Bankruptcy and Child Support Enforcement: Improved Information Sharing Possible without Routine Data Matching
Published: 2008-01-23T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Recognizing the importance of child support, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 requires that if a parent with child support obligations files for bankruptcy, a bankruptcy trustee must notify the relevant custodial parent and state child support enforcement agency so that they may participate in the case. The act also required GAO to study the feasibility of matching bankruptcy records with child support records to assure that filers with child support obligations are identified. GAO therefore (1) identified the percent of bankruptcy filers with obligations nationwide, (2) examined the potential for routine data matching to facilitate the identification of filers with child support obligations, and (3) studied the feasibility and cost of doing so. GAO interviewed child support enforcement and bankruptcy officials at the federal level and in six states. GAO also conducted a nationwide test data match and reviewed national bankruptcy filings for people with support obligations in Texas for an indication of whether filers are failing to provide this information.
section_title: What GAO Found
paragraphs: Nationwide, about 7 percent of individuals who filed for bankruptcy between October 17, 2005, and October 17, 2006--the first year of the bankruptcy act implementation--were noncustodial parents with child support orders. They, in turn, represented about one-half of 1 percent of the 9.9 million noncustodial parents with orders to pay child support. While these proportions are small, they represented 45,346 adults and at least as many children. Routine data matching might identify individuals who have not reported their child support obligations. However, GAO estimated from a random sample file review that 98 percent of noncustodial parents nationwide with orders in Texas had volunteered this information when they filed. (The results could be higher or lower in other states.) Another potential benefit would be to reduce the workload for state child support agencies by providing positive identification of bankruptcy filers with orders under the states' purview by comparing the full social security numbers (SSNs) of individuals in both bankruptcy and child support databases. This would help address the current situation state agency officials described, in which significant numbers of the notices they receive from bankruptcy trustees included only partial SSNs of the named person, imposing additional work on staff to make a positive identification in their databases. For bankruptcy case trustees participating in the U.S. Trustee Program, we found this to be the case, even though program guidance--covering 84 of the 90 bankruptcy districts--calls for case trustees to provide full SSNs in notices sent to state agencies. These notices are not part of any public record and trustee program officials said this use of the full SSNs is consistent with executive branch policies designed to guard privacy. For the remaining six districts, administered under a separate program, no guidance has been developed. A data matching system is technically feasible, but it would be a complex and costly undertaking, and would involve addressing some statutory and policy considerations. Regarding notifying state agencies of the match results, federal child support enforcement officials said that their national automated system could disseminate this data after modifications to federal and state systems. However, a data matching system would not offer a comprehensive alternative to the trustee notification system, because it would not transmit information to custodial parents. Regarding cost, bankruptcy and child support enforcement officials said that the development and implementation of an automated interface between two separate databases is a complex and costly undertaking, requiring modifications to each, with many steps required to assure that the matching system is developed and deployed without critical flaws and allowing for the secure exchange of data. Also, bankruptcy officials cited some statutory and policy considerations to releasing their own data or to performing a data match. It would also duplicate a portion of the current trustee notification process. In view of these findings, instituting a data matching system may not be warranted, especially if the case trustees can provide full SSNs of bankruptcy filers when notifying state agencies.

section_title: Letter
paragraphs: Millions of parents nationwide do not live with one or more of their minor  Millions of parents nationwide do not live with one or more of their minor  children. For many of these children and the households they live in, child  children. For many of these children and the households they live in, child  support payments from noncustodial parents can be an important source  support payments from noncustodial parents can be an important source  of income. In fiscal year 2006 alone, almost $24 billion in child support  of income. In fiscal year 2006 alone, almost $24 billion in child support  payments was collected and distributed through the federal/state child  payments was collected and distributed through the federal/state child  support enforcement (CSE) program. In recognition of the importance of  support enforcement (CSE) program. In recognition of the importance of  child support to these families, the Bankruptcy Abuse Prevention and  child support to these families, the Bankruptcy Abuse Prevention and  Consumer Protection Act (also known as the Bankruptcy Reform Act)— Consumer Protection Act (also known as the Bankruptcy Reform Act)— which was signed into law in April 2005 and addresses, among other  which was signed into law in April 2005 and addresses, among other  things, certain factors viewed as contributing to an escalation in  things, certain factors viewed as contributing to an escalation in  bankruptcy filings—included new provisions to help better ensure that  bankruptcy filings—included new provisions to help better ensure that  child support is given a high priority in bankruptcy.  child support is given a high priority in bankruptcy.
Specifically, to help ensure that child support payments are made to  Specifically, to help ensure that child support payments are made to  custodial parents, bankruptcy filers are to disclose their support  custodial parents, bankruptcy filers are to disclose their support  obligations on certain bankruptcy forms. The act amended the Bankruptcy  obligations on certain bankruptcy forms. The act amended the Bankruptcy  Code to require bankruptcy case trustees—generally private individuals  Code to require bankruptcy case trustees—generally private individuals  who are appointed by the federal government to administer individual  who are appointed by the federal government to administer individual  bankruptcy cases—to notify child support claimants, such as custodial  bankruptcy cases—to notify child support claimants, such as custodial  parents to whom support payments are owed by an individual filing for  parents to whom support payments are owed by an individual filing for  bankruptcy, as well as state CSE agencies that might be involved. This is  bankruptcy, as well as state CSE agencies that might be involved. This is  designed to allow custodial parents and state CSE agencies to have an  designed to allow custodial parents and state CSE agencies to have an  opportunity to be party to any bankruptcy proceedings. Nationwide, most  opportunity to be party to any bankruptcy proceedings. Nationwide, most  parents with child support orders receive child support enforcement  parents with child support orders receive child support enforcement  services through state CSE agencies while the remainder rely on private  services through state CSE agencies while the remainder rely on private  arrangements.  arrangements.
