Potential Effect of Bankruptcy Abuse Prevention and Consumer	 
Protection Act on Child Support Payments Cannot Be Determined	 
because Data Needed for Study Are Not Available (26-OCT-07,	 
GAO-08-148R).							 
                                                                 
Between 2001 and 2004, an average of more than 1.5 million people
annually filed for personal bankruptcy protection. In April 2005,
the Bankruptcy Abuse Prevention and Consumer Protection Act	 
(Reform Act) was enacted, in part, to address certain factors	 
viewed as contributing to an escalation in bankruptcy filings.	 
Described as representing the most comprehensive set of reforms  
in more than 25 years, the Reform Act, among other things,	 
requires those filers with the ability to pay some of their debts
from future earnings to enter into repayment plans under Chapter 
13 of the Bankruptcy Code instead of liquidating their assets	 
under Chapter 7 and granting the debtor a discharge from eligible
debts. Individuals usually file for bankruptcy under one of two  
chapters of the Bankruptcy Code. Under Chapter 13, filers submit 
a repayment plan to the court agreeing to pay part or all of	 
their debts over time, usually 3 to 5 years. Under Chapter 7, the
filer's eligible assets are reduced to cash and distributed to	 
creditors in accordance with distribution priorities and	 
procedures set out in the Bankruptcy Code. A large majority of	 
cases filed under Chapter 7 have no assets available for	 
liquidation, and thus no funds are available to pay creditors.	 
Upon the successful completion of both Chapter 7 and 13 cases,	 
the filer's personal liability for eligible debts is discharged  
at the end of the bankruptcy process, which means that creditors 
may take no further action against the individual to collect the 
debt. Bankruptcy filers may choose to reaffirm a debt, often for 
those debts secured by collateral, such as a home or a car. A	 
reaffirmation agreement, generally filed under Chapter 7,	 
formalizes this arrangement, whereby a filer with debts secured  
by collateral retains the collateral and continues to make debt  
payments to a creditor. Congress has expressed interest in	 
learning whether the Reform Act has had or is likely to have an  
effect on bankruptcy filers who have a child support obligation  
and their ability to make these payments. Obligation refers to an
amount owed or promised for payment, whereas payment refers to	 
the act of paying or state of being paid. Child support 	 
obligations can be for past due child support, current support,  
or medical support. Past due child support refers to a debt owed 
by a noncustodial parent to, for example, a custodial parent or  
guardian for past child support owed but not paid. In contrast,  
current child support obligations reflect ongoing child support  
obligations. In the bankruptcy filing documents, a filer is to	 
report past due child support and current child support expenses.
Unpaid child support obligations are not discharged through	 
bankruptcy. To request relief from debt, individuals file a	 
petition, financial statements, and schedules (including	 
information about child support obligations), among other things,
with the bankruptcy court. In this report, we refer to all	 
documents filed with the court as bankruptcy filing documents.	 
Congressional interest stemmed from concerns that amendments made
by the Reform Act that require certain debtors to enter into	 
Chapter 13 repayment plans or potential pressure from creditors  
to reaffirm debts might affect the ability of bankruptcy filers  
to pay past due child support or ongoing child support		 
obligations. This report discusses issues related to our	 
inability to assess the potential impact of the Reform Act on	 
child support payments as well as information on bankruptcy	 
filers who have child support obligations. Specifically, this	 
report addresses (1) difficulties in determining the potential	 
effect of the Reform Act on an individual's ability to pay child 
support and (2) an agency proposal regarding the use of 	 
data-enabled forms--documents with embedded, invisible data tags 
that facilitate the extraction of data for analysis--to alleviate
some of these difficulties.					 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-08-148R					        
    ACCNO:   A78368						        
  TITLE:     Potential Effect of Bankruptcy Abuse Prevention and      
Consumer Protection Act on Child Support Payments Cannot Be	 
Determined because Data Needed for Study Are Not Available	 
     DATE:   10/26/2007 
  SUBJECT:   Bankruptcy 					 
	     Child support payments				 
	     Comparative analysis				 
	     Data collection					 
	     Databases						 
	     Debt collection					 
	     Federal courts					 
	     Information management				 
	     Information systems				 
	     Law enforcement information systems		 
	     Legal records					 
	     Personal liability (legal) 			 
	     Records management 				 
	     Statistical data					 
	     Executive Office for U.S. Trustees 		 
	     Automated Case Management System			 
                                                                 

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GAO-08-148R

   

     * [1]PDF6-Ordering Information.pdf

          * [2]Order by Mail or Phone

United States Government Accountability Office
Washington, DC 20548

October 26, 2007

The Honorable Christopher B. Cannon
Ranking Member
Subcommittee on Commercial and Administrative Law
Committee on the Judiciary
House of Representatives

