Who Is Filing Chapter 11?
Executive Office for U.S. Trustees1
According to statistics compiled by the Administrative Office of the United States Courts (AOUSC), approximately 10-15 percent of chapter 11 cases are consumer rather than business cases. The AOUSC obtains this information from the case cover sheets prepared by debtors or their attorneys. In contrast, recent research by Professors Elizabeth Warren and Jay Westbrook indicated that more than one-third of chapter 11 filings in 1994 were filed by individuals.
Part of the difference is definitional. AOUSC figures revolve around whether the debt is primarily consumer or business in nature. Warren and Westbrook looked at whether the case was filed by a business entity or a natural person, and found that many chapter 11 cases designated as "business" cases had actually been filed by individuals.
A U.S. Trustee database2 on chapter 11 cases can provide additional information on this issue. It contains information on the Social Security Number (SSN) and the Employer Identification Number (EIN) of chapter 11 debtors. Most cases list one number or the other for the debtor. Nearly all of the cases with a SSN appear to have been filed in the name of an individual (or couple), and nearly all of the cases with an EIN carry a business name. A review of this data gives a rough approximation3 of the business/individual breakdown for chapter 11 cases.
In late 1994, the debt limits for chapter 13 cases were raised substantially, and the percentage of individual cases immediately dropped to the 20-23 percent range.
Several interesting facts emerge from this data. The percentage of individual chapter 11 cases rose from 28.2 percent in 1989 to 36.2 percent in 1993. The 33.4 percent figure for 1994 is consistent with the 36 percent figure reported by Professors Warren and Westbrook. In late 1994, the debt limits for chapter 13 cases were raised substantially, and the percentage of individual cases immediately dropped to the 20-23 percent range. This indicates that each year prior to 1995, several thousand cases were filed under chapter 11 because the debtor had too much debt to be eligible for chapter 13.
The individual chapter 11 cases are less likely to result in confirmation than the business cases. Approximately 29.2 percent of the business cases filed between 1989 and 1996 have been confirmed, compared with only 22.8 percent for the individual cases. Additionally, the individual chapter 11 cases take somewhat longer to reach confirmation than business chapter 11 cases (683 days on average for individual cases vs. 586 days for business cases).
Chapter 11 filings declined by about 40 percent between 1994 and 1998. It appears that about one-half of this decline has occurred in filings by individuals, in large part due to the higher chapter 13 debt limits. The higher debt limits may have also resulted in a remaining pool of chapter 11 cases that are more likely to be confirmed, and to be confirmed more quickly.
2 The Fee Information and Collection System (FICS) database is maintained by the EOUST to support the U.S. Trustee Program's collection of quarterly fees from chapter 11 cases. The FICS database contains information on more than 163,000 chapter 11 cases filed since 1989 in 88 of 94 judicial districts. Return to article
3 A precise breakdown is not possible from this data. About five percent of the cases in FICS reported both EIN and SSN, or neither. A small proportion of the cases with an EIN were named after an individual rather than a business, and some of the cases with only an SSN carried a business name. Return to article