The ability to identify bankruptcy filers who have child support obligations  The ability to identify bankruptcy filers who have child support obligations  is essential for many of the new provisions in the act to work. While the  is essential for many of the new provisions in the act to work. While the  federal bankruptcy system and the CSE program have national databases,  federal bankruptcy system and the CSE program have national databases,  none identify bankruptcy filers who owe or pay child support. The  none identify bankruptcy filers who owe or pay child support. The  Bankruptcy Reform Act, therefore, required that we study and report on  Bankruptcy Reform Act, therefore, required that we study and report on  the feasibility, effectiveness, and cost of identifying such filers through  the feasibility, effectiveness, and cost of identifying such filers through  database matching of bankruptcy records with child support enforcement  records. (The names of addressees are listed at the end of this letter.)
To respond to this statutory requirement, we addressed the following  questions: (1) What percent of bankruptcy filers are parents who have  orders to pay child support? (2) In what ways, if any, might matching of  national bankruptcy and child support enforcement data on a routine basis  facilitate the identification of bankruptcy filers with orders to pay child  support? (3) What is the feasibility and estimated cost of conducting such  a data match on a routine basis?
To address these objectives, we used several different methodologies. To  identify the percent of bankruptcy filers with orders to pay child support,  we worked with the U.S. Department of Health and Human Services’  (HHS) Office of Child Support Enforcement (OCSE)—the entity  overseeing state CSE agencies—to match its national child support  enforcement data with a national extract of data on bankruptcy filers that  we obtained from the Administrative Office of the United States Courts  (Administrative Office). The Administrative Office provides support for  federal courts and is supervised by the Judicial Conference of the United  States. The HHS data comprised all parents in its national-level database  with current orders to pay child support as of June 29, 2007, and the  Administrative Office data comprised all individuals that filed for  consumer bankruptcy between October 17, 2005, and October 17, 2006,  the first year of implementation under the Bankruptcy Reform Act. For  more information on scope and methodology, see appendix I.
To determine in what ways matching bankruptcy and child support data  might facilitate the identification of bankruptcy filers with child support  obligations as well as to assess the feasibility and estimated costs of  matching on a recurring basis, we interviewed officials in both the  federal/state CSE program and bankruptcy system. We interviewed  officials at OCSE as well as officials at state agencies in Alabama,  California, Illinois, New York, Texas, and West Virginia. We chose these  six states for their diverse geography, caseload sizes, and administrative  structures. More specifically, to illustrate whether a routine match could  facilitate the identification of bankruptcy filers who fail to report their  child support obligations, we conducted a match of national bankruptcy  filings with child support enforcement data from the Texas state CSE  agency to identify all bankruptcy filers between October 17, 2005, and  October 17, 2006, who had a child support order in Texas open at any time  during this same time period. Using the matched results, we then  reviewed publicly accessible bankruptcy files of a simple random sample  of 100 to determine whether they had reported their child support  obligation in their bankruptcy filing. The results of this case study cannot  be generalized nationwide; however, they can be generalized to the  population of 1,931 noncustodial parents who filed for bankruptcy  nationwide and also had child support orders in Texas.
We assessed the reliability of both the bankruptcy and child support  enforcement data by reviewing documentation about the systems that  produced them, interviewing agency officials knowledgeable about the  data, and performing electronic testing of the relevant data elements.  Because HHS conducted the test match of the bankruptcy data and  national child support enforcement data itself, we were unable to conduct  electronic testing as a part of our data reliability assessment. However,  HHS performed the analysis to meet certain specifications we provided  and included some information to allow us to assess the work performed.  We determined that these data were sufficiently reliable for the purposes  of this report.
Additionally, we interviewed officials of the executive branch’s United  States Trustee Program at the Department of Justice and the judicial  branch’s Bankruptcy Administrator Program, which share responsibility  for bankruptcy case trustees. For the U.S. Trustee Program that covers  bankruptcy districts in all but two states, we talked with officials from the  Executive Office for U.S. Trustees (EOUST) and 5 regional U.S. Trustees  as well as 15 bankruptcy case trustees participating in this program in five  of the states we selected. Separate from the U.S. Trustee Program, the  judicial branch Bankruptcy Administrator Program has bankruptcy  administrators who operate in the remaining two states (Alabama and  North Carolina) who perform duties similar to those of the U.S. Trustees,  including maintaining a panel of private bankruptcy case trustees. In  Alabama, we interviewed one bankruptcy administrator and one case  trustee who reports to this bankruptcy administrator.
We conducted this performance audit from December 2006 to January  2008 with generally accepted government auditing standards. Those  standards require that we plan and perform the audit to obtain sufficient,  appropriate evidence to provide a reasonable basis for our findings and  conclusions based on our audit objectives. We believe that the evidence  obtained provides a reasonable basis for our findings and conclusions  based on our audit objectives.
subsections: section_title: Background
paragraphs: Bankruptcy is a federal court procedure designed to help both individuals  and businesses address debts they cannot fully repay as well as help  creditors receive some payment in an equitable manner. Individuals  usually file for bankruptcy under one of two chapters of the Bankruptcy  Code. Under Chapter 7, the filer’s eligible nonexempt assets are reduced to  cash and distributed to creditors in accordance with distribution priorities  and procedures set out in the Bankruptcy Code. Under Chapter 13, filers  submit a repayment plan to the court agreeing to pay part or all of their  debts over time, usually 3 to 5 years. Upon the successful completion of  both Chapter 7 and 13 cases, the filer’s personal liability for eligible debts  is discharged at the end of the bankruptcy process, which means that  creditors may take no further action against the individual to collect the  debt. Child support is not a debt eligible for discharge.
The Bankruptcy Reform Act, among other things, amended the  Bankruptcy Code to require those filers with the ability to pay some of  their debts to enter into repayment plans under Chapter 13 of the  Bankruptcy Code instead of liquidating their assets under Chapter 7 and  granting the debtor a discharge from eligible debts. During the first year of  implementation under the Bankruptcy Reform Act, about 628,537  individuals filed for bankruptcy, based on the Administrative Office  bankruptcy data we used for our national data match.
subsections: section_title: The Bankruptcy System
paragraphs: The bankruptcy system is complex and involves many entities in the  judicial and executive branches of the federal government. (See fig. 1.)
