptcy's procedures advance the system's goals. Instead, bankruptcy's procedures have received strikingly little scholarly attention. This Article begins to fill this significant gap by combining procedural justice and related research with what is known about the people who file bankruptcy to craft a theory of consumer bankruptcy's procedural deficiencies. If consumer bankruptcy is procedurally bankrupt, as this Article posits, then the "fresh start" delivered to struggling households is not nearly as fresh as presumed, hampering people's return to their communities and to the credit economy. As such, this Article proposes two sets of changes to the consumer bankruptcy process--one modest and one more drastic. Both of these new deals for debtors promise to enhance people's perceptions of bankruptcy's procedural justice and thereby the legitimacy of the system. [ABSTRACT FROM AUTHOR]

Using a novel data set from a major credit bureau, we examine the early effects of the Affordable Care Act Medicaid expansions on personal finance. We analyze less common events such as personal bankruptcy, and more common occurrences such as medical collection balances, and change in credit scores. We estimate triple-difference models that compare individual outcomes across counties that expanded Medicaid versus counties that did not, and across expansion counties that had more uninsured residents versus those with fewer. Results demonstrate financial improvements in states that expanded their Medicaid programs as measured by improved credit scores, reduced balances past due as a percent of total debt, reduced probability of a medical collection balance of $1,000 or more, reduced probability of having one or more recent medical bills go to collections, reduction in the probability of experiencing a new derogatory balance of any type, reduced probability of incurring a new derogatory balance equal to $1,000 or more, and a reduction in the probability of a new bankruptcy filing. [ABSTRACT FROM AUTHOR]

The article presents information on the latest developments related to the American Bankruptcy Institute (ABI). ABI will release the final report and recommendations of the Commission on Consumer Bankruptcy in April 2019. In January 2019, ABI’s Bankruptcy Litigation Committee hosted an ABILive webinar. More than 200 members rely on the monthly ABI webcast “Eye on Bankruptcy” for insights into the significant opinions of the month.

The article provides commentary on personal expenditure and income analysis, specifically focusing on those who spend more than they earn, who are known as dis-savers. Data from the "Study of Consumer Purchases" and U.S. Bureau of Labor Statistics are presented. The data utilizes an accrual method for determining cost of living and adjusting for long term use of a product, such as a house, automobile or furniture. The primary concerns of the article are to determine patterns of 'dis-saving' and evaluating if 'dis-saving' is a sign of distress.

The article explores the intersection of economic exploitation and patriarchal oppression in the context of the 2005 reforms to the U.S. Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA). Topics covered include bankruptcy's macroeconomic function, cultural examples of how feminized consumer identity has taken shape, and challenged to the alleged benefits of the child support prioritization for women.

The article examines the discharge of late-filed taxes in consumer bankruptcy which the 2005 amendments to the U.S. Bankruptcy Code, Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) failed to address. It discusses the purpose of the Bankruptcy Code, its history and bankruptcy treatment of tax debts. It also explores the differences between federal and state tax obligations.

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. [ABSTRACT FROM AUTHOR]

This article studies the financial decision-making behavior of U.S. families that have difficulties paying for their medical bills and investigate what alternatives they have to avoid filing for formal bankruptcy and what influence their motivation to do so. Using household financial and demographic information from the Health Tracking Household Survey in 2007 and 2010, this article finds that families with younger age members, minority ethnic background, more doctor visits, and without insurance made more diverse and severe choices to finance the payments before resorting to personal bankruptcy. Interestingly, households with better education seek more diverse but easier financing methods, suggesting that financial literacy may play a dual role in undertaking financial planning—strategic default and bankruptcy avoiding. [ABSTRACT FROM AUTHOR]

This paper estimates the effect of Chapter 13 bankruptcy protection on financial health using a new data set linking bankruptcy filings to credit bureau records. Our empirical strategy uses the leniency of randomly assigned judges as an instrument for Chapter 13 protection. We find that Chapter 13 protection decreases an index measuring adverse financial events such as civil judgments and repossessions by 0.323 standard deviations and increases the probability of being a homeowner by 13.2 percentage points. Chapter 13 protection has little impact on open unsecured debt but decreases the amount of debt in collections by $1,333. [ABSTRACT FROM AUTHOR]

