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36 American Bankruptcy Institute Journal 20 (June 2017)


In a forthcoming article in the Southern California Law Review, the authors use new data from the ongoing Consumer Bankruptcy Project (CBP) to explore the "no money down" bankruptcy. This article summarizes that article and discusses the law that influenced the creation of "no money down" chapter 13s, which households are more likely to file with "no money down," and why this type of chapter 13 case might be less than optimal for the consumer bankruptcy system. Both studies draw data from a debtor's bankruptcy court records and written questionnaires mailed to the debtors to collect demographic information and details on the debtor's circumstances; the authors rely on data from the 2007 CBP and the current CBP. From the 2007 CBP data, the authors use court records and questionnaire data from the 2,437 debtors who returned questionnaires. From the current CBP, the authors use the 670 questionnaires returned by the debtors as well as all court record data from all 2,400 cases in the 2013-15 sample. The legal origins of "no money down" chapter 13 lie in the U.S. Supreme Court's decision in Lamie v. United States Trustee. Although Lamie featured a complex fact pattern involving conversion from chapter 11 to chapter 7, the decision's significance is that any attorneys' fees a chapter 7 debtor owes prior to filing are considered pre-petition unsecured debts subject to being discharged with little to no payment.