Within the judicial branch, 90 federal bankruptcy courts have jurisdiction  over bankruptcy cases. The Administrative Office is the central support  entity for federal courts, including bankruptcy courts, providing a wide  range of administrative, legal, financial, management, and information  technology services. It also maintains the U.S. Party/Case Index, which  contains information collected from all 90 federal bankruptcy courts and  allows courts to identify parties involved in federal litigation almost  anywhere in the nation. The Director of the Administrative Office is  supervised by the Judicial Conference of the United States. The Judicial  Conference also considers administrative problems and policy issues  affecting the federal judiciary and makes recommendations to Congress  concerning legislation affecting the federal judicial system.
The bankruptcy courts share responsibility for bankruptcy cases with the  United States Trustee Program, which is part of the executive branch’s  U.S. Department of Justice (Justice). In all but six bankruptcy court  districts in Alabama and North Carolina, the U.S. Trustee Program is  responsible for appointing and supervising private bankruptcy case  trustees who manage many aspects of individual bankruptcy cases. The  Executive Office for U.S. Trustees at Justice provides general policy and  legal guidance, oversees operations, and handles administrative functions  for the U.S. Trustee Program. It also manages the Automated Case  Management System, which functions as the U.S. Trustee Program’s  system for administering bankruptcy cases. Separate from the U.S. Trustee  Program, the remaining six districts have judicial branch bankruptcy  administrators (referred to as the Bankruptcy Administrator Program)  who perform duties similar to those of the U.S. Trustees, including  overseeing the administration of bankruptcy cases, maintaining a panel of  private case trustees, and monitoring the transactions and conduct of  parties in bankruptcy in those states.
section_title: The Child Support Enforcement Program
paragraphs: The federal government partners with states to operate the child support  enforcement program, making available to parents a range of child support  services, including establishing and enforcing child support orders. A child  support order can be entered into voluntarily, ordered by a court, or  established by a state agency through an administrative process. Once  established, it generally legally requires a noncustodial parent to provide  financial support to a custodial parent with at least one child.
Nationwide, almost 10 million noncustodial parents had child support  orders in place in June 2007, based on the Federal Case Registry  maintained by OCSE. This registry, part of the Federal Parent Locator  Service, contains information about individuals with child support cases  and orders administered by state CSE agencies as well as individuals not  part of the CSE program, but who had orders established after 1998. About  78 percent of these 10 million noncustodial parents had orders enforced  through state CSE agencies; the remaining parents are not involved with a  state agency in enforcing their orders.
The CSE program makes services available, upon request, to any parent or  other person with custody of a child (custodial parent) who has a parent  living outside of the home (noncustodial parent). Parents that receive  public assistance through the Temporary Assistance for Needy Families  (TANF), Medicaid, and Foster Care programs receive CSE services free;  others are charged a nominal fee not to exceed $25. TANF recipients are  required to assign their rights to child support payments to the state. In  fiscal year 2006, the state CSE agencies administered 15.8 million cases,  providing a range of services, including establishing paternity and support  orders, locating noncustodial parents, collecting and distributing child and  medical support, and reviewing and modifying support orders.
The majority of child support is collected through wage withholding, but  state agencies also use other methods for enforcing child support orders.  In 2006, about 69 percent of child support payments were collected  through wage withholding, which involves employers withholding support  from noncustodial parents’ wages and sending it to the appropriate state  agency for distribution. Other methods include intercepting federal and  state income tax refunds; liens against property; as well as withholding or  suspending driver’s licenses, professional licenses, recreational and  sporting licenses, and passports of persons who owe past-due support.  During fiscal year 2006, total distributed collections were almost $24  billion. Program costs for that year totaled $5.6 billion, of which $3.7  billion was federally funded.
State agencies administer the CSE program, but the federal government  plays a major role in supporting them. At the federal level, OCSE within  the Administration for Children and Families of HHS provides a majority  of program funding. It also establishes enforcement policies and guidance,  provides state agencies with technical assistance, and oversees and  monitors state programs.
section_title: Bankruptcy Reform Act’s Treatment of Child Support
paragraphs: The Bankruptcy Reform Act included new provisions to help better ensure  that noncustodial parents who file for bankruptcy continue paying child  support and that child support payments are given a high priority in  bankruptcy. One of these provisions clarifies that proceedings to establish  or modify a domestic support obligation (e.g., child support) owed to a  governmental unit (e.g., state CSE agencies) are exempt from the  automatic stay. An automatic stay bars creditors from taking measures to  collect a debt pending resolution of the bankruptcy proceeding. Another  provision allows for the continued operation of wage withholding for  domestic support obligations (e.g., child support). Further, the Bankruptcy  Reform Act, for example, requires that noncustodial parents filing for  Chapter 13 bankruptcy must be current on their child support obligations  to confirm a repayment plan. In addition, the Bankruptcy Reform Act  provides child support with the first priority for payment of unsecured  claims, up from a seventh-level priority under previous Bankruptcy Code  provisions.
section_title: Notifying Custodial Parents and State Child Support Enforcement Agencies of Bankruptcies
paragraphs: The Bankruptcy Code requires bankruptcy filers to submit a list of their  creditors, which could include a custodial parent or state CSE agency, in  their financial disclosures. The court, in general, is to provide listed  creditors with notice of a meeting of creditors. A filer who knowingly and  fraudulently conceals a debt owed to a creditor is subject to criminal  penalties.
In addition, the Bankruptcy Reform Act amended the Bankruptcy Code to  require that child support claimants, such as custodial parents and state  agencies, be specifically notified of the bankruptcies of parents having a  domestic support obligation (DSO), a designation that includes child  support and alimony. Case trustees are to send notices of the bankruptcy  case to these parties after bankruptcy filers report in their paperwork that  they have a DSO. Figure 2 shows court and trustee notification processes  based on law, regulations, and guidelines.
