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Outcomes of Chapter 11 Cases:
U.S. Trustee Database Sheds New Light on Old Questions
Ed Flynn Executive
Office for United States Trustees
Policymakers and commentators frequently remark on the lack of systematic,
detailed, statistical information about the fate of entities in chapter 11. Even
very basic facts such as the proportion of cases confirmed, converted or
dismissed, and the time intervals between filing and these three outcomes, have
not been readily accessible.
Here we present a brief first look at data obtained from the Fee Information
and Collection System (FICS) database maintained by the Executive Office for
U.S. Trustees (EOUST) to support the U.S. Trustee Program’s collection of
quarterly fees from chapter 11 cases. The FICS database is the most reliable and
comprehensive single source of basic infor-mation about chapter 11 cases that we
have seen. The FICS database is updated monthly with case information
transmitted from each region. We anticipate that analyses of the data in FICS
will be of considerable utility in answering a number of practical questions
about chapter 11 issues.
We have begun to compare the data in FICS with the same fields in the
bankruptcy data compiled by the Administrative Office of the United States
Courts (AOUSC). The congruence of the two data sources has been encouraging. For
example, FICS contains data on 131,089 chapter 11 filings between January 1,
1989 and December 31, 1995. The AOUSC data show 129,304 chapter 11 cases for the
same period, excluding filings from Alabama and North Carolina. Part of this 1.4
percent difference is due to the inclusion in FICS of cases that were converted
into chapter 11 from other chapters.
Overview of Outcomes
Figure 1 shows that about 70 percent of the FICS chapter 11 pie for cases
filed between 1989 and 1995 contains two equal pieces: 35.3 percent of the cases
were dismissed and 35.4 percent were converted. Confirmed cases composed
approximately 26 percent of the total, two percent of the cases remained open as
of 12/1/97, and the remaining 1.4 percent are reported by FICS as closed by the
court but without further specification as to outcome.
Heretofore, the most comprehensive source of information on national
confirmation rates of cases of all sizes was a 1989 report by the AOUSC on cases
filed in 15 judicial districts between 1979 and 1986. Two salient facts about
confirmation rates emerged from that study: first, the estimated annual
confirmation rate over the sampled period was 17 percent. Second, a trend of
increasing annual confirmation rates was apparent between 1982 (13 percent) and
1986 (22 percent). This led to the prediction that confirmation rates would
continue to rise during the 1980s.
We are now able to continue the time series of annual confirmation rates
using FICS data. The graph in Figure 2 shows the rates from the AOUSC study for
1979/80-1986 and from FICS for 1989-1995.
The national trend evident in the AOUSC data has been sustained in the FICS
data. The average annual confirm-ation rate over the period measured in FICS,
approximately 27 percent, is about twice the rate that was achieved in the early
1980s. The data for 1989-1995 include minor adjustments to include expected
future confirmations of cases that are still open and closed cases for which
FICS did not report the disposition.
The strong national trend toward increased chapter 11 confirmation rates
requires substantial analysis and interpretation to discern its causes. Some of
the required additional information will be available in FICS, some will require
linking FICS data with AOUSC databases, and some will require developing new
databases gathered from diverse sources.
Intervals from Filing to Confirmation
In addition to a higher than expected con-firmation rate, the FICS data show
a clear trend toward faster con-firmations in chapter 11 cases. Figure 3
displays the 20th, 50th and 80th percentiles of the distribution intervals from
filing to confirmation for cases that were confirmed from 1989 to 1997. Viewed
from this national perspective, the greatest changes have taken place among the
cases slowest to confirm, e.g., those at the 80th percentile of each
annual distribution. While intervals at the 20th percentile have decreased by
approximately 18 percent, and intervals at the 50th percentile (median) by about
27 percent, intervals at the 80th percentile have decreased by about 37.
It is one thing to describe the trends toward more and faster confirmations,
and quite another to explain them. Bankruptcy experts doubt-less will have
strong opinions about why chapter 11 cases are confirming faster and at a higher
rate. These opinions should be treated as hypotheses to test with objective
information and analysis.
The increasing speed to confirmation on the national level needs to be
disaggregated in several ways. We need to know, for example, how con-firmation
speed varies with the size of the case; there are good reasons to believe that
larger cases are more likely to confirm and also more likely to confirm quickly
than are smaller cases. We also need to study how confirmation rates and
intervals vary among judicial districts, U.S. Trustee regions, and by assigned
bankruptcy judge to assess the influence of local practices and to identify best
practices wherever they may be found. For example, preliminary analysis shows
that the confirmation rates range from 13 to 38 percent among the 21 U.S.
Trustee regions, and from 7.4 to 59.2 percent among the bankruptcy judges who
handled at least 200 chapter 11 cases between 1989 and 1995. Further, the
average time from filing to confirmation varied from 478 days to 860 days among
the U.S. Trustee regions, and from 292 days to 1,092 days among the judges who
have confirmed more than 100 chapter 11 cases since 1989.
Intervals from Filing to Dismissal or Conversion
Confirmation is not a necessary condition for success in chapter 11.
Dismissal sometimes follows a successful accommodation between a debtor and its
creditors without the need for a court-approved plan of reorganization. It is
also clear that moving appropriate cases quickly from filing to dismissal or
conversion into chapter 7 is a per se benefit in terms of judicial
administration, a reduction in the length of the queue for other cases awaiting
judicial action, and a quickening of the time required for creditors to gain
liquidation value from the bankrupt estate.
The FICS database allows us also to assess trends in the durations from
filing to dismissal or conversion. Figures 4 and 5 show these trends at the
20th, 50th and 80th percentiles for cases converted or dismissed from 1989 to
As was seen with the interval between filing and confirmation, the intervals
from filing to conversion or dismissal also have shortened considerably. Most of
the overall improvement in case disposition times during this period occurred
during 1990-1991, and from 1995 to 1997.
Figure 6 summarizes the percentage reductions from 1989 to 1997 in the
intervals from filing to each type of termination.
Figure 6: Percentage Reduction in the Interval from Filing to
(Comparison of Cases Terminated in Calendar Years 1989 and 1997)
Outcome of Case
The graphs and summary table show unequivocally that terminations of all
types, particularly dismissals, now occur faster than they did eight years ago.
This is a national trend that no doubt has many local variations. Attributions
of causality for these reductions in any district, as have been published
recently, need to be evaluated in light of the larger national trend.
Information in the FICS database will advance the understanding of the course
of chapter 11 cases through the bankruptcy system in recent years. We have much
to do to derive all possible benefit from this useful source.
During the next several months we will refine our analyses of the FICS
database, explore the opportunities and challenges of linking FICS data with
other bankruptcy data sources, and explore ways to make much of the FICS data
available to other analysts. In the meantime, we welcome correspondence from
ABI Journal readers about these preliminary findings.
Bankruptcy Basics - For Cases Filed on or after October 17, 2005 (pdf)
Basics - For Cases Filed before October 17, 2005 (pdf)
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