The Journal of The DuPage County Bar Association

Back Issues > Vol. 20 (2007-08)

The Growing Trend of Women Filing Bankruptcy and the Effect of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005
by Arthur W. Rummler

This article addresses two issues: first is the growing trend of women filing individual bankruptcy cases and a review of possible contributing factors. Second is a summary of some of the changes that women (and to a lesser extent men, see infra) can expect as a result of the not so recent amendments to bankruptcy law. As you may have heard, the Bankruptcy Code1 was revamped in 2005 with the passage of the Bankruptcy Abuse Prevention and Consumer Protection Act. With a name like that, it’s no wonder that everyone refers to the amendment as "BAPCPA" (pronounced bap-see-puh). While the Bankruptcy Code aims to treat men and women the same, it would appear that certain sections affect women differently both generally and specifically. Additionally, there is a growing trend towards higher bankruptcy rates among women. While the exact causes are not certain, there are enough commonalities that commentators have reduced the reasons to perceived core causes. The higher rates of bankruptcy combined with the changes from BAPCPA present a challenge for women and the attorneys who represent them. Before exploring the specifics, let’s take a brief journey through the history of bankruptcy laws.

Short History of Bankruptcy Laws. Perhaps Polonius’ advice to his son Laertes2 would seem more on point if our modern world didn’t revolve around credit, debt, borrowing, lending and when necessary, bankruptcy. Today we accept them simply as de facto parts of life that have been part of civilized societies for ages. Indeed, the origins of bankruptcy laws can be traced to Old Testament of the Bible.

"At the end of every seven years you shall grant a release of debts. And this is the form of the release: Every creditor who has lent anything to his neighbor shall release it; he shall not require it of his neighbor or his brother . . . " Deuteronomy 15:1-2.

The word "bankruptcy" originated in medieval Italy, where it was common that when a merchant did not pay his debts, his creditors would have his trading bench destroyed. In Italian, the phrase for broken bench is "banca rotta" and hence the term bankruptcy. 3

In England, the first bankruptcy laws were enacted in 1542.4 In English law it was common for debtors to be imprisoned for not paying their debts. However, after several centuries of sending debtors off to penal colonies, the English reformed the law and began allowing debtors to "discharge" their debts. Early laws in Colonial America varied amongst the colonies and generally favored punitive measures over rehabilitation.5

Our venerable United States Constitution authorizes Congress to enact "uniform Laws on the subject of Bankruptcies throughout the United States." 6 Congress enacted several bankruptcy laws during the 1800s but they were intended to address short term problems such as land speculation busts and post Civil War rebuilding. "Modern" bankruptcy law began in 1898 when Congress enacted the Bankruptcy Act of 1898. The law evolved for another 80 years until Congress replaced the grand old Bankruptcy Act with the then newly minted Bankruptcy Reform Act of 1978, now commonly referred to as simply the Bankruptcy Code.

The Bankruptcy Code itself has been amended from time to time including major amendments in 1984, 1986, and 1994. The BAPCPA amendment in 2005 (a major, major amendment) was intended to address perceived abuses and at the same time provide new protections, though it is still unclear whether it succeeded on either account. Probably the most ballyhooed provision of BAPCPA was the now infamous "means test" which put income limits on the eligibility for Chapter 7 bankruptcy cases with the intent that more debtors would file for Chapter 13.7

BAPCPA is now part and parcel of the Bankruptcy Code and attorneys and courts are still adjusting to its new mandates. While some viewed the changes to the law as mostly negative for women, there are many positive aspects which must also be considered. When viewed in the light of higher and higher rates of bankruptcy among women, these issues become increasingly important.

More Women File Bankruptcy Than Men. Statistically, more women file bankruptcy than men. Post BAPCPA statistics are still being analyzed but studies of prior years indicate that of the total bankruptcy filers, women filing individually comprised 40% of the total.8 The same study indicates that men filing individually accounted for 28% and joint filings (husbands and wives together) were 32%. These numbers represent a huge increase from prior years. Why are so many women filing bankruptcy? Single parenting, job uncertainties, lower pay and reliance upon unsteady child support payment are just a few of the reasons.