State agencies and custodial parents benefit from knowing about the  bankruptcies of parents who owe child support. The notice to the  custodial parent provides information about the state agency and his or  her right to use its services. Knowing about the bankruptcy of a  noncustodial parent is important so that the state agency or custodial  parent can participate in and be a party to pertinent bankruptcy  proceedings. Knowing about the bankruptcy also helps state agencies  avoid violating any automatic stay that may be in place. Although the CSE  program may continue using many of its collection tools, such as wage  withholding, a few of these tools are still subject to the automatic stay.  According to a state official, agencies can face penalties if they collect  funds using tools subject to the automatic stay.
section_title: About 7 Percent of Those Who Filed for Bankruptcy Have Orders to Pay Child Support and Most Are Part of the CSE Program
paragraphs: Our data match using the national bankruptcy and OCSE data found that  among the 628,537 individuals who filed for bankruptcy between October  17, 2005, and October 17, 2006, the first year of implementation of the  Bankruptcy Reform Act, about 7.2 percent were noncustodial parents with  orders to pay child support. This population represents just one-half of 1  percent of the 9.9 million noncustodial parents who have orders to pay  child support. While these proportions are small, they nevertheless  represent 45,346 adults with orders to pay child support and at least as  many children.
About three-quarters (33,958) of bankruptcy filers with orders to pay  support were receiving services from CSE programs in various states. At  least half of these bankruptcy filers were past due on their payments.  While data obtained for our study did not include the past due amounts  owed by these parents, fiscal 2004 data reported by OCSE, the most recent  available, show that of all noncustodial parents with orders who are part  of the CSE program, the average total past due amount owed was about  $9,400.
A greater number of noncustodial parents filed for Chapter 7 than Chapter  13 bankruptcy. Nevertheless, proportionally more noncustodial parents  filed for bankruptcy under Chapter 13 than did all filers (see table 1).  Several experts on bankruptcy and child support as well as officials in  some state agencies said the state agency is likely to play a role in Chapter  13 filings because under this chapter an individual repays some or all debt  under a court-approved plan prior to a discharge. Past due child support is  a debt that can be included in the repayment plan and state agencies may  opt to continue collecting past due support through the state agency  enforcement process or through the Chapter 13 repayment plan. In  contrast, a large majority of filers under Chapter 7 have no assets available  for liquidation, and thus no funds are available to pay creditors. Regardless  of which chapter a noncustodial parent files under, collection of ongoing  child support would continue if, for example, the filer had income and a  wage withholding order in place.
Although our study does not focus on custodial parents who are owed  child support and who filed for bankruptcy, our match showed that a  slightly higher percentage of bankruptcy filers were custodial parents than  noncustodial parents. Specifically, custodial parents represented 10  percent of all those who filed for bankruptcy while noncustodial parents  represented 7 percent.
section_title: A Routine, National Data Match Might Identify Filers Who Do Not Report Their Support Obligations and Reduce the Workload Associated with the Current Process
paragraphs: A national match of bankruptcy data with child support enforcement data  conducted on a recurring basis might help identify filers who, for one  reason or another, fail to report their child support obligations in their  bankruptcy paperwork. The results of such a match would also reduce the  research workload for state agencies by providing positive identification  of bankruptcy filers with orders under the states’ purview by comparing  the full SSNs of individuals in both databases. This step would allow state  agencies to more quickly and accurately identify the relevant individuals in  their records. Currently, some case trustees do not include the full SSN of  the filer in their notifications to the state agencies, which imposes  additional work on the state agency staff to make a positive identification.  For case trustees in all but six bankruptcy districts in two states, guidance  calls for them to provide full SSNs in the notices they send to state  agencies.
subsections: section_title: A National Match of Federal Bankruptcy with Child Support Enforcement Data Might Identify Some Filers Who Do Not Report a Child Support Obligation
paragraphs: Conducting a national bankruptcy and child support enforcement data  match on a recurring basis might identify some additional filers who have  orders to pay child support but who do not report this obligation, as  required, when they file for bankruptcy. In a test review of bankruptcy  filings involving orders to pay child support in Texas, we found that an  estimated 2 percent of filers who completed all of their bankruptcy  paperwork may not have reported their child support obligations. (The  results could be higher or lower in other states.) For these and other filers  who fail to report their obligations in their paperwork, they may  subsequently report these obligations at a later stage in the bankruptcy  process when case trustees ask them under oath whether they have a  domestic obligation. Almost all of the 16 case trustees we spoke with for  this review said they always ask debtors this question under oath.
section_title: A Data Match Might Readily Provide State Agencies with Positive Identifications and Reduce the Workload Associated with the Current Trustee Notification Process
paragraphs: A data matching process in which OCSE conveys results to state agencies  that positively identify bankruptcy filers would allow state agencies to  process the information more efficiently and accurately than the current  process, reducing state agency workload. State agency officials reported  that their staff currently take steps when they receive notices from case  trustees to determine whether the named individual is in their agency’s  database. A significant portion of the notices a state agency receives may  pertain to noncustodial parents who are not part of that state’s CSE  program. For example, our national data match analysis identified about  one-quarter of noncustodial parent filers with orders not administered as  part of any state agency. Match results distributed to state agencies by  OCSE would, in effect, pre-sort the orders, only sending to state agencies  the information on bankruptcy filers whose orders are under their  purview. Also, agency staff can have difficulty distinguishing among the  noncustodial parents in their caseload with similar names when the  notices do not contain the full SSNs. Federal agencies often use full SSNs  when data matching or other information-sharing is used to help them  meet program goals, such as improving collections or minimizing fraud, as  long as they take the required steps to safeguard the personally- identifiable information in their possession.
We found that it is not always the practice for case trustees to include full  SSNs in their bankruptcy notices to state agencies, even though some  guidance has been issued on this. In our selected six states, state agency  officials said that trustee notices did not always contain full SSNs. In  Alabama, Illinois, and New York, for example, agency officials estimate  that half or more of the trustee notices they receive contain the filer’s  partial SSN. Of the 16 case trustees we interviewed, 5 said they do not  include the full SSN in the notices they send to state agencies. Four of  these five case trustees participating in the U.S. Trustee Program  expressed a variety of reasons for not providing full SSNs, such as  administrative convenience or some concerns about privacy, despite  EOUST guidance instructing them to do so. In Alabama, where a  bankruptcy administrator rather than a regional U.S. Trustee oversees  case trustees, a trustee and the bankruptcy administrator said that their  policy is to provide only a partial SSN to the custodial parent and state  agency.