The Honorable Melvin L. Watt
The Honorable Adam B. Schiff
House of Representatives

Subject: Potential Effect of Bankruptcy Abuse Prevention and Consumer
Protection Act on Child Support Payments Cannot Be Determined because Data
Needed for Study Are Not Available

Between 2001 and 2004, an average of more than 1.5 million people annually
filed for personal bankruptcy protection. In April 2005, the Bankruptcy
Abuse Prevention and Consumer Protection Act^1 (Reform Act) was enacted,
in part, to address certain factors viewed as contributing to an
escalation in bankruptcy filings. Described as representing the most
comprehensive set of reforms in more than 25 years, the Reform Act, among
other things, requires those filers with the ability to pay some of their
debts from future earnings to enter into repayment plans under Chapter 13
of the Bankruptcy Code instead of liquidating their assets under Chapter 7
and granting the debtor a discharge from eligible debts.

Individuals usually file for bankruptcy under one of two chapters of the
Bankruptcy Code. Under Chapter 13, filers submit a repayment plan to the
court agreeing to pay part or all of their debts over time, usually 3 to 5
years. Under Chapter 7, the filer's eligible assets are reduced to cash
and distributed to creditors in accordance with distribution priorities
and procedures set out in the Bankruptcy Code. A large majority of cases
filed under Chapter 7 have no assets available for liquidation, and thus
no funds are available to pay creditors. Upon the successful completion of
both Chapter 7 and 13 cases, the filer's personal liability for eligible
debts is discharged at the end of the bankruptcy process, which means that
creditors may take no further action against the individual to collect the
debt. Bankruptcy filers may choose to reaffirm a debt, often for those
debts secured by collateral, such as a home or a car. A reaffirmation
agreement, generally filed under Chapter 7, formalizes this arrangement,
whereby a filer with debts secured by collateral retains the collateral
and continues to make debt payments to a creditor.

You have expressed interest in learning whether the Reform Act has had or
is likely to have an effect on bankruptcy filers who have a child support
obligation and their ability to make these payments. Obligation refers to
an amount owed or promised for payment, whereas payment refers to the act
of paying or state of being paid. Child support obligations can be for
past due child support, current support, or medical support. Past due
child support refers to a debt owed by a noncustodial parent to, for
example, a custodial parent or guardian for past child support owed but
not paid. In contrast, current child support obligations reflect ongoing
child support obligations. In the bankruptcy filing documents, a filer is
to report past due child support and current child support expenses.
Unpaid child support obligations are not discharged through bankruptcy. To
request relief from debt, individuals file a petition, financial
statements, and schedules (including information about child support
obligations), among other things, with the bankruptcy court. In this
report, we refer to all documents filed with the court as bankruptcy
filing documents.

^1 Pub. L. No. 109-8, 119 Stat. 23, (2005).

Your interest stemmed from concerns that amendments made by the Reform Act
that require certain debtors to enter into Chapter 13 repayment plans or
potential pressure from creditors to reaffirm debts might affect the
ability of bankruptcy filers to pay past due child support or ongoing
child support obligations. This report discusses issues related to our
inability to assess the potential impact of the Reform Act on child
support payments as well as information on bankruptcy filers who have
child support obligations. Specifically, this report addresses (1)
difficulties in determining the potential effect of the Reform Act on an
individual's ability to pay child support and (2) an agency proposal
regarding the use of data-enabled forms--documents with embedded,
invisible data tags that facilitate the extraction of data for
analysis--to alleviate some of these difficulties.

To develop an assessment methodology and determine whether we would be
able to implement it, we reviewed pertinent Bankruptcy Code provisions,
including those relating to child support that were amended by the
Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, as well
as studies, analyses, and other relevant literature covering bankruptcy,
in general, and how these intersect with the child support system,
specifically. In addition, we reviewed and analyzed the processes and
procedures used for both bankruptcy and child support cases, including the
federal bankruptcy and child support data systems, to determine which
systems, if any, might be used to identify a national universe of
individuals who filed for bankruptcy and paid child support obligations.
To understand the various federal court, bankruptcy, and child support
databases, we interviewed officials and analyzed documentation from the
Administrative Office of the U.S. Courts (AOUSC), the Department of
Justice's Executive Office for U.S. Trustees (EOUST), and the Department
of Health and Human Services' (HHS) Office of Child Support Enforcement.

