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Consumer Friendly Forms for Bankruptcy

posted by Katie Porter

In many respects, bankruptcy is a one-size-fits-all legal process. Yes, there are ample differences in the law (and a world of difference in practice) between the bankruptcy of a large corporation and a typical consumer. But the Bankruptcy Code itself contains plenty of provisions of general applicability. A major example of the one-size-fits-all approach to bankruptcy is the official forms for filing a case. The basic petition and schedules are the same forms for Big Airline Co. and Mr. Joe Blow. The information on the forms is wildly different, with Big Airline Co. listing hundreds or even thousands of creditors, with many more digits in their debts, than Joe Blow. But the form for those debts--Schedule F--is the same form. That may all be changing soon.

The Bankruptcy Rules Committee began a Forms Modernization Project a few years ago, and one of its top agenda items has been creating new forms just for use in consumer bankruptcy cases. Although few people seem to be aware of the effort, a draft version of those new forms is available to the public and to my mind, well worth a look. To see the forms, go here, then click on September 2011, download the file, and look  at pp. 189-315 of the PDF (or tab 7.1 if you use the PDF index.) One thing that is obvious from the page numbers in the prior sentence is that the new forms are really long--way longer than the current forms as completed in the typical consumer case. The added length results in part from the development of extensive instructions for each form. Below is an example of a new form with some commentary on its notable new features.

This is the first page of the draft new form for consumer debtors to report their unsecured debts; this would replace the existing Schedule F. New Form B106C From an aesthetic perspective, note that the form has a larger typeface than the existing form and makes much more use of font characteristics such as bold, underline, boxes, etc. to differentiate content. This is all part of the art of making a form "readable." It also contains lots of little checkboxes rather than columns to hold information like the current form. From a substantive perspective, and before someone makes a comment that I have made a mistake, note that this first page of the form starts by asking the debtor to list priority debts. The form combines Schedules E and F, into a single form for Unsecured Claims. It also lists only the three most common kinds of priority debts in consumer cases--domestic support, taxes, and drunk driving--on the form and uses an "other" box where the debtor could list the kinds of priority debts in Section 507 of the Bankruptcy Code that rarely apply in consumer cases, but frequently come up in businesses cases. This is a great example of how the form departs from one-size-fits-all forms that match where bankruptcy law takes a one-size-fits-all approach in the Bankruptcy Code.

The period for public comment on these forms has not yet begun, and the Bankruptcy Rules Committee may well make changes before then. In future posts, I will say more about what kinds of changes I hope to see and offer some thoughts on whether this initiative is a positive development for the system.

Comments

Katie, is there any thought of doing some consumer focus group testing of the forms? Also, given that forms are filed electronically, what about developing a free software tool that would allow consumers to complete the forms on line, perhaps made available in clerk's offices, libraries, etc.? Obviously this would make the commercial BK software vendors unhappy.

I like Alans idea...maybe like the free filing of tax returns?? Of course we will be awaiting the 707b motions that debtors will need direction on because they forgot to mention this or that as far as income... Honestly no mater how easy you make it for some it will still be way too hard and scary!

I believe that they did do focus group testing and that this is documented in the minutes of one of the Rules Committee meetings. I am not sure if or the degree to which the testing was with consumers or whether it was with attorneys, trustees, judges, etc. We have a big readership on Credit Slips--perhaps someone participated in such testing? I personally have not met or heard of anyone that I know participating or being invited to participate. The testing was overseen by the Administrative Office of the US Courts, I believe.

I consider it deeply regrettable that the current forms incorporate staggering amounts of instructions into the actual forms that must be filed with the court. This draft makes that deficiency far worse. We are going to end up with voluminous documents with, in most cases, a light smattering of actual information sprinkled very lightly throughout. They may be plausibly well designed for a smart, patient pro se debtor, but are bizarre for a represented debtor (and his/her counsel). It would be far better to keep the instructions separate (and unfiled) and make the filed documents much sparer and information-dense. The federal income tax forms would be a better model, but I would go even further in that direction. Who benefits here? Professional form program sellers, who will build systems to translate reasonably efficient data input into these scattered-smattering forms. In the great majority of non-pro-se cases nobody -- did I mention NOBODY!? -- at any point in the process will read those stunningly prolix instructions cluttering up the court file.

Assuming these forms make it official:

The paper WASTE would be out of control. Many jurisdictions still require PAPER copies of the petition and schedules to be served on the Court (Chambers as well) and the Trustee appointed.