In developing guidance for trustee noticing under the U.S. Trustee  Program, EOUST officials told us that they worked closely with OCSE  regarding what information to include in the notices going to state  agencies. The guidance notes that state child support agencies have  requested that the notices identify bankruptcy filers by name and SSN. The  guidance also includes sample notices that trustees can use that indicate  that the full SSN should be included for notifying the state agencies.   EOUST officials told us that OCSE officials emphasized the importance of  the full SSN for effective processing of notices. EOUST officials also said  that providing the full SSN to state agencies is consistent with the  Bankruptcy Reform Act. In addition, EOUST officials said that they  provided training about the notices to case trustees, through the regional  U.S. Trustees, as part of training on all aspects of the new bankruptcy  reform provisions and posted the guidance on their external and internal  Web sites.
EOUST officials also said they had considered executive branch policies  about privacy and security of personal identifiers and determined that its  guidance was consistent with these policies. It is important to note that  the notices from case trustees are not made available to the public and are  not part of the bankruptcy case docket, which is publicly available.  Officials from state agencies said similarly that they do not make this  information in the notices publicly available. We have previously reported  that SSNs can be useful tools to enhance program integrity through data  matching; however, government agencies and courts need to take steps to  prevent the improper disclosure of SSNs, including limiting the use and  display of SSNs in public records (e.g., SSN truncation in all lien records).
While EOUST officials acknowledged the importance of full SSNs in  notices, they told us that they do not have authority to require case  trustees to provide them. They said that case trustees are not directly  supervised by, or employees of, EOUST. The EOUST officials also said  that case trustees are required to administer a bankruptcy estate in  accordance with applicable state laws.
For case trustees who are overseen by judicial branch bankruptcy  administrators in the six bankruptcy districts in Alabama and North  Carolina, neither the Judicial Conference nor the Administrative Office has  established an explicit policy about case trustees providing the filer’s full  9-digit SSN in the notices sent to custodial parents and the state child  support enforcement agencies.
In addition to reducing state agencies’ workload, a routine data match  would have the additional advantage of identifying those parents who may  be part of the CSE program, but whose cases are administered by an  agency in another state. In some cases the notices could go to the wrong  state because the Bankruptcy Reform Act requires that notices be sent to  the state in which the child support claimant, such as a custodial parent,  lives, although some may live in a state other than the one administering  CSE services. Also, more than one state may be involved in some case  activity. For example, according to OCSE officials, a January 2000 national  analysis showed that, of noncustodial parents with orders to pay child  support, and who were past due on their payments, 24 percent resided in a  state other than the state seeking collection of these payments.
section_title: Although a Data Match Is Technically Feasible, There Would Be Substantial Start- Up Costs as well as Some Policy Considerations
paragraphs: A national data match conducted on a recurring basis is technically  feasible, although it would require modifications to existing systems at  national and state levels, including many steps for effectively developing  and implementing data matching that are costly. Moreover, bankruptcy  and CSE program officials expressed concern about implementing an  automated system that provides notification of noncustodial parent filers  to state agencies because of potential duplication between any new  automated system and the existing trustee notification process that was  implemented as a result of the Bankruptcy Reform Act. In addition to  these costs, bankruptcy officials cited some statutory and policy  considerations to releasing their own data or to performing a data match.  Weighing these factors and concerns against the benefits of conducting a  data match is an important consideration.
subsections: section_title: A Data Match with Transmission of Results to State Agencies Is Technically Feasible, Though It Would Not Replace Notifications to Custodial Parents
paragraphs: Officials from the Administrative Office, EOUST, and CSE agencies said  that it is technically feasible to provide information in their databases to  the other system and then match records between the two systems on a  routine basis. They also brought up legal and policy considerations, which  we discuss in more detail later. The bankruptcy system and CSE program  each have federal databases that use SSNs as key identifiers and contain  the information that potentially can be used to identify, on a routine basis,  bankruptcy filers with orders to pay child support. Both the Administrative  Office and EOUST databases contain the full SSNs of filers for consumer  bankruptcies. The EOUST database does not include bankruptcy filers in  Alabama and North Carolina because these two states do not participate in  the U.S. Trustee Program. OCSE maintains the Federal Case Registry, a  national automated system containing limited data of noncustodial parents  with orders to pay child support that are enforced through state CSE  programs and those that are not, among other information. OCSE also  maintains the Federal Offset Program file that contains information on  individuals who owe past due child support who are part of the state CSE  programs.
Using the Federal Case Registry and its other automated systems, OCSE  currently conducts routine data matches with other entities to help state  agencies locate parents and enforce child support orders. For example,  the registry helps state agencies identify noncustodial parents who are  located or working in other states. By matching its data with data held by  other agencies, such as the Social Security Administration, the Department  of Defense, the Federal Bureau of Investigation, and the Internal Revenue  Service, it can locate the parent’s employer for state agencies, allowing  them to issue income-withholding orders, among other actions. Moreover,  an OCSE analysis estimated that its National Directory of New Hires  Database matches result in about $400 million in child support collected  annually. Typically, OCSE conducts matches with entities that have  information common among many individuals in its target population or  that are expected to yield significant results. See figure 3.