In addition, we interviewed officials and collected documentation from 4
of 90 bankruptcy courts (Northern District of Alabama, Central District of
California, Northern District of Texas, and Southern District of West
Virginia); the regional U.S. Trustees and case trustees who manage cases
for the districts of Central California, Northern Texas, and Southern West
Virginia; and the bankruptcy administrator for the Northern District of
Alabama.^2 These districts were selected based on specific criteria,
namely that the selected courts' proportion of cases filed by Chapter 7 or
13 varied, and that rural and urban locations were represented. Using the
courts' electronic public access service, we reviewed a nongeneralizable
sample of about 60 bankruptcy cases filed in the Eastern and Northern
Districts of Texas to gain a better understanding of how child support
obligations were reported in practice. These cases were selected based on
our knowledge of cases containing a child support obligation, as reported
by the case trustees who manage cases for both the Eastern and Northern
Districts of Texas. Case trustees are individuals who are typically
appointed by the regional U. S. Trustees to administer individual
bankruptcy cases. To further our understanding of state child support
processes and the data systems used by states, we interviewed officials
and collected documentation from selected states' child support
enforcement agencies, those of Alabama, California, Illinois, New York,
Texas, and West Virginia. We chose these six states for the diverse
geography, caseload sizes, and administrative structures. Our work was
conducted in accordance with generally accepted government auditing
standards from May 2006 through September 2007.

^2 Six district bankruptcy courts in Alabama and North Carolina are not
under the jurisdiction of the Executive Office for U.S. Trustees. These
six districts are the Northern, Middle, and Southern Districts of Alabama
and the Eastern, Middle, and Western Districts of North Carolina. These
districts have bankruptcy administrators who oversee bankruptcy cases and
are under the jurisdiction of the federal judiciary. Pursuant to the
Bankruptcy Judges, United States Trustees, and Family Farmer Bankruptcy
Act of 1986 (Pub. L. No. 99-554, 100 Stat. 3088 (1986)), the Judicial
Conference established the bankruptcy administrator program in these two
states as a part of the federal judiciary.

Results in Brief

After exploring the data available and the limitations of those data, we
found that it was not possible to determine the potential effects of
pertinent child support-related provisions of the Bankruptcy Abuse
Prevention and Consumer Protection Act of 2005 on filers' child support
obligations and payments for two principal reasons. First, current federal
laws do not require this particular universe--- bankruptcy filers who also
have child support obligations--to be identified on a recurring basis,^3
and the federal judiciary and the Executive Office for U.S. Trustees do
not separately identify filers who have these obligations. The information
contained in the data systems used by the federal judiciary and regional
U.S. Trustees cannot be searched for bankruptcy cases that contain child
support obligations. Therefore, we tested a case study approach to
identify these filers. At our request, 33 case trustees who manage
individual bankruptcy cases in the Eastern and Northern Districts of Texas
identified 495 cases filed between October 2005 and August 2006 in which
the bankruptcy filer reported a child support obligation. The case
trustees perceived this task as one that required extra effort and added
to their case management responsibilities. To do a national study would
require making a similar request of the other 20 regional U.S. Trustees
and a statistically representative sample of their 1,342 case trustees.
Second, in our review of a nongeneralizable sample of 60 cases, we found
that the information provided by filers and their attorneys contained in
the case files had data limitations--including missing information and
data that were inconsistently reported--that limited any analysis that
could be done. For example, the bankruptcy documents that filers are
required to complete did not show what portion of a payment for a child
support obligation is applied to current support versus past due child
support. According to HHS officials, state child support data would be
needed to determine the details regarding the amounts of child support
payments and the payment status of cases; those data are complex and
available only through the individual states. State child support
enforcement officials in one state told us that providing child support
payment information would involve a time-consuming and resource-intensive
process because the data come from several sources within the state's data
system. Thus, data limitations, the need to examine individual bankruptcy
case files, and the need to work with each state child support enforcement
agency combined to make examining the issues of child support and
bankruptcy very expensive and time-consuming, and the conclusions that
could be drawn from such an examination uncertain.

As of August 2007, the federal judiciary is considering a request from the
Executive Office for U.S. Trustees (EOUST) for the mandatory use of data
enabled forms which may enhance the ability to search future bankruptcy
data. Data-enabled forms contain embedded data tags that are invisible to
the user. The tags allow computer systems to automatically extract the
tagged data as well as categorize it so that the information can be
analyzed. Currently, filers are not required to use data-enabled forms.
EOUST officials have requested that the federal judiciary make the use of
the data-enabled forms mandatory because, once implemented, they believe
that the data-enabled forms will eliminate thousands of hours attributed
to the manual review of forms by EOUST staff to meet the Reform Act's
mandatory data collection requirements.^4 EOUST's request included marking
data elements to meet new requirements under the Reform Act and other data
elements, including child support obligations. However, judiciary
officials and others have expressed concerns about the forms' mandatory
use because of technical, nontechnical, and cost issues. With regard to
technical issues, according to AOUSC officials, the data-enabled form
technology must be compatible with its current information system, and the
electronic and hard copy documents should be identical to comply with
legal requirements, applicable Federal Rules of Procedure, and
record-keeping requirements (i.e., National Archives and Records
Administration standards). With regard to nontechnical issues, the
judiciary, certain attorneys, and form vendors are concerned about the
amount of data that EOUST wants to extract and is also concerned about the
purpose for which these data would be or could be used. With respect to
cost, AOUSC officials expressed concerns about their developmental costs
and implementation costs to filers and their attorneys.

