From time to time in this column we have reported on general trends in chapter 13 case administration. Here, we present an update through the end of September 2003 (FY 2003).¹

Table 1 displays the numbers of chapter 13 filings and the amount of disbursements made during fiscal years 1994-2003.²

The drop in filings in 1999 and 2000, followed by successive increases surpassing all previous levels, is typical of the "filings rollercoaster" that we have described on earlier occasions.³

While filings declined during two of the last nine years, distributions increased each year, more than doubling over the last decade. Several factors contribute to the increase in disbursements each year. First, the distributions come from cases filed as much as five years earlier. Although filings may decrease modestly for a year or two, over a five-year period the trend is always upward. Thus, the number of "paying" cases increases each year.

A second factor is that the average payments per case have been increasing over time. Table 2 shows the average payments per case since FY 1998.⁴

Two points need to be emphasized about the numbers in Table 2. First, they represent national averages and do not necessarily reflect accurately the experience in particular districts or trustee offices. Second, though they are intended to account for fluctuations in filings numbers during the period in which these cases would have been paying out (1994-2003), this accounting is no more than a rough approximation. Nevertheless, it represents the best that we are able to do with the national data in their current degree of availability.

Most of the growth in payments per case is accounted for by secured debt payments. Table 3 shows the percentages of total disbursements that were made to the major creditor classes; excluded here are payments made to debtors' attorneys inside the plans.

Disbursements to the main creditor classes accounted for 85-88 percent of total disbursements during each of the last 10 years. Over time, the proportion going to priority creditors has fallen by nearly one-half, the proportion paid to secured creditors has increased, and the percentage paid to unsecured creditors has been fairly stable. Almost all of the remaining disbursements are made in two categories: payments to debtors' attorneys inside the plans⁵ and fees transferred to the trustee's expense accounts to maintain the operations of the offices. As a remarkably accurate rule of thumb, plan payments to debtors' attorneys during the year are 1.5 times greater than the costs of maintaining the trustees' offices, as shown in Table 4.

Significant Growth of Post-petition Mortgage Payments

The data in Table 3 show secured debt accounting for 54-59 percent of total disbursements over the years 1994-2003. Obscured in the numbers is a reallocation of percentages of post-petition payments and mortgage arrearage payments, as shown in Table 5. During the past four years, the numbers of trustees making post-petition mortgage payments inside the plan ("conduit payments"), and the amounts being paid, have increased substantially (these payments were not separately reported prior to FY 2000). There are good reasons to believe that this practice works to the benefit of creditors, debtors and trustees.⁶

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Footnotes

¹ Bermant, Gordon and Flynn, Ed, "Distributions and Expenses in Chapter 13," ABI Journal, May 2000; Bermant, Gordon and Flynn, Ed, "Measuring Projected Performance in Chapter 13: Comparisons Across the States," July/August 2000; Bermant, Gordon and Flynn, Ed, "Stability and Change in Chapter 13 Activity, 1990-1999," ABI Journal, November 2000; Bermant, Gordon and Flynn, Ed, "Sources of Variability in Chapter 13 Performance," ABI Journal, April 2001; Bermant, Gordon and Flynn, Ed, "Chapter 13 Disbursements in Fiscal Year 2000: Steady Growth," ABI Journal, November 2001; Bermant, Gordon, Flynn, Ed and Bakewell, Karen, "Where is Local Legal Culture? The Case of Consumer Chapter Choice," ABIJournal, February 2002; Flynn, Ed, Bermant, Gordon and Bakewell, Karen, "A Tale of Two Chapters," ABI Journal, August 2002; Flynn, Ed, Bermant, Gordon and Bakewell, Karen, "A Tale of Two Chapters: Financial Data," ABI Journal, October 2002. Return to article

² Not included here are any data from Alabama or North Carolina, which are not administered by the U.S. Trustee Program. Return to article

³ See, e.g., Bermant, Gordon and Flynn, Ed, "Riding the Filings Rollercoaster," ABI Journal, July/August 2004. Return to article

⁴ The method used in the estimate is described in Bermant, Gordon and Flynn, Ed, "Estimating the Yield to Creditors of Chapter 13 Cases," http://www.usdoj.gov/ust/press/articles/abi102000a.htm. Return to article

⁵ Unfortunately, there is no ready way to assess attorney payment inside plans as a percentage of total attorney fees paid by chapter 13 debtors. Return to article

⁶ Bermant, Gordon, "Making Payments Through the Plan: A Survey of Chapter 13 Trustees," Report to the Participating Trustees and the National Conference of Bankruptcy Judges, July 2004. Return to article