With regard to using the results of a data match, current technical  capability differs among agencies. OCSE and some state agency officials  we spoke with said that OCSE’s Federal Case Registry could disseminate  this information to the 54 state agencies after modifications to this system  and state systems. Upon receiving an electronic notification that a  noncustodial parent in their caseload has filed for bankruptcy, state  agencies would also be able to identify custodial parents in their caseloads  who are associated with these noncustodial parent filers. However,  notifying the custodial parent about the bankruptcy is not currently part of  the state agencies’ or OCSE’s duties. Also, these agencies do not have  much information on custodial parents who are not part of their state CSE  programs. Alternatively, case trustees could use the match results to  continue carrying out their statutorily required duty to notify these  parents. However, EOUST officials told us they would need to build the  capacity to transmit the match results from EOUST to case trustees who  participate in the U.S. Trustee Program.
section_title: A Data Match Would Likely Involve Substantial Start- up Costs and Would also Duplicate a Part of the Current Notification System
paragraphs: Although electronic data sharing across government agencies is not  uncommon, it can be a complex and costly undertaking. Data matching  would need to be done frequently (e.g., weekly) to be useful, according to  some state agency officials, and would likely involve developing  automated interfaces to exchange data effectively on a recurring basis. In  developing such systems, to reduce the risks to acceptable levels,  following and effectively implementing accepted best practices in systems  development and implementation (commonly referred to as disciplined  processes) is important. It would include at a minimum    defining the detailed requirements for the new or modified systems and  interfaces, and  thorough and complete testing to determine that new or modified  systems will work as intended.
Even when the agencies have effectively implemented the disciplined  processes necessary to reduce risks to acceptable levels, a framework is  needed to guide a data sharing project such as this. Specifically, agencies  generally enter into written agreements when they share information for  conducting data matches. Based on their experience, OCSE officials  estimate that developing such agreements generally requires many  months.
Officials from OCSE and EOUST believe that system modifications that  would precede data sharing would involve significant costs. They said, for  example, they would need to build an exchange method that would allow  for the secure exchange of data. Overall, OCSE officials estimate that their  development costs would be between $2 million and $2.5 million and  would take between 15 and 18 months to implement.
Once a matching process is established, disseminating match results  would not be a cost-free proposition. EOUST officials said that it would  take a considerable effort to establish an internal process, either manual  or automated, for disseminating the match results to the case trustees.  While state agencies could accept match results from OCSE using an  existing system, OCSE officials said that this would require building this  capability into the state agencies’ respective automated systems. States  would incur some of these up-front costs, according to these officials.  Additional costs may be incurred at the county level, with officials at one  state agency saying that counties, and not just the state, might need to  modify their systems to receive matched data.
Once the necessary interfaces and system changes have been developed  and effectively implemented, there are ongoing operation and  maintenance costs to consider. OCSE estimates annual costs of between  $35,000 and $50,000, depending on which entity conducts the match. These  costs would include computer processing time and staff resources for  managing data transactions. For example, EOUST currently employs two  full-time staffers to extract bankruptcy data weekly from the  Administrative Office’s bankruptcy case database, and a data match  between the bankruptcy system and CSE program would likely involve  staffing.
Some Administrative Office, EOUST, and CSE officials expressed concern  about implementing an automated system providing notification of  noncustodial parent filers to state agencies because of potential  duplication between any new automated system and the existing paper  system, which was implemented as a result of the Bankruptcy Reform Act.  If a new system duplicates the notices that state agencies now receive  from bankruptcy case trustees, it could add to their workload. That is,  state agencies would be receiving information about bankruptcy filers  with child support obligations from both trustees and OCSE unless the  Bankruptcy Code is amended.
Overall, officials from several of the state agencies we talked with said  that while conducting electronic matching and sending the results to their  agencies could be useful to them, the costs might not warrant such a  match. Moreover, according to OCSE officials, state agency directors they  have communicated with about a potential data match have similarly  noted this trade-off.
section_title: Officials of the Administrative Office Say That Their Current Policy Does Not Allow for a Data Match while Officials from Other Programs Say It Could Be Acceptable
paragraphs: Officials from the Administrative Office said that their current policy does  not allow a data match while officials from EOUST and OCSE said that a  data match would be acceptable if the match met specific privacy  guidelines. Officials at the Administrative Office cited a policy against  releasing and disseminating their bankruptcy data to OCSE. This federal  judiciary policy specifically bars release of the names and SSNs of  bankruptcy filers to HHS on the grounds that the judicial branch must  remain an independent and objective adjudicator of creditor claims.  Administrative Office officials also noted that data on bankruptcy filers is  available at EOUST, which is responsible for managing bankruptcy cases  and ensuring compliance with applicable laws and procedures.
For their part, officials at EOUST stated that their policy on data sharing is  guided by the Privacy Act—the federal law governing federal agencies’ use  and disclosure of records containing individuals’ personal information.  The officials said that EOUST’s current policy implementing the routine  use exception of the Privacy Act does not support a match with the system  of records in which the bankruptcy data are kept, because identifying  bankruptcy filers with child support obligations is not part of its mission.  However, if OCSE requested the bankruptcy data from EOUST and  EOUST determined that this request falls within the law enforcement  agency exception of the Privacy Act, then EOUST officials said that it  could share its data with OCSE.
According to OCSE officials, it would be acceptable for OCSE data to be  matched with bankruptcy data and for OCSE to disseminate the results to  state agencies on a recurring basis. However, OCSE officials noted that the  match results could only be used for CSE program purposes. That is,  EOUST or the Administrative Office could perform a match using CSE  data and bankruptcy data and return the results to OCSE, but these  entities could not use the CSE data or match results for their own  purposes, such as sending match results to case trustees. With respect to  sending match results to custodial parents outside the CSE program,  OCSE officials said that OCSE would not be the appropriate entity to do  this because it is neither authorized nor funded to interact with these  parents in this way.
section_title: Conclusion
paragraphs: While matching federal bankruptcy data with child support records might  facilitate the identification of some additional bankruptcy filers with child  support obligations and improve the current system for notifying state  agencies, these potential improvements seem modest in comparison to the  costs, efforts, and statutory and policy considerations involved in  implementing and maintaining a data matching system. As a result, it  appears that instituting a routine data matching system may not be  warranted. A relatively small percentage of bankruptcy filers have orders  to pay child support. In addition, a process is currently in place to identify  and notify custodial parents and state agencies of bankruptcy proceedings,  as called for under the Bankruptcy Reform Act. Moreover, a data matching  system with results transmitting electronically to state agencies would not  offer a comprehensive alternative to the trustee notification system insofar  as it would not transmit information to custodial parents and would  partially duplicate the trustee notification process. Finally, legal and policy  considerations would need to be addressed to institute data matching  between these two systems.