^3 Pursuant to a statutory mandate, GAO is performing a one time study to
assess the feasibility, effectiveness, and cost of requiring trustees or
the bankruptcy courts to provide the Health and Human Services
Department's Office of Child Support Enforcement with bankruptcy debtor
information to allow the office to determine whether such debtors have
outstanding child support obligations.

We provided a draft of this report to the Department of Health and Human
Services and the Department of Justice (DOJ) and the Administrative Office
of the U.S. Courts for comment. The two departments had no comments. On
October 18, 2007, AOUSC provided written comments that are presented in
enclosure I. In its comments, AOUSC notes that the report reflects how
difficult it is to assess the effects of the Reform Act in the complex
area of bankruptcy and child support. AOUSC also noted that the report
should more clearly state that additional data, or the implementation of
data-enabled forms, would not necessarily enhance the ability to assess
the pre- and post-Reform Act status of debtors' ability to pay their child
support payments after exiting bankruptcy. We recognize and agree that
there are a number of issues that affect such an analysis. Nevertheless,
the data in the bankruptcy case files is essential for analyzing the
implementation of the Reform Act and the operations of the bankruptcy
system in general. The extraordinary effort currently required to extract
data from bankruptcy case files greatly increases the time, effort, and
cost associated with any analysis of bankruptcy filers or bankruptcy
cases. Congress has a policymaking and oversight interest in the
operations of the bankruptcy system and in obtaining cost-effective
analyses that can inform congressional decisionmaking with regard to
potential changes in bankruptcy statutes and processes. We believe such
analyses cannot be efficiently accomplished unless AOUSC and the judiciary
help make bankruptcy case data more readily accessible for analysis.

Background

Overview of the U.S. Bankruptcy System

Bankruptcy is a federal court procedure designed to help both individuals
and businesses address debts they cannot fully repay as well as help
creditors receive some payment in an equitable manner. Under Chapter 7, an
individual's assets are liquidated for the benefit of creditors and the
debtor's personal liability for eligible debts is discharged. Under
Chapter 13, an individual repays some or all debt under a court-approved
plan prior to a discharge.^5 Child support debt is not discharged under
either Chapter 7 or Chapter 13. Individual bankruptcy is designed to give
debtors a "fresh start" but is often considered a last resort, in large
part because of the adverse effect it can have on an individual's credit
record. As shown in figure 1, federal courts have jurisdiction over
bankruptcy cases, and petitions can be filed in any one of the nation's 90
federal bankruptcy courts.^6 The figure also shows that the courts share
responsibility of administration for bankruptcy cases with regional U.S.
Trustees at the Department of Justice.

^4 The Reform Act imposed new requirements for collecting and reporting
data on bankruptcy cases. The purpose of these bankruptcy statistics
requirements is to be able to gather detailed information, at the
individual case level, about bankruptcy filers, including financial
statistics and the average period of time between case filing and closure.
This information is to be used to provide an overview of the bankruptcy
filer universe (not individual cases) annually, beginning no later than
July 2008.

^5 Because businesses do not pay child support obligations, the scope of
this report is limited to individual bankruptcies.

^6 There are 94 judicial districts, but only 90 federal bankruptcy courts
because the Eastern and Western Arkansas judicial districts are served by
a single bankruptcy court and bankruptcy cases in Guam, the Virgin
Islands, and the Northern Mariana Islands judicial districts are filed in
district court.

Figure 1: Overview of Federal Bankruptcy System

aSix districts in Alabama and North Carolina do not have regional trustees
and are not under the jurisdiction of the Executive Office for U. S.
Trustees. Instead, these six districts have bankruptcy administrators who
are under the jurisdiction of the federal judiciary. The bankruptcy
administrators carry out duties similar to those of the regional U.S.
Trustees, including the administration of bankruptcy cases, maintaining a
panel of private trustees, and monitoring the transactions and conduct of
parties in bankruptcy.