This Article examines the issue of categorically nondischargeable debts in the Bankruptcy Code. These debts are excepted from discharge ostensibly because they indicate that the debtor incurred the debt through some misconduct, there is an important public policy at play that requires the debt to be excepted from discharge, or a discharge of certain state-imposed debts raises federalism concerns. Using penal debt as its lens, this Article critiques these analytical frames, arguing that they do not do much work to help explain why some debts are treated as categorically nondischargeable while others that seem to implicate the same concerns are not treated similarly. The practical consequence of this analytical murkiness is that some debtors may look to the Bankruptcy Code for relief from unmanageable debt while others may not. Significantly, this arbitrary line-drawing has negative implications for economically and socially disenfranchised communities in which categorically nondischargeable debts may be concentrated. This Article argues that categorical nondischargeability denies relief from unmanageable and socially undesirable debt to those who are least able to bear the burden of ongoing debt. [ABSTRACT FROM AUTHOR]

There is growing recognition that economic sanctions--fines, surcharges, fees, and restitution--are routinely imposed at rates many people have no meaningful ability to pay, which can exacerbate financial instability and lead to the perception that economic sanctions are unfairly punitive to people of limited means. Concerns triggered primarily by highly punitive tactics, including incarceration and long-term probation of low-income debtors for the failure to pay, have led to increasing calls for reform. While much attention is now being paid to the back-end of the system, and particularly limitations on punitive responses for the failure to pay due to poverty, this Article considers the problem from the front-end. In particular, this Article focuses on a potential reform with increasing bipartisan support: the graduation of economic sanctions according to a person's financial circumstances. To that end, this Article explores several key considerations essential to designing a system of graduation, relying heavily on a largely-forgotten experiment in seven geographically, demographically, and politically diverse jurisdictions in the United States with the "day-fine." A day-fine is calculated using a penalty unit assigned based on the seriousness of the offense of conviction. The penalty unit is then multiplied by the defendant's adjusted daily income to determine the day-fine amount. The result is an economic sanction adjusted to offense seriousness and simultaneously graduated to the defendant's financial condition. This Article mines the historical record of the American day-fines experiments--complemented by recent interviews with people involved in the design and implementation of the projects and experiences with means-adjustment in the consumer bankruptcy, tax, and public benefits contexts--for lessons on the design of graduating economic sanctions. What emerges from this review is promising evidence that a properly designed and implemented system for graduation is consistent with efficient court administration, revenue generation, and equality in sentencing. [ABSTRACT FROM AUTHOR]

We build a structural model that captures salient features of personal bankruptcy under Chapter 13. We estimate our model using a novel data set that we construct from bankruptcies filed in Delaware between 2001 and 2002. Our estimation results highlight the importance of a debtor's choice of repayment plan length on other Chapter 13 outcomes. We use the estimated model to conduct policy experiments to evaluate the impact of more stringent laws that impose restrictions on the length of repayment plans. We find that these provisions would not materially affect creditor recovery rates and would not necessarily make discharge more likely. [ABSTRACT FROM AUTHOR]

The article looks at a study of public attitudes to bankruptcy to be conducted in any jurisdiction and associating bankruptcy with poor financial management, extravagance and greed. It mentions bankruptcy stigma relates to the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) which significant increases in the rate of bankruptcy filings in the U.S. It also mentions reforms effected by the Enterprise Act which was framed as a measure to promote entrepreneurial culture.