Although these challenges are not insurmountable and data matching can  be a useful tool, in this case, there is an alternative that should improve  information sharing between case trustees and state child support  agencies within the current system of trustee notices. Notwithstanding  EOUST guidance calling for case trustees to provide the full SSNs, some  case trustees only provide partial SSNs. Although EOUST cannot require  case trustees to provide the full SSN, its examination of the trustee  notification process might identify reasons for case trustees not providing  the full SSNs as well as measures to help encourage the provision of full  SSNs in notices to state agencies. Without EOUST more actively  encouraging case trustees to provide full SSNs, state agencies may  continue to experience more difficulties than necessary in accomplishing  the child support goals of the Bankruptcy Reform Act. While neither the  Judicial Conference nor the Administrative Office has developed similar  guidance for bankruptcy administrators, the same reasons exist for state  agencies having full SSNs, regardless of which program supervises case  trustees. These reasons warrant some examination of the trustee  notification process in the bankruptcy administrator districts.
section_title: Recommendations for Executive and Judicial Branch Action
paragraphs: To help improve the bankruptcy trustee notification process for state child  support enforcement agencies called for under the Bankruptcy Reform  Act, we are making two recommendations.
First, we recommend that the Attorney General direct the Director of the  Executive Office for U.S. Trustees to more actively encourage case  trustees to provide state agencies the full SSNs of bankruptcy filers. This  could be accomplished, for example, by working with case trustees to  identify and address any issues related to implementation of the current  guidance, such as lack of clarity in the guidance or concerns about  preserving the security of SSNs.
Second, we recommend that the Judicial Conference of the United States  work with bankruptcy administrators in the six bankruptcy court districts  in Alabama and North Carolina not subject to EOUST guidance to examine  whether case trustees should provide state agencies with the full SSN of  bankruptcy filers. This might be done in the following ways:  Inform bankruptcy administrators and the bankruptcy court judges in  those six districts about the importance of including the full SSN, how  this information would be used by state agencies if provided, and to do  so in a way that preserves the security of the information.
Work with the bankruptcy administrators and bankruptcy court judges  in those six districts to identify and if possible, address any issues or  concerns, including the security of the information, related to the use  of full SSNs in the notices.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided Justice, the Administrative Office, and HHS with a draft of  this report for their review and comments. The U.S. Trustee Program at  Justice said that it supported the recommendation and would continue to  work with the private case trustees, including through their national  associations, to identify and address impediments to ensuring that full  SSNs are provided to state CSE agencies. Its written comments are  included in appendix II. Officials from the Administrative Office, in  commenting orally on the draft, said that in light of our recommendation,  they would review—in the bankruptcy districts in Alabama and North  Carolina—the entire process in place for notifying state CSE agencies to  see if the process is working correctly and take action as needed. They  also provided technical comments that we incorporated as appropriate. In  addition, HHS provided technical comments that we incorporated as  appropriate.
We are sending electronic copies of this report to the directors of the  Administrative Office of United States Courts and the Executive Office for  U.S. Trustees at the Department of Justice; the Secretary of Health and  Human Services; appropriate congressional committees, and other  interested parties. We will also make copies available to others upon  request. In addition, the report will be available at no charge on GAO’s  Web site at http://www.gao.gov. Please contact me at (202) 512-7215 if you  have any questions about this report. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. Other major contributors to this report are listed in  appendix III.
section_title: Appendix I: Objectives, Scope, and Methodology
subsections: section_title: Objectives
paragraphs: The objectives of this report were to determine (1) What percent of  bankruptcy filers are parents who have orders to pay child support? (2) In  what ways, if any, might matching national bankruptcy and child support  enforcement data on a routine basis facilitate the identification of  bankruptcy filers who have child support obligations? (3) What is the  feasibility and estimated cost of conducting such a data match on a routine  basis?
section_title: Scope and Methodology
paragraphs: To conduct our work we reviewed relevant laws, rules and regulations,  and guidance that affect the bankruptcy process and child support  enforcement (CSE) program, including the Bankruptcy Abuse Prevention  and Consumer Protection Act of 2005, Title IV-D of the Social Security Act,  the Personal Responsibility and Work Opportunity Reconciliation Act of  1996, and the Privacy Act. We also interviewed bankruptcy and CSE  program officials. This information was also used to review the national  court, bankruptcy, and the CSE data systems that might be used for a  potential recurring, national data match.
To identify the proportion of parents with orders to pay child support who  filed for bankruptcy nationwide, we worked with the U.S. Department of  Health and Human Services’ Office of Child Support Enforcement (OCSE)  to develop an analysis plan. This plan outlined how they would match their  national CSE data with a national extract of personal bankruptcy filers  that we obtained from the Administrative Office of United States Courts  (the Administrative Office). The national CSE data from the Federal Case  Registry, as of June 2007, contained information about individuals who are  participants of the CSE program and individuals who are not participants  of the CSE program but had orders established after 1998 to pay child  support. The national CSE data also included data from the Federal Offset  Program file, which contains only current information about noncustodial  parents that participate in the CSE program who owe past due child  support. The bankruptcy data from the U.S. Party/Case Index included  names and Social Security numbers (SSNs) of all individuals that filed for  Chapter 7 or Chapter 13 bankruptcy between October 17, 2005, and  October 17, 2006, the first year of implementation under the Bankruptcy  Reform Act.
We recognize that the difference in time frames for the bankruptcy and  CSE data could mean that we over-or under-counted individuals in this  population. For example, we may have under-counted if a noncustodial  parent’s order ended in May 2007, but this noncustodial parent filed for  bankruptcy on August 1, 2006. However, we determined that this was not a  significant methodological limitation for the purposes of testing this data  match and our analysis.