Overview of Federal/State Child Support Enforcement System

Child support obligations are enforced through a federal/state
partnership. State child support enforcement agencies typically maintain
detailed information about child support cases, including the court order
for child support that specifies the amount of the obligation and how it
is to be paid; the status of payments made, including the amount of past
due child support owed, if any; and the names and addresses of all parties
involved in a child support order, among other things.^7 As figure 2
shows, each state regularly transmits some of this information to HHS's
Office of Child Support Enforcement to be included in federal databases
that help states enforce child support obligations nationwide.

^7 While state agencies have detailed information about child support
cases they administer, HHS officials said that the states have minimal to
no information available about child support cases that are handled
outside the state child support enforcement agency, and the amount of
information varies state by state.

Figure 2: Overview of Child Support Enforcement System

Data Limitations Restrict Analysis of the Potential Effects of the Reform
Act on Bankruptcy Filers' Child Support Payments

Data limitations we encountered when attempting to assess the effect of
the pertinent child support related provisions of the Reform Act on child
support payments relate to identifying a sample of bankruptcy filers with
child support obligations as well as data collection and consistency
issues. These factors restricted our ability to perform an analysis of
child support payments.

Information to Identify Bankruptcy Filers with Child Support Obligations
Is Not Readily Available

At the time of our review, it was not possible to determine the potential
effects of the Reform Act on bankruptcy filers who also had child support
obligations because there is no practical means of reliably identifying
this universe. We sought to identify a representative sample of bankruptcy
filers with child support obligations from a national universe so that we
could project an effect of the Reform Act nationwide. Although the federal
bankruptcy system has multiple databases, as does the federal/state child
support system, none of these databases single out a universe of
bankruptcy filers who have child support obligations and their child
support payment information, as shown in figure 3. Current federal laws do
not require this universe to be identified on a recurring basis.

Figure 3: Information Contained in Bankruptcy and Child Support Databases

In an effort to identify whether each database described in figure 3
contained information on either child support obligations or child support
payments, we reviewed these databases, including the systems used by staff
in the Executive Office for U.S. Trustees and the U.S. bankruptcy courts,
which manage federal bankruptcy cases. At EOUST, the Automated Case
Management System (which is based on extracts of case management
information from AOUSC) functions as an internal agency case management
system that contains the information needed by the U.S. Trustee Program to
carry out its responsibilities, including supervising the administration
of cases and case trustees. Some case details, such as child support
information, are not extracted--and this system is not designed to provide
that type of information. The case management system contains information
about bankruptcy filers in 84 of 90 bankruptcy courts. The remaining 6
bankruptcy courts are not part of the U.S. Trustee Program, so information
about bankruptcy filers in these districts is not included in the
Automated Case Management System.^8

^8 These include the Northern, Middle, and Southern Districts of Alabama
and the Eastern, Middle, and Western Districts of North Carolina.

To identify a national universe of bankruptcy filers who also have child
support obligations, we reviewed two databases used by AOUSC and the
bankruptcy courts. While one of these systems--the Case
Management/Electronic Case Files System--included child support
information, the fields where this information is contained are not
searchable. The child support information is contained in filing documents
as text. According to AOUSC officials, it is difficult to isolate and
extract the relevant child support information from other text in the
documents. The second system, the U.S. Party Case Index, does not contain
any child support information.

The two federal HHS child support systems we reviewed--the Federal Case
Registry and the Federal Offset Program database--did not contain all of
the information needed for analysis. Specifically, they did not contain
detailed payment information needed for our analysis. This information is
available only at the state child support enforcement agencies.

For a case study approach, we explored identifying bankruptcy filers who
have child support obligations at the bankruptcy court
level--specifically, in the Eastern and Northern Districts of Texas. We
found that identifying these filers required the regional U.S. Trustee
(who oversees bankruptcy cases filed in these two courts) to ask the 33
case trustees in the region to identify, using their working files, those
cases where the filer reported owing a child support obligation. When we
made this request, the case trustees identified 495 cases filed between
October 2005 and August 2006 in which the bankruptcy filer reported a
child support obligation. However, this information was not readily
available and it took them almost 3 months to compile. Also, the case
trustees perceived this task as one that required extra effort and added
to their case management responsibilities. To do a national study would
require making a similar request of the other 20 regional U.S. Trustees
and a statistically representative sample of their 1,342 case trustees.

Missing Information and Inconsistent Data Reporting Affect Analysis of
Reform Act Impact

Even if we were able to identify a sample of bankruptcy filers who also
have child support obligations, we noted data limitations that may
preclude the necessary analysis. Of the 495 cases identified by case
trustees as having a child support obligation, we reviewed data provided
by bankruptcy filers and their attorneys for 60 case files and found data
limitations such as missing information and inconsistent data. In addition
to data issues, we found that changes to filing information and the
characteristics of bankruptcy filers resulting from the Reform Act affect
our ability to make direct pre- and post-Reform Act comparisons.

