Debtors who file personal bankruptcy petitions usually file under chapters 7 or 13 of the bankruptcy code. Generally, debtors who file under chapter 7 of the bankruptcy code seek a discharge of all their eligible dischargeable debts. Debtors who file under chapter 13 submit a repayment plan, which must be confirmed by the bankruptcy court, for paying all or a portion of their debts over a 3-year period unless for cause the court approves a period not to exceed 5 years. The Center report was based on data from 3,798 personal bankruptcy petitions filed principally in May and June 1996 in 13 of the more than 180 bankruptcy court locations. The petitions included 2,441 chapter 7 and 1,357 chapter 13 petitions. The researchers collected a wide variety of information about debtors’ income, expenditures, and debts from the schedules the debtors filed with their bankruptcy petitions. Because the debtors’ schedules used in the report must be obtained from the case files at each court location, obtaining the data used for the Center report represented a considerable investment of Center time and money. The data are not available from the automated databases maintained by the federal judiciary or the Executive Office of U.S. Trustees, the two principal sources of automated data on bankruptcy cases. On the basis of the Center report’s assumptions and the formula used to determine income available for repayment of nonpriority, nonhousing debt, the report estimated that about 50 percent of the chapter 13 debtors in the 13 locations combined would have sufficient income, after living expenses, to repay all of their nonpriority, nonhousing debt over a 5-year period; and an additional 19 percent could pay 60 percent or more over the same period. The report estimated that 5 percent of the chapter 7 debtors in the 13 locations combined could repay all of their nonpriority, nonhousing debt over 5 years; 10 percent could repay at least 78 percent, and 25 percent could repay at least 30 percent. The Center report also estimated that about 11 percent of chapter 13 debtors and about 56 percent of chapter 7 debtors were expected to have no income available to repay nonhousing debts. The Center report’s analysis was based on data from the initial schedules of current estimated monthly income, current estimated average monthly expenditures, and debts that debtors submitted at the time they filed for bankruptcy. There are two reasons to question whether broad conclusions about debtors’ ability to pay nonhousing debt can be made on the basis of the debtors’ statements of estimated income and estimated expenses at the time of filing for bankruptcy: The accuracy of the data in the debtors’ initial schedules is unknown, and no empirical study has been done to assess their accuracy. Moreover, debtors may generally amend these schedules as a matter of course at any time prior to final disposition of the debtors’ bankruptcy cases. The Center report assumed that debtors’ income and living expenses, as reported in those schedules, could be used to satisfactorily forecast debtors’ income and living expenses for a 5 year debt repayment period. However, the report did not include empirical evidence to support this assumption. There is some empirical evidence that this assumption may not be appropriate, at least for a portion of debtors who file for bankruptcy. The Center report relied on debtors’ self-reported data on current estimated income, current estimated expenditures, and debts at the time of filing and assumed that these data were accurate. Although the data in the various schedules are the only such information available at the time a debtor files for bankruptcy, the National Bankruptcy Review Commission report noted that “no study has yet been done to test the accuracy of the data as initially reported by debtors,” and it recommended random audits of debtors’ initial schedules. The effect of any inaccuracies in these schedules could be that the debtor’s actual net income is overstated or understated. The schedules that debtors complete on their current average monthly income and current average monthly expenditures indicate that debtors should estimate their income and expenditures. The data that debtors report in these schedules represent a snapshot in time, and debtors may generally amend their schedules at any time prior to final disposition of their bankruptcy cases. Such amendments were not included in the Center’s analysis. Amendments may be made for a variety of reasons, but there are no readily available empirical data on how frequently schedules are actually amended and the effect of such amendments on the income, expenditures, and debts that debtors report on their initial schedules. The Center report’s analysis assumed that the debtor’s income and expenses, as reported on the schedules filed with the bankruptcy petition, could be used to satisfactorily forecast his or her income and expenses during the course of a 5 year debt repayment period. In other words, the Center report assumed that a debtor’s reported income and expenses would remain uninterrupted and unchanged over the 5 years. This assumption is critical to the report’s estimate of the percentage of nonhousing debt that debtors could repay over 