Why Women File Bankruptcy: Social and Economic Factors. It’s too easy to generalize that someone filing for bankruptcy is simply a spendthrift who couldn’t resist the temptations of the material world. Spend too much on the credit cards today and it will eventually catch up to you. Can’t pay the bill? Well just file bankruptcy. That stereotype is far from the truth when it comes to the upward trend of women in bankruptcy.

Single Parenting: Caring for Our Children. Perhaps the largest contributing factor to women filing bankruptcy is raising children as a single parent. When two parent households collapse or fail to emerge in the first place, mothers typically have the main responsibility for raising the children.9 Single parents bear the burden of increased expenses of maintaining the household. At the same time same time, single mothers have constraints on their career growth as they are stretched between responsibilities at home and the workplace. Single mothers are 50% more likely than married parents, and 3 times more likely than childless people to file bankruptcy.10

Women Earn Less than Men for the Same Jobs. Despite what you might think, women continue to earn less than men for the same job. This income inequality is recognized a major contributing factor to the prevalence of women seeking bankruptcy protection.11 According to the Institute for Women’s Policy Research, in 2002 women working full time year round earned 76.2% of what men earned for the same job.12 This disparity increases the volatility that women experience when it comes to unexpected expenses and reduces the margin for error in the household budget. As any bankruptcy practitioner will tell you, falling behind on bills is a slippery slope not easily overcome and an all too frequent trigger of further financial trouble.

Unexpected Medical Bills and Job Loss. The strains on custodial parents often prevent women from obtaining good jobs with decent benefits. With the high costs of decent child daycare, there is sometimes no choice but part-time jobs in order to balance work and home. The result is little or medical insurance to cover unexpected illnesses and routine medical bills.

Further, as women strive to care for children, the volatility of their job increases, causing less job security and more job losses. Untimely days off from work caring for a sick child or being called away during work are problems for many employers. The net result is that single parents have more job stress and more turnover than their counterparts. 13

A Harvard University study found that half of all bankruptcy filings were the result of unexpected medical expenses. 14 Women are not immune from these statistics and they also list medical bills as a major cause of bankruptcy. One estimate is that 9 out of 10 women filing bankruptcy do so because of unexpected medical bills or loss of a job. 15

Instability of Child Support Payments. According to a report by the U.S. Census Bureau, 9 out of 10 persons due to receive child support payments were women. From the total of all people due to receive child support payments, 23.6% received no payments at all. Another 31.1% received only partial payment and 45.3% received all of the payments they were due. 16 The lack of child support payments to custodial parents is another factor which adds to the overall instability of the economic realities of many women.

Some women face difficult odds when it comes to economic security. Whether it is the disparity in incomes between their male counterparts, custodial parenting with unstable contributions from non-custodial parents, job uncertainties or unexpected medical bills, the fact is that more women are seeking relief by filing bankruptcy than before.

Higher Costs of Bankruptcy May Limit Access. One expected result of the BAPCPA amendment was that the costs of filing bankruptcy would have to rise dramatically. The law added several layers of requirements upon bankruptcy lawyers which in turn added to the time necessary to complete a case. As predicted by many, the costs have been passed onto the clients. While attorney fees for a typical Chapter 7 case might have cost an individual debtor $1500 under the old law, the current cost is averaging around $2500.

In addition, BAPCPA mandated "credit counseling" as a precursor to the filing of a bankruptcy petition. While altruistic in theory, practice shows that the "counseling" is little more than getting your ticket punched on the way to the bankruptcy court. The cost of credit counseling varies, but is typically around $100.00. Lastly, the court costs for filing bankruptcy also increased after BAPCPA from $209 to the current $299 (for Chapter 7 cases).

While these costs are borne equally among the sexes, because of the salary/pay inequalities, it follows that they are likely to fall harder upon many women. In fact, one commentator has suggested that the costs of filing bankruptcy are so high that they may actually prevent women from seeking bankruptcy relief at all.17

Bad News Is Good News: Salary Gap May Allow For More Chapter 7 Cases. As mentioned above, the BAPCPA amendments added an income qualification test, commonly called the "means test" to the Bankruptcy Code. If a person has income in excess of the median income for their household, they may be required to file a Chapter 13 debt repayment plan instead of a Chapter 7 case. This would require the debtor to be in bankruptcy for three to five years and pay back some or all of their debt during that time. Contrast that with a Chapter 7 which would typically allow the debtor to discharge their debts in full and begin a fresh start within four to five months.