Missing Information Affects Data Analysis

On the basis of our nongeneralizable case file review in the two
districts, we found that the details needed to determine how child support
payments were applied to child support debt were not available.
Specifically, the bankruptcy documents that filers are required to
complete do not show what portion of a payment for a child support
obligation is applied to current monthly support versus past due child
support. Without this information, we are unable to provide a complete
picture of how a bankruptcy filer's child support debt is structured.
Details about child support payments are available only at the state child
support agencies.

To explore how state child support enforcement agencies maintain data
regarding child support payments, we contacted child support enforcement
officials in six states. While officials in one state were helpful in
providing some child support data, these officials told us that there were
technical barriers and resource limitations to making child support
payment data easily available for our purposes. For example, officials
were able to provide summary data to us about individuals in the system,
such as whether they were custodial or noncustodial parents. However,
these officials said that providing child support payment information
involves a time-consuming and resource-intensive process because the data
come from several sources within the state's data system.^9 These
circumstances require preparing programming language to merge the sources
and compile the information. When the state provided the summary data,
officials had to take into consideration their existing workload in order
to meet our request as well as accommodate the needs of the state
legislature, which was in session. In addition, officials in two other
states mentioned that they would have to balance providing this type of
information with the priority of carrying out their enforcement
activities.

We also observed examples where bankruptcy data that would be needed for
determining a filer's financial condition after a Chapter 7 case is closed
were not collected. Knowing this information is important when assessing a
filer's future ability to pay child support. For instance, under Chapter
7, bankruptcy filers are to propose in the filing documents how they plan
to address a debt secured by collateral. Whether or not the filer took
action on this proposal cannot be determined because this information is
not captured in the bankruptcy filing documents or data systems. For
example, a filer can propose to surrender the collateral to the creditor.
However, neither the filer nor the creditor is required to provide
information to the court or trustees about whether or not this action
occurred, so we have no way of confirming that the collateral was
surrendered. We also found a case where a filer proposed to reaffirm a
debt, but no reaffirmation agreement (an agreement that formalizes the
arrangement whereby a filer retains collateral and continues to make
payments to a creditor) was filed with the court. We have no way of
knowing whether or not the filer continued to make payments to the
creditor after the case was closed. In fact, even when a reaffirmation
agreement is filed, data on the extent to which a filer was able to meet
the terms specified in the agreement (e.g., made payments as required) are
likely only available, if at all, at the individual creditor level.

Inconsistent Data Affect Analysis

Our review raised questions about the consistency of bankruptcy filers'
data. We found instances among the nongeneralizable sample of case files
we reviewed where information in the filing documents was reported
inconsistently. For example, one case showed the total amount of an
ongoing child support obligation as a debt in the filing documents for
several years into the future (i.e., debt obligations that are not due
until a future date), whereas in another case, the filer reported the
ongoing obligation as a monthly amount, not the total amount of the future
obligation. Also, some case trustees told us that filers (and their
attorneys) sometimes complete the filing documents differently, resulting
in inconsistent information being reported. For example, on one filing
document filers may report past due or current child support obligations
without identifying which type of obligation is being reported.

Changes to Filing Information and the Characteristics of Bankruptcy Filers
Affect Ability to Analyze the Impact of the Reform Act

In addition to the data collection and the consistency issues we
identified, we also were unable to make direct comparisons between the
universe of bankruptcy filers who filed just before the majority of the
Reform Act provisions took effect in October 2005 and those who filed
immediately after. The ability to perform a pre- and post-Reform Act
analysis of filers is important for conducting an analysis of the Act's
impact on bankruptcy filers who also have a child support obligation.

^9 We worked with these state officials for over approximately 7 months to
obtain the summary-level data. The officials estimated that an additional
2 months would be required to obtain the payment information needed for
our analysis.

We were unable to compare these universes for two reasons. First, the
filers within these universes may well have been motivated to file for
different reasons than filers in prior years--reflecting, in part, the
perception that filing for bankruptcy would be more difficult after the
Reform Act, according to court officials and our analysis. Thus,
individuals who filed before the law's provisions went into effect may
have been less critically in need of bankruptcy relief than typical filers
in prior years, whereas after the law's provisions went into effect,
filers may have been more critically in need of bankruptcy relief. We
would be unable to directly attribute any differences between these groups
as resulting from the Reform Act because of the possibility that the
characteristics of the groups of filers might be inherently different for
reasons related more to behavior than changes in Bankruptcy Code
provisions.