From the Administrative Office we received 839,597 records of bankruptcy  case data. After cleaning the data, 642,709 records were left for our work.  Records were removed for the following reasons: missing SSN, bad SSN  (more or less than nine digits), text strings instead of SSN, duplicates, and  bankruptcy chapters other than 7 and 13. We had several communications  with the system administrators to clarify our reasoning before dropping  any records. We were told that although the system has data checks there  is no automatic cleaning performed. Rather, notices are sent to the district  courts and it is left to them to correct the data.
We assessed the reliability of the respective bankruptcy and CSE data by  reviewing existing information about these data and the systems that  produced them, interviewing agency officials knowledgeable about these  data, and performing electronic testing. Because of OCSE’s legal concerns,  we agreed that they would not provide us with child support case data.  Instead, they performed the test match of the bankruptcy data and  national CSE data themselves to meet certain specifications we provided,  and included some information to allow us to assess the work performed.  If we are not provided with underlying data, the ability to conduct  electronic testing as a part of the data reliability assessment is limited. For  analyses such as these, electronic testing of the data is generally a routine  part of the reliability assessment. However, based on interviews of  knowledgeable officials and reviews of relevant documentation, and  because OCSE routinely performs SSN checks with the Social Security  Administration, we have sufficient reason to believe that the OCSE data  are reliable for the purpose of this report. In preparation for matching, we  eliminated duplicate SSNs from the data within each bankruptcy chapter,  which brought our total to 630,075 individuals who filed for bankruptcy.  This total double-counts the 1,538 individuals who filed for both Chapter 7  and Chapter 13 bankruptcy.
To help determine the potential benefits of data matching on a routine  basis, we conducted a match ourselves of national bankruptcy filings with  CSE data in Texas to ascertain whether bankruptcy filers volunteered  their child support obligations when they file for bankruptcy. Among the  six states we contacted, Texas was readily able to provide us with an  extract of their child support caseload. Our universe totaled 1,931  individuals, which included noncustodial parents with child support  orders who were participating in the Texas CSE program at some point  between October 17, 2005, and October 17, 2006, and who filed for  bankruptcy between October 17, 2005, and October 17, 2006. From this  universe, we then selected a simple random probability sample of 100  noncustodial parents. With this probability sample, each member of the  study population had a nonzero probability of being included, and that  probability could be computed for any member. Each sample element was  subsequently weighted in the analysis to account statistically for all the  members of the population, including those who were not selected.
Because we followed a probability procedure based on random selections,  our sample is only one of a large number of samples that we might have  drawn. Since each sample could have provided different estimates, we  express our confidence in the precision of our particular sample’s results  as a 95 percent confidence interval. This is the interval that would contain  the actual population value for 95 percent of the samples we could have  drawn. As a result, we are 95 percent confident that the interval ranging  from less than 1 percent to over 7 percent would contain the true  percentages of our sample population who completed all of their  bankruptcy paperwork and had not reported their child support  obligations.
To conduct our review of the bankruptcy case files for the Texas sample,  we developed a data collection instrument to gather information  systematically from the selected bankruptcy files and used the  Administrative Office’s electronic public access service to review all  bankruptcy filings and to record whether the child support obligation was  reported in the bankruptcy paperwork. Bankruptcy filers (and their  attorneys) can report these obligations in a number of places in the  paperwork. We did not determine whether the individuals who neglected  to report their obligations eventually did so when asked by a case trustee.  The results of this case file review cannot be generalized nationwide;  however, they can be generalized to the population of 1,931 noncustodial  parents with IV-D orders on record in the automated system of the Texas  State CSE program who also filed for bankruptcy nationwide and are  intended for illustrative purposes. Moreover, it is possible that we  identified some individuals as non-reporters due to a timing issue rather  than their not disclosing a current obligation. While we attempted to  match the time frames of the bankruptcy and child support data as closely  as possible, it is possible that an individual’s child support status on the  exact date they filed for bankruptcy might not have been captured in our  data match. We determined that this timing issue was not a significant  methodological limitation because we found so few filers that did not  report their child support obligations.
To help us understand the potential benefits as well as the feasibility and  cost of data matching on a routine basis, we interviewed officials in both  the bankruptcy system and the CSE program, including officials  representing federal, regional, and state entities. In interviews with these  officials, we also discussed challenges that data matching would involve  for all parties, including technical, legal, financial, and security challenges  that data matching would entail for all parties. We spoke with officials in  the Administrative Office, the Executive Office for U.S. Trustees, and  OCSE. We also interviewed officials at state agencies in Alabama,  California, Illinois, New York, Texas, and West Virginia. We chose these  six states for their diverse geography, caseload sizes, and administrative  structures. Our work at the six state agencies focused on the notices they  receive from case trustees under the new DSO provisions of the  Bankruptcy Reform Act rather than the notices they receive from  bankruptcy courts under the more general requirement that all creditors  specified in bankruptcy filings are to be notified by the courts.  Additionally, we interviewed 5 regional U.S. Trustees and 1 bankruptcy  administrator in Alabama and the 16 case trustees who report to them in  bankruptcy districts in these six states.
We conducted this performance audit from December 2006 to January  2008 with generally accepted government auditing standards. Those  standards require that we plan and perform the audit to obtain sufficient,  appropriate evidence to provide a reasonable basis for our findings and  conclusions based on our audit objectives. We believe that the evidence  obtained provides a reasonable basis for our findings and conclusions  based on our audit objectives.
section_title: Appendix II: Comments from the Department of Justice
section_title: Appendix III: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Acknowledgments
paragraphs: In addition to the contact named above, Denise M. Fantone, Acting  Director; Gale Harris, Assistant Director; James Whitcomb, Analyst-in- Charge; Susan Higgins; and Sara Pelton made significant contributions to  this report. In addition, Ron La Due Lake, Cynthia Grant, and John “Chris”  Martin provided assistance in data collection and analytical support; Linda  Watson, Ellen Wolfe, and Jessikah Foulk provided assistance in data  collection; Susan Bernstein provided writing assistance; Jim Rebbe and  Geoff Hamilton provided legal assistance; and Lise Levie provided  technical assistance.