Who Are Chapter 7 Bankruptcy Debtors?

The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005 changed the Bankruptcy Code in many ways that made it harder for debtors to file a simple chapter 7 bankruptcy. However, one potentially positive change it made is requiring federal courts to track data on bankruptcy cases. The information they collect is not particularly detailed, but it can give us an idea of what kinds of debtors with primarily consumer debts file New York bankruptcy or Brooklyn bankruptcy cases in New York’s Southern and Eastern districts.

The information below is adapted from two tables in the BAPCPA Report for 2016. The first one, Table 3, answers a question that many debtors have: How long does a chapter 7 New York bankruptcy case take? The answer: usually less than three months.

Circuit and District Total Chapter 7
Number of Cases Interval in days Number of Cases Interval in days
Mean Median Mean Median
TOTAL 844,549 592 156 504,951 209 115
NY, E 11,128 253 102 8,087 168 102
NY, S 6,913 392 118 5,453 191 111

In the Eastern District of New York, which includes Kings (Brooklyn), Richmond (Staten Island), Queens, Nassau, and Suffolk counties, the median length of a chapter 7 case is 102 days. This is odd because the section 341 meeting with the creditors is usually one month after the filing date, and then there is a 60-day period for objections. It’s unclear how the median chapter 7 case can be fewer than 90 days, but perhaps the BAPCPA Report includes cases that are voluntarily closed by debtors.

Nevertheless, the fact that the mean case takes longer, 168 days, indicates many debtors’ cases take much more time than the median. New York bankruptcy cases are still faster than the national average, 209 days.

This table also shows us that about 73 percent of all bankruptcy cases in the Eastern District are in chapter 7, as opposed to 60 percent nationwide. The higher proportion of chapter 7 cases is arguably a good thing for debtors. One reason that ProPublica found significant racial disparities in bankruptcy outcomes is that debtors in other states were filing chapter 13 when it was not appropriate for them. Consequently, a greater proportion of chapter 7 cases suggests Brooklyn bankruptcy debtors are getting better relief more quickly.

In the Southern District of New York (New York County, Bronx County, and six mid-state counties to the north) chapter 7 bankruptcy cases take slightly longer and are closer to the national averages, both mean and median. 79 percent of debtors’ cases are in chapter 7, which is another sign of people being able to find relief in the right chapter for them.

Next, Table 2A shows “Income and Expenses Reported by Debtors,” which comes from information debtors supply bankruptcy courts in their bankruptcy forms. The table gives an idea of how much money debtors earn monthly.

Circuit and District Cases Current Monthly Income Average Monthly Income Average Expenses
Total With Complete Schedules Median (in $s) Total (in $s) Median (in $s) Total (in $s) Median (in $s) Total (in $s)
TOTAL 458,796 435,709 $2,750 $3,609 $2,435 $2,730 $2,616 $2,920
NY, E 8,087 7,302 $3,158 $3,603 $2,693 $3,020 $3,080 $3,579
NY, S 5,117 4,866 $3,001 $4,203 $2,572 $2,975 $2,920 $3,372

“Currently Monthly Income” comes from the new Form 122A-1 that debtors must complete. It is the total income debtors (and their spouses) earned in the previous six months, divided by 6. “Average Monthly Income” is similar information debtors insert in Form 106I. Lastly, “Average Expenses” appear in Form 106J.

It may help to consider these numbers as annual figures. Thus, the median current monthly incomes are equivalent to $33,000, $37,900, and $36,000, for the national total, the Eastern District, and the Southern District, respectively. These figures are well below the median family income debtors must not exceed to avoid taking the chapter 7 means test, but they may include unemployed debtors with no household income, which would push the averages downward.

Debtors’ average expenses eat up nearly all of their current monthly incomes, which explains why they have difficulty paying their unsecured debts. (Mortgage payments are included.)

There’s more information in the BAPCPA Report, but I will save it for a second part. The report itself can be found here.

[Update: Click to read, “Who Are Chapter 7 Bankruptcy Debtors? Part 2 of 2“]

Whether you see your situation reflected in the BAPCPA Report or not, if you are experiencing financial problems, then talking to an experienced New York bankruptcy lawyer can help you strategize your options.

For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced bankruptcy attorney Brooklyn NY Bruce Weiner for a free initial consultation.

Rosenberg, Musso & Weiner, L.L.P
26 Court St # 2211
Brooklyn, NY 11242, USA
718-855-6840
http://nybankruptcy.net/

Recent Posts

Stay Clear of Payday Lenders, Bankruptcy Is So Much Safer

For too many people, bankruptcy feels like giving up. Choosing other, riskier options may make them feel as though they’re still in control, and who knows? Maybe things will turn around for them. They run down their savings, rely on credit cards, and then as a last resort make a visit to a payday lender.

Read More »

How to Deal with “Zombie Debt” Collectors in New York

At some point, if it believes it will never be repaid, the original bank that makes a loan will sell it to a debt collection company. The loan will be bundled with numerous other ones in the sale, and the price will be a fraction of the total value of the loans. Because of the small

Read More »

How to Use Bankruptcy to Reduce Auto Loan Payments in New York

Many New Yorkers have difficulty with auto loans. In some cases, the car’s value has depreciated significantly, making resale difficult, and in others the car was over-financed to begin with, which is more common when the dealership plays the role of lender as well. Unlike the underwater mortgage, the bankruptcy code offers solutions that are

Read More »

4 Steps to Escape Paying Income Tax on Discharged Debt in New York

Receiving a discharge from the bankruptcy court  in New York is the goal of New York bankruptcy petitioners. It should be a relief so that people can continue their lives. Although, occasionally creditors claim the loans you discharged are forgiven instead; that means you’ll have to pay income tax on the forgiveness. What does this

Read More »

Pop Quiz on Discharging Unsecured Debt in New York

This quiz has a single multiple choice question. Suppose you have more credit card debt than you can pay down?  This is not an uncommon situation—but let’s add a twist: one of your creditors is a family member. The debt situation cannot be resolved without bankruptcy, but you don’t want to create discord among your

Read More »