The A2J Lab produces quality research on A2J issues and seeks to change hearts and minds about the value of rigorous empirical study, including RCTs, to the legal profession. It also has a symbiotic relationship with students. Lots of students. Currently, over four dozen law students work on A2J Lab projects. Some of these students will be writing blog entries to show how their work furthers Lab projects, and how the Lab provides them with opportunities to experience the real world of law.
Our first student blogger is Seth Motel. Seth works on the Bankruptcy Team for the Financial Distress Research Project. That means he works with several student team members to create self-help materials to allow low-income Connecticut individuals and families to file for Chapter 7 bankruptcy. Self-help materials are one of the primary interventions that the Project will evaluate.
Seth’s post shows that a great deal of empiricism involves good, old-fashioned spadework.
What to Exempt? Real Filings Show the Way
People who file for bankruptcy can exempt various assets from the reach of creditors. In certain states, bankruptcy filers can choose whether to file exemptions based on that state’s legal code or a similar federal statute. Since our project’s state of Connecticut allows filers to choose either set of exemptions, our team wanted to develop instructions for the set that made the most financial sense. To determine the answer, a colleague and I looked at actual Connecticut bankruptcy filings from two different days in 2016. Using Bloomberg, we filtered out cases that did not fit our study population. Together, we downloaded 13 PDFs of filings. Then, we sorted them into an Excel spreadsheet with columns denoting key information: monthly income, household size, etc.
While not a truly random sample, this collection gave us a very helpful peek at what sorts of exemptions our study population might list. Indeed, while the exemptions varied, most people only claimed a few of them. For instance, just 3 of the 13 filers used the exemption that protects up to $1,600 of jewelry (under 11 U.S.C. § 522(d)(4)). Slightly more than half (7 of 13) listed a motor vehicle under § 522(d)(2), including one person who listed two vehicles. Furthermore, many listed money in checking, savings, and retirement accounts, while one person protected “sports equipment” under § 522(d)(5)—the so-called wild card exemption. One person listed no exemptions.
This research revealed two key pieces of information. First, there exists a tremendous diversity in bankruptcy filers’ assets and what they choose to exempt. Second, and most important for this exercise, all 12 of the Connecticut filers who listed exemptions did so under the federal provisions. Although there are some areas in which Connecticut state law offers more generous exemptions (such as homesteads or certain pension accounts), these people and/or their attorneys clearly saw a bigger benefit in the federal law than the state law. Ultimately, knowledge of this preference was crucial in order to most helpfully walk filers through the maze of bankruptcy forms.