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

Letter

Background

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.

The Bankruptcy System

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.

The Child Support Enforcement Program

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.

Bankruptcy Reform Act’s Treatment of Child Support

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.

Notifying Custodial Parents and State Child Support Enforcement Agencies of Bankruptcies

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.

About 7 Percent of Those Who Filed for Bankruptcy Have Orders to Pay Child Support and Most Are Part of the CSE Program

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.

A Routine, National Data Match Might Identify Filers Who Do Not Report Their Support Obligations and Reduce the Workload Associated with the Current Process

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.

A National Match of Federal Bankruptcy with Child Support Enforcement Data Might Identify Some Filers Who Do Not Report a Child Support Obligation

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.

A Data Match Might Readily Provide State Agencies with Positive Identifications and Reduce the Workload Associated with the Current Trustee Notification Process

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.

Although a Data Match Is Technically Feasible, There Would Be Substantial Start- Up Costs as well as Some Policy Considerations

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.

A Data Match with Transmission of Results to State Agencies Is Technically Feasible, Though It Would Not Replace Notifications to Custodial Parents

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.

A Data Match Would Likely Involve Substantial Start- up Costs and Would also Duplicate a Part of the Current Notification System

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.

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

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.

Conclusion

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.

Recommendations for Executive and Judicial Branch Action

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.

Agency Comments and Our Evaluation

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.

Appendix I: Objectives, Scope, and Methodology

Objectives

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?

Scope and Methodology

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.

Appendix II: Comments from the Department of Justice

Appendix III: GAO Contact and Staff Acknowledgments

GAO Contact

Acknowledgments

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.