The Distribution of Assets in Consumer Chapter 7 Bankruptcy Cases

Abstract

This Article presents the first in-depth examination of consumer Chapter 7 asset cases in over 20 years, and the first ever using a national sample of consumer bankruptcies. It finds that only 7% of Chapter 7 cases filed by individuals result in assets to distribute to creditors, and that the majority of those assets come from the sale of real estate or the debtor’s income tax refund. The median case produced just over $3,400 for administrative, priority, and general unsecured creditors. Administering these cases did not come cheaply - 74 cents were spent in administration for every dollar that unsecured creditors received. For all this effort, the median general unsecured creditor received 8 cents on the dollar. Priority creditors fared a little better in the rare case in which they appeared - but domestic support claimants likely fared worse. This Article also finds that the majority of cases in which assets were captured could have been avoided with minor pre-bankruptcy planning.

Keywords: bankruptcy, consumer bankruptcy, assets, chapter 7