This Article reports on a breakdown in access to justice in bankruptcy, a system from which one million Americans will seek help this year. A crucial decision for these consumers will be whether to file a chapter 7 or chapter 13 bankruptcy. Nearly every aspect of their bankruptcies-both the benefits and the burdens of debt relief-will be different in chapter 7 versus chapter 13. Almost all consumers will hire a bankruptcy attorney. Because they must pay their attorneys, many consumers will file chapter 13 to finance their access to the law, rather than because they prefer the law of chapter 13 over chapter 7. Attorneys charge about $1,200 to file a chapter 7 bankruptcy; their debt-laden clients must pay this amount up front. Attorneys charge about $3,200 to file a chapter 13 bankruptcy, but clients can pay attorneys' fees over time as part of their cases. Chapter 7 and 13 bankruptcies also differ in the relief achieved. Almost all chapter 7 cases end with the debtor receiving a discharge of debts. In contrast, only around one-third of chapter 13 cases end in discharge. This Article exposes the increasingly prevalent phenomenon of debtors paying nothing in attorneys' fees to file chapter 13. New data from the Consumer Bankruptcy Project, our original empirical national study, suggest that these "no money down" consumers are similar to those who use chapter 7. However, because they cannot afford to pay their attorneys up front, these "no money down" bankruptcy debtors suffer. They pay $2,000 more and have their cases dismissed at a rate eighteen times higher than if they had filed chapter 7. The two most significant predictors of whether a consumer files a "no money down" bankruptcy are the consumer's place of residence and race. We could not identify legitimate ways that these factors correlate with debtors' needs for the substantive legal benefits of chapter 13. "No money down" bankruptcy can be a distortion in the delivery of legal help. We suggest reforms to how attorneys collect fees from consumer debtors that will reduce the potential conflict between clients' interests and attorneys' interests. The reforms will deliver access to justice and improve the functioning of the bankruptcy system. [ABSTRACT FROM AUTHOR]

The article discusses the bankruptcy law under the U.S. Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 and the court case of Rivera v. Orange County Probation Department. Emphasis is given to topics such as bankruptcy protection for debtors, support costs owed by parents for the detention of their children under California law, and inequities of criminal justice debt.

The article discusses the U.S. Bankruptcy Code (Code) in relation to the authors' empirical analysis of the outcomes of consumer bankruptcy claims in America as of 2017, and it mentions a bankruptcy-related reorganization option for consumers under chapter 13 of the Code. The legal rights and obligations of creditors, debtors, and consumers in the U.S. are addressed, along with America's legal culture and federal bankruptcy system. Debt relief claims and bankruptcy discharges are assessed.

The article investigate whether the elimination of consumer bankruptcy protections for private student loans has lessened the cost of those loans in the U.S. Topics discussed include effects of Bankruptcy Abuse Prevention and Consumer Protection Act on private student loan market; use of datasets from Consumer Financial Protection Bureau (CFPB) and econometric techniques for evaluating its effect of students loan; and enactment of Truth In Lending Act for the same.

The authors discuss the rate of financial hardships and bankruptcy caused by medical bills in the U.S. despite passage of the Affordable Care Act in 2014 which expanded and upgraded health insurance coverage, banned preexisting illness exclusions, imposed a cap on out-of-pocket spending, and mandated coverage for essential benefits. Topics include the impact of rising medical costs and stagnant incomes on the risks associated with medical bankruptcy.

The article examines the fundamental aspects of Chapter 7 of the U.S. Bankruptcy Code and argues that the U.S. consumer bankruptcy system fails to promote those aspects, with particular regard to the U.S. legislation the Bankruptcy Abuse Prevention and Protection Act of 2005. It also discusses the development of U.S. bankruptcy law including legislation such as the Chandler Act and the Bankruptcy Reform Act of 1978. The article also examines the significance of Chapter 7 to debtors and creditors.

