- It started with a paper by Bob Lawless, Angela K. Littwin, Katherine M. Porter, John Pottow, Deborah Thorne, and Elizabeth Warren (hereinafter the “Six”), Did Bankruptcy Reform Fail? An Empirical Study of Consumer Debtors, 83 Am. Bankr. L. J. 27 (2009). The authors of that paper found that there was “no change in the income levels of bankruptcy filers after the [bankruptcy reform] amendments [and that] debtors filing for bankruptcy in 2007 have even greater debt loads than their counterparts from 2001.”
- Rafael Pardo responded in Failing to Answer Whether Bankruptcy Reform Failed: A Critique of the First Report from the 2007 Consumer Bankruptcy Project , 83 Am. Bankr. L. J. 47, in which he made several critiques of the Six’s method and lack of nuance regarding the Code.
- Pardo’s critique seems to have pushed the Six to a very defensive response (not yet on SSRN, but which you can find on WL), called “Interpreting Data: A Response to Professor Pardo”
- Pardo has now responded.
You should read the papers, if you are interested in empirical analysis of bankruptcy, or if you just relish a well-articulated methods discussion. I’ll leave the merits largely alone, with one exception. The papers appear to disagree about a relatively fundamental question of predicted selection effects.
Selection effects operate at various stages of litigation to remove certain cases via settlement or unilateral withdraw from the fight. As is well known, these “missing” parties and claims make it quite difficult to analyze the effects of changes in law on datasets of outcomes of litigation. (As an illustration, imagine that Noah had a policy that denied snakes entry into the ark (as some posit). Rational snakes, knowing about the policy, wouldn’t approach the choosing point, and, therefore, we wouldn’t see the policy’s effects in action.) A law might make it easier for plaintiffs to win, but the resulting set of cases will be unaffected because more defendants settle both before and after filing. Selection turns out to play a very important role in this bankruptcy dispute.