All potential debtors are measured by the same yardstick: the median income in your state for the number of people in your household as measured by the U.S. Census Bureau. The census bureau website does not indicate that it takes into account any gender parameters when calculating median income, nor whether the household is a custodial parent or otherwise.

The effect of measuring women against the entire pool of adult households with the same number of people in a specific geographical region is that the relative income disparity is not taken into account. In Illinois, the median income for a single adult household is approximately $44,673 (as of April 2008). If you consider the plight of two workers, Mr. XY and Ms. XX, who have identical job classifications in a large company, Ms. XX statistically makes 23.8% less on average than Mr. XY.

In a bankruptcy analysis if Mr. XY makes $50,000 per year he may have to file a Chapter 13 because his income exceeds the median. However, Ms. XX who likely earns less, approximately $31,800, is far under the median income and is not subject to further analysis. She passes (or fails, as the case may be) the means test.

Elevation of Priority of Divorce Support Payments. BAPCPA amended the bankruptcy code to change the priorities of who gets paid first when a bankruptcy estate has funds. The overwhelming majority of bankruptcy cases are "no asset" cases with no payments to unsecured creditors, but sometimes assets are available to be collected. The bankruptcy trustee typically collects the assets and liquidates them to reduce them to cash. Creditors share this pool of cash according to priorities established by Congress and listed in the Bankruptcy Code. 18 Because of BAPCPA, Domestic Support Obligations (DSOs)19 are now provided first priority over other unsecured creditors. In asset cases this should be a boon to women who are owed domestic support.

Broader Definition of Domestic Support Obligations. BAPCPA included a definition of Domestic Support Obligations, such that virtually all alimony, maintenance or child support payments and obligations regardless of whom they may be owed to are included within the definition. This greatly expanded and clarified the prior law which differentiated between support and property division settlements/orders in divorce proceedings, with the latter often being dischargeable.

Stricter Non-Dischargeability for DSOs and Other Divorce Obligations. Another positive modification from BAPCPA is the increased non-dischargeability of Domestic Support Obligations. Under 11 U.S.C. §523(a)(5), all Domestic Support Obligations are non-dischargeable. Furthermore, debts to a spouse, former spouse, or child whether or not designated as a "domestic support obligation," are non-dischargeable pursuant to 11 U.S.C. §523(a)(15). If the debt is a support obligation incurred in a marital dissolution, it is non-dischargeable under §523(a)(5). If it is a non-support marital obligation incurred in a marital dissolution is it non-dischargeable under §523(a)(15) (such as an award of Attorney fees to the non-debtor former spouse).

Notice Provisions for Support Obligors. Domestic Support obligees should received adequate notice of the bankruptcy case because of changes enacted by BAPCPA. This change requires that the bankruptcy trustee must notify holders of domestic support claims of their rights to access state child support agencies and also provide notice of the bankruptcy to the State Child Support Enforcement Agency. Notices must be made at the time of filing and also at the end of the case.

Domestic Support Payments Not Preferences. One of the confounding sections of the Bankruptcy Code to many outside the halls of the Bankruptcy Courts is 11 U.S.C. 547 which allows the Bankruptcy Trustee to avoid certain payments by the debtor to creditors made within a 90 day window prior to filing as preferences. Recipients of a trustee demand letter for repayment of a preference are never pleased and often have to return monies paid to them. BAPCPA excludes payments under Domestic Support Orders from the reach of the bankruptcy trustee as preferences. Again, the benefit falls mostly to women who are the majority recipients of domestic support payments.

Expanded Exceptions to Automatic Stay. BAPCPA expanded the exceptions to the automatic stay provisions of 11 U.S.C. §362. No longer must a creditor seek relief from the automatic stay – or pay the $150 filing fee for doing so – in cases of child custody, visitation, divorce proceedings (except proceedings concerning the division of assets) and protection from abuse cases. Under the old law these proceedings came to a screeching halt when one of the parties filed bankruptcy. No longer.