5 years. However, the Center report provided no empirical support for this assumption. A couple of factors raise questions about the validity of this assumption. First, the Center report provided evidence of instability in debtor income in the year preceding the debtor’s bankruptcy filing. About 77 percent of the 2,441 chapter 7 debtors and about 85 percent of the 1,357 chapter 13 debtors in the Center’s analysis reported having some wage income at the time of filing. However, about 68 percent of the chapter 7 debtors and about 50 percent of the chapter 13 debtors in the Center’s report also reported they had experienced a reduction in income during the 12 months prior to filing bankruptcy. As the Center report noted, it is not surprising that those who file for bankruptcy have suffered a loss of income prior to filing. Second, there is also some evidence that debtors may experience fluctuating income or expenses in the 5 years following the filing of their bankruptcy petitions. The findings of a 1994 report by AOUSC suggest that at least a portion of debtors could be expected to experience deterioration in their financial circumstances during the 5 years after filing for bankruptcy. AOUSC reviewed the outcomes of 953,180 chapter 13 cases filed between calendar years 1980 and 1988 and terminated by September 30, 1993. AOUSC found that debtors received a discharge in only about 36 percent of all chapter 13 cases terminated. A chapter 13 discharge is generally granted when a debtor successfully completes a court-approved repayment plan. A hardship discharge may be granted to chapter 13 debtors who fail to complete the plan payments due to circumstances for which the debtor should not justly be held accountable. AOUSC found that in about 14 percent of all chapter 13 cases terminated, the debtors were unable to maintain their payments; prior to termination, their cases were converted to chapter 7 liquidation, in which all eligible debts were discharged. The typical case that converted to chapter 7 did so about 2 years after the case was filed. AOUSC also found that about 49 percent of all chapter 13 cases terminated were dismissed, but data were not available on the reasons for the dismissals. The results of the AOUSC report caution against making broad conclusions about debtors’ ability to maintain debt payments over a 5-year period based on the data in the initial schedules alone. There is some evidence in the Center report that the intent of the analysis was to estimate debtors’ ability to pay their eligible dischargeable nonhousing debts—secured and unsecured. However, this is not explicitly stated, and the Center report did not clearly define the universe of nonhousing debts for which it estimated debtors’ ability to pay. The Center report defined the net income that debtors had available to pay nonhousing debts as the debtor’s net annual take-home pay less (1) living expenses (as defined in the report) and (2) payments toward “unsecured priority debt.” As examples of such debts, the report mentioned back taxes and past-due child support. These are examples of debts that are generally nondischargeable in bankruptcy proceedings. Debtors report unsecured priority debts on Schedule E. However, the debts to be listed in Schedule E can, in some cases, include both debts that are dischargeable and debts that are generally nondischargeable. Moreover, not all nondischargeable debts can be found in Schedule E.For example, certain student loans, debts arising out of drunk driving, criminal restitution, and criminal court fines are not dischargeable in bankruptcy, but such obligations would be appropriately listed as “unsecured nonpriority debt” on Schedule F. The Center report included student loans in unsecured nonpriority debt. However, it is not clear if these student loans represented only loans that were eligible for discharge. Thus, the Center report may not have identified all generally nondischargeable debts for which the debtor would still be responsible following the close of his or her bankruptcy case. To the extent that the Center report understated nondischargeable debts, it would have overstated the net income that debtors would have available to pay dischargeable nonhousing debts. Conversely, to the extent that the report overstated nondischargeable debts, it would have understated debtors’ net income available to pay dischargeable debts. In addition, to the extent that the report assumed that dischargeable unsecured priority debts would be paid, it would have created a disparity in the report’s treatment of dischargeable nonhousing debts. A portion of personal bankruptcy debtors voluntarily agree to reaffirm, or repay, some of their dischargeable debts by entering into a reaffirmation agreement to remain personally liable for reaffirmed debts. According to the Executive Office of the U.S. Trustees, debtors tend to reaffirm secured debt, such as a home mortgage or car loan. By reaffirming these debts and keeping current on the payments, the debtors retain possession of the property secured by the debt. To the extent that debtors maintain their payments on reaffirmed debt, it would reduce the amount of income debtors have to pay eligible dischargeable debts that were not reaffirmed.