Double-sided copying will have to become the norm, otherwise I'll be charing cleints extra just for the paper copies involved.

The posts raise a number of questions that some information can answer. As the chair of the forms modernization project I offer the following observations. In addition I’d like to invite any academic readers of this blog—either individually or though an informal committee—to give us comments about the draft forms. You can contact us by writing scott_myers@ao.uscourts.gov.

Length. The forms are longer, but not nearly as long as you might think from the 126 pages of materials provided to the Bankruptcy Rules Committee. That count includes some forms that most consumer debtor will NOT use (such as the List of 20 Largest Unsecured Creditors) and it includes extensive instructions that also will never be filed—they’ll be in a separate instruction booklet.

To the extent that the forms are actually longer, the main reason is that they eliminate the dense instructions at the beginning of the current forms. Instead, we ask for information on the forms in an understandable way. Numerous explanations are included within the forms themselves in order to make them easier to understand. Ken suggests that including instructions on forms is a waste and that the forms should be more like IRS forms. But debtors sign their bankruptcy documents under penalty of perjury, and so they need to be able to understand what is being asked. In addition, some questions are changed to a closed-ended format to increase the likelihood of getting a response.

At the same time, some forms have actually gotten shorter. For example, the means test form has been divided into two parts and below-median income debtors will only file the much shorter part. The draft forms include multiple spaces that may not be necessary for many debtors to complete. They also contain conditional questions that allow debtors who answer “no” to skip several questions. Current Bankruptcy Rule 9009 permits the forms to be truncated to eliminate unnecessary material when filed.

Paper excess? Mike argues that paper waste would be out of control. But all bankruptcy courts have electronic files and the modernized forms are designed for an electronic world. The Bankruptcy Rules Committee is doing what it can to eliminate the need for paper copies. For example, as a result of the work of forms modernization, the Rules Committee will discuss at the spring meeting a national convention for standardized electronic signatures designed to eliminate the requirement of retaining paper copies with wet signatures.

Moreover, we’re taking steps to allow non-paper filing even by pro se debtors. Free Software for Electronic Filing is currently being developed through the Pro Se Pathfinder project. Testing of the free software will take place in three districts - New Jersey, New Mexico, and the Central District of California - starting this spring.

Research about Individual Forms. Research has been a feature of the forms project from the beginning. At the outset, the Federal Judicial Center began surveying attorneys, bankruptcy judges, bankruptcy clerks, trustees, and academics about the current forms. Once the individual forms were drafted, the FJC has been testing the draft forms and the testing has resulted in revisions. Three groups of testers of varying sophistication - career law clerks, law students, and college students - completed draft forms using information from different types of filed bankruptcies and their own information. In addition, a researcher tested the comprehensibility of the draft forms with a group of lay people. The FJC ran telephonic focus groups about the draft forms with representatives of NACBA, NABT, the UST, and NACTT (trustees, mortgage-creditors, and other creditors). The results of this research has been incorporated into each reiteration of the proposed forms.

Elizabeth Perris
Bankruptcy Judge, District of Oregon

From a bankruptcy trustee perspective, these proposed forms are simply awful. The time needed to review the forms would be many times what it is now, and the apparent focus on the lowest common denominator of unrepresented consumer debtors will only complicate the process for everyone involved, including the unrepresented debtors.

If the desire is to make it easier for unrepresented debtors to fully disclose assets and liabilities, using a 126 page forms package is not the way to go. In my experience, consumer debtors often have difficulty reading and following even simple instructions contained in a one page letter. The forms package as proposed ignores the simple realities faced by most consumer debtors.

Even following a free and easily accessible computerized script in the fashion of TurboTax (which is the only way this project has any hope of being successful in my opinion) will be beyond the capabilities of many if not most consumer debtors. And this doesn't even begin to address the new challenges faced by already overworked debtors attorneys presented with these new forms requirements.

If the committee insists on using this gargantuan forms package, than at least provide a summary page that will provide essential information at a glance. For instance, a simple spreadsheet format showing all assets with columns for full descriptions, values, lien amounts and whether and how much claimed exempt would be far more accessible and useful to trustees than the current proposal.

Unfortunately, it appears that a great deal of time and effort has been invested in coming up with this forms package, which suggests that significant effort will go into defending and "cramming down" the package rather than focusing on producing something that will actually be practical and effective from the various constituencies' point of view. This is an admittedly jaded opinion, but one amply informed by past bureaucratic endeavors of this nature.

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