Purpose – A financially distressed homeowner considers bankruptcy filing, either Chapter 7 or Chapter 13, to delay foreclosure. On one hand, Chapter 13 filing takes longer processing time, spreads mortgage arrearages over the debt repayment period, and increases the possibility of loan modification. On the other hand, Chapter 7 filing discharges unsecured debt, which provides additional disposable income for mortgage payments. The paper aims to discuss these issues. Design/methodology/approach – The author uses fixed-effects (within variation), random-effects, and generalized estimation equation models with time dummies on the panel data of US counties. Findings – The results show that mortgage delinquency increases Chapter 7 filings, while it has positive but statistically insignificant effect on Chapter 13 filings. In addition, a county’s mortgage debt to income and proportion of mortgage borrowers increase its Chapter 7 filings. Originality/value – The contribution of the paper is to assess the effect of mortgage credit on the bankruptcy chapter choice using the county-level data. [ABSTRACT FROM AUTHOR]

Jean Braucher was a leading scholar of contract and consumer bankruptcy law. Although she did not devote substantial energy to corporate bankruptcy, an important but comparatively under-cited 1994 paper, Bankruptcy Reorganization and Economic Development ("Economic Development") recognized that "relationalism"--and, by inference, relational contract theory--could provide a powerful set of tools with which to analyze corporate reorganization under chapter 11 of the Bankruptcy Code. The rise of "distress investing," and distress investors' use of contract in bankruptcy, require us to better understand the relational aspects of the contracting environment in chapter 11. In Economic Development, Jean anticipated the relevance of this analysis long before most of us did. [ABSTRACT FROM AUTHOR]

The rising medical costs associated with cancer have led to considerable financial hardship for patients and their families in the United States. Using data from the LIVESTRONG 2012 survey of 4,719 cancer survivors ages 18-64, we examined the proportions of survivors who reported going into debt or filing for bankruptcy as a result of cancer, as well as the amount of debt incurred. Approximately one-third of the survivors had gone into debt, and 3 percent had filed for bankruptcy. Of those who had gone into debt, 55 percent incurred obligations of $10,000 or more. Cancer survivors who were younger, had lower incomes, and had public health insurance were more likely to go into debt or file for bankruptcy, compared to those who were older, had higher incomes, and had private insurance, respectively. Future longitudinal population-based studies are needed to improve understanding of financial hardship among US working-age cancer survivors throughout the cancer care trajectory and, ultimately, to help stakeholders develop evidence-based interventions and policies to reduce the financial hardship of cancer. [ABSTRACT FROM AUTHOR]

The article provides an analysis of exceptionalism, historical institutionalism, and comparative study of consumer bankruptcy law in the U.S. Topics discussed include how the U.S. system of consumer bankruptcy influenced European reforms, implementing consumer bankruptcy law in Europe and the U.S., and harmonization of European personal insolvency laws by the European policymakers.

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A partial test for strategic behavior in bankruptcy filing may be formulated by testing whether consumers manipulate their debt and filing decision jointly, or not: that is, testing for endogeneity of financial benefit and the bankruptcy filing decision. Using joint maximum likelihood estimation of an extended discrete choice model, test results are consistent with nonstrategic filing: financial benefit is exogenous to the filing decision. This result is confirmed in two different datasets ( Panel Study of Income Dynamics and Survey of Consumer Finances). This result is consistent with an ex ante low net gain from a bankruptcy filing; a type of 'rational inattention' to rare events such as bankruptcy. ( JEL D12, D14) [ABSTRACT FROM AUTHOR]

with the treatment of home mortgage liens in consumer bankruptcy. The courts have developed different approaches on how to treat home mortgage liens based on whether the lien is undersecured or unsecured and whether the debtor has filed for relief under Chapter 7 or Chapter 13. Most courts agree that a home mortgage lien can be stripped off in a Chapter 13 when the lien is totally unsecured. However, a conflict has arisen between four circuit courts as to whether a debtor can strip off a home mortgage lien that is totally unsecured in Chapter 7. Three circuit courts, as do most courts, prohibit strip off, whereas the Eleventh Circuit permits strip off. This paper analyzes the caselaw and policy arguments of each approach and advocates courts adopting an approach consistent with the Eleventh Circuit. Permitting the strip off of totally unsecured home mortgage liens in Chapter 7 provides a lifeline to debtors and promote the fresh start principle, which is a cornerstone of U.S. bankruptcy policy. [ABSTRACT FROM AUTHOR]