Second, some definitional changes made to the Bankruptcy Code as a result
of the Reform Act limit our ability to make pre- and post-Reform Act
comparisons. For example, prior to the Reform Act, the term "debt for
child support" was defined as specified types of debt for maintenance or
support of a child of the debtor. The Reform Act introduced the broader
umbrella term "domestic support obligation" that in addition to child
support debt also refers to certain other types of debts such as alimony.
In addition, under the Reform Act, the definition of domestic support
obligation expanded the types of entities that could seek to collect
domestic support obligations beyond a spouse, former spouse, or child of
the debtor to include a child's parent, legal guardian, responsible
relative, or a governmental unit. These types of definitional changes
limit our ability to compare filer universes.

As mentioned previously, reaffirmed debts are certain debts (e.g., a
mortgage or automobile loan) that a bankruptcy filer agrees to pay that
might otherwise be discharged by the bankruptcy court. The Reform Act
included changes that affected reaffirmation agreements. The Reform Act
requires that certain information, such as the amount to be reaffirmed, be
disclosed. This information was not required under federal law prior to
the Reform Act and may or may not be included in reaffirmation agreements
filed prior to the act. Furthermore, agreements made before or after the
Reform Act were not required to include information on actual monthly
payments made that would be needed to assess the impact of such agreements
on a filer's ability to pay child support.

Data-Enabled Forms under Consideration as a Method to Search Bankruptcy
Data For Filers Who Have Child Support Obligations

As noted earlier, bankruptcy databases do not contain information that
would be needed about actual child support payments--information available
only through state child support agency data. In particular, state child
support data would be needed to determine the details regarding the
amounts of child support payments and the payment status of cases--that
is, whether child support payments are up to date or past due child
support is owed. However, if data-enabled forms were to be used and if
child support obligations were among the data fields tagged, limited
analysis could include summary information on the number of bankruptcy
filers who reported a domestic support obligation or included ongoing
child support obligations in their bankruptcy filing documents.
Data-enabled forms contain embedded data tags that are invisible to the
user but which a computer system can detect using programming language.
After a user completes the form online, the tags allow a computer system
to automatically extract the tagged data as well as categorize it so that
the information can be compared and analyzed.

As mentioned previously, according to AOUSC officials, extracting child
support information from the current bankruptcy courts databases is
difficult. The judiciary is considering a request by EOUST to mark certain
data elements in the filing document text so it can more easily be
extracted. EOUST's request included marking data elements to meet new
requirements under the Reform Act and other data elements, including child
support obligations. The Reform Act imposed new requirements for
collecting and reporting specified data on bankruptcy cases. The purpose
of these bankruptcy statistics requirements is to be able to gather
detailed information, at the individual case level, about bankruptcy
filers, such as financial statistics and the average period of time
between case filing and closure. This information is to be used to provide
an overview of the bankruptcy filer universe (not individual cases)
annually beginning no later than July 2008. AOUSC and EOUST both have
responsibilities for collecting and reporting data as a result of the
Reform Act. For purposes of the bankruptcy data collection, EOUST is
considering data-enabled forms as one option for meeting reporting
requirements, such as the total assets and liabilities of filers, the
aggregate debt discharged by filers during the reporting period, and
trustees' final reports (which include information about the length of
time a case was pending, assets, disbursements, and expenses, among other
things). EOUST's request seeks to include additional data elements that
judiciary officials consider unrelated to the data required by the Reform
Act and unrelated to the management of cases. Judiciary officials have
expressed concerns about the volume of data proposed to be tagged.

There are factors that affect the potential use of data-enabled forms.
According to AOUSC officials, the forms have not been used because certain
bankruptcy attorneys and the software vendor community have raised
concerns about privacy issues and the volume of data proposed to be
tagged, among others. Issues have also been raised concerning the
programming format for embedding the tags. Currently, filers are not
required to use data-enabled forms. EOUST has proposed a technology for
data-enabled forms and made a request to AOUSC that the use of
data-enabled forms be mandatory because, once such forms are implemented,
they believe that the new automated data collection process will eliminate
thousands of hours attributed to the manual review of forms by EOUST to
meet the Reform Act mandatory data collection requirements. As of August
2007, the federal judiciary is considering EOUST's request that
data-enabled forms be mandatory. However, the federal judiciary, certain
attorneys, and form vendors have voiced concerns about the forms'
mandatory use because of technical, nontechnical, and cost issues. With
regard to technical issues, according to AOUSC officials, the data-enabled
form technology must be compatible with its current information system,
and the electronic and hard copy documents should be identical to comply
with rules of court procedures and record-keeping standards. With regard
to nontechnical issues, the judiciary, certain attorneys, and form vendors
are concerned about the amount of data that EOUST wants to extract and are
also concerned about the purpose for which these data would be or could be
used. With respect to cost, AOUSC officials expressed concerns about their
developmental costs and implementation costs to filers and their
attorneys.