Expanded Power for Spouses to Pursue Debtor’s Exempt Assets. Typically a debtor in bankruptcy can claim certain assets as exempt. The exemptions allow the debtor to retain some assets and use them to get a fresh start. 11 U.S.C. §522(c)(1) allows a domestic support creditor to pursue assets that would otherwise be exempt from other creditors or the bankruptcy trustee. For instance, if a debtor has a sizeable 401(k) account, but had not paid his (or hers) Domestic Support Obligations, the obligee of those payments could seek payment by liquidation of the asset inside the bankruptcy.

Requirement that Chapter 13 Debtors Pay Domestic Support Obligations. BAPCPA also provided that Chapter 13 Debtors must 1) remain current on all post-petition payments of DSOs and 2) fully cure any past due DSOs through their Chapter 13 Plan. Combined with the new notice provided by the trustee, this change could greatly benefit recipients of support payments, provided the actually file a claim in the case.

Conclusion. There are certainly trends, causes and changes to the law that have not been explored. However, what is clear is that the realities of the economy and modern society are having an effect on women. For some, the effect is economic uncertainty and accumulation of debt. As the trends show, more and more women are filing individual bankruptcy cases seeking relief from their debts. The BAPCPA amendments to the Bankruptcy Code changed many aspects of bankruptcy. Some of the changes were negative for women, but many were also positive. Having a working knowledge of these trends and the changing legal landscape will help you advise your clients in the most effective way.n

1 All references to the Bankruptcy Code relate to Title 11 United States Code.

2 "Neither a borrower nor a lender be, For loan oft loses both itself and friend, And borrowing dulls the edge of husbandry." Hamlet, Act I, Scene 3, William Shakespeare.

3 Maurizio Pontani (2004) "Pre-Bankruptcy Crimes and Entrepreneurial Behavior. Some Insights From American and Italian Bankruptcy Laws", German Working Papers in Law and Economics: Vol. 2004: Article 14.

4 See Civil Aspect of Bankruptcy, The Catholic Encyclopedia,

5 The 13th colony of Georgia was established a debtor’s colony in 1733.

6 See U.S. Constitution Article 1, Section 8

7 Chapter 7 is commonly called "straight bankruptcy" or "fresh start". Chapter 13 is a debt repayment "plan" of three to five years often employed as a tool to prevent foreclosure or repossession.

8 See, "Women in Bankruptcy", Sullivan and Warren, 1999

9 According to "Custodial Fathers and Mothers 2003", U.S. Census Bureau, July 2006, 14 million parents had custody of 21.6 million children while the other parent lived somewhere else. Of these custodial parent 5 out of 6 were mothers and 1 in 6 were fathers.

10 "Bankruptcy Reform would Hurt Women in Transition", Women Work!, March 2005

11 Jeffrey Freedman, Buffalo Law Journal, Vol. 77, No. 10, February 2005

12 Marianne Sullivan, "Wage Gap Is Wider for Women of Color", Women’s Enews, April, 2004

13 U. S. Department of Labor: Futurework, Trends and Challenges for Work in the 21st Century, September 1999

14 David U. Himmelstein, Elizabeth Warren, Deborah Thorne, and Steffie Woolhandler, "Illness And Injury As Contributors To Bankruptcy", February, 2005;

15 "Bankruptcy Reform would Hurt Women in Transition", Women Work!, March 2005

16 "Custodial Fathers and Mothers 2003", U.S. Census Bureau, July 2006

17 Sandra Guy, "Bankruptcy Law Pushes Women Closer to Edge", Women’s Enews, October, 2005.

18 See 11 U.S.C. § 507 (a)(1)

19 See 11 U.S.C. §101 (14A)

Arthur Rummler is an attorney practicing in the area of bankruptcy as an associate at Springer, Brown, Covey, Gaertner & Davis, LLC.  He began his practice in 1992.  He has extensive experience in all phases of bankruptcy including trustee, debtor and creditor representation.  He is actively involved in the DCBA and appeared for the first time this past year in Judges Night.

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