At its January 2007 meeting, the Committee on the Administration on the
Bankruptcy System^10 of the U.S. Judicial Conference decided to study
further the mandatory use of data-enabled forms. According to AOUSC
officials, in September 2007 EOUST demonstrated its technological proposal
for the use of data-enabled forms to the Bankruptcy Committee's
Subcommittee on Automation and other judiciary officials. The Bankruptcy
Committee is considering plans to conduct a survey of vendors and
bankruptcy attorneys regarding the mandatory use of data-enabled forms.
According to AOUSC officials, as of August 2007, the Bankruptcy Committee
had not set a time frame for completing its study.

^10 The Judicial Conference of the United States operates through a
network of committees created to address and advise on a wide variety of
subjects such as information technology, personnel, space and facilities,
security, judicial salaries and benefits, budget, court administration,
and rules of practice and procedure. The Committee on the Administration
of the Bankruptcy System oversees the bankruptcy system by monitoring,
analyzing, and proposing legislation affecting bankruptcy operations,
including their impact on the entire judiciary, for consideration by the
Judicial Conference.

In summary, obtaining the data needed to asses the impact of the Reform
Act on filers who have child support obligations is difficult and
time-consuming and requires the review of case files by us and case
trustees. Moreover, it is not clear, given the limitations of the data
available, that the extensive and expensive effort required would yield
data that could be used to reach reasonably reliable conclusions.

Agency Comments and Our Evaluation

We provided a draft of this report to AOUSC, DOJ, and HHS for review and
comment. DOJ and HHS had no comments on the draft. AOUSC provided written
comments on October 18, 2007, which are presented in appendix I. AOUSC
also provided technical comments that were incorporated as appropriate.

In its comments, AOUSC notes that the report reflects how difficult it is
to assess the effects of the Reform Act in the complex area of bankruptcy
and child support. AOUSC also noted that the report should more clearly
state that additional data, or the implementation of data enabled forms,
would not necessarily enhance the ability to assess the pre- and
post-Reform Act status of debtors' ability to pay their child support
payments after exiting bankruptcy, given the variations in local
economies, debtor characteristics, and other factors. We recognize and
agree there are a number of issues that affect any pre- and post-Reform
Act analysis. Nevertheless, the data in the bankruptcy case files is
essential for analyzing the implementation of the Reform Act and the
operations of the bankruptcy system in general.

To compensate for the limitations of the data available for analysis,
AOUSC suggests that we provide a more extensive legal analysis, including
expounding on the potential validity of hypotheses regarding the effect of
chapter 13 versus chapter 7 proceedings on the ability of debtors to pay
child support obligations. We, bankruptcy scholars, and other researchers
can speculate on these probable effects. However, Congress has requested
fact-based analyses. The extraordinary effort currently required to
extract data from bankruptcy case files greatly increases the time,
effort, and cost associated with any analysis of bankruptcy filers or
bankruptcy cases. The data in the case files are essential for testing the
validity of many hypotheses regarding the operations of the bankruptcy
courts and bankruptcy system. Congress has a policymaking and oversight
interest in the operations of the bankruptcy system and in obtaining
cost-effective analyses that can inform congressional decisionmaking with
regard to potential changes in bankruptcy statutes and processes. We
believe such analyses cannot be efficiently accomplished unless AOUSC and
the judiciary help make bankruptcy case data more readily accessible for
analysis.

As agreed with your office, unless you publicly announce the contents of
this report earlier, we plan no further distribution of it until 30 days
from the date of this letter. We then plan to provide copies of this
report to the Director of the Administrative Office of the U.S. Courts,
the Attorney General of the Department of Justice, and the Secretary of
the Department of Health and Human Services and other interested
congressional committees and parties. We will also make copies available
to others upon request. In addition, the report will be available at no
charge on GAO's Web site at [3]http://www.gao.gov .

If you or your staff have any questions about this report, please contact
me at (202) 512-8757 or [email protected]. Contact points for our Office
of Congressional Relations and Public Affairs may be found on the last
page of this report. GAO staff contributing to this report are listed in
the enclosure II.

William Jenkins, Jr., Director
Homeland Security and Justice Issues

Enclosure I

Enclosure II: GAO Contact and Staff Acknowledgments

GAO Contact

William O. Jenkins, Jr., Director, GAO Homeland Security and Justice
Issues, (202) 512-8757 ( [4][email protected] )

Acknowledgments

Other key contributors to this report were Linda Watson, Assistant
Director; and Amy Bernstein; Cynthia Grant; Geoffrey Hamilton; Gale
Harris; Susan Higgins; Ron La Due Lake; Sara Pelton; Peter Singer; Jamie
Whitcomb; Tracy Williams; and Ellen Wolfe.

(440443)

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