Apologies for Bankruptcy

My colleague, Jennifer Robbennolt, and I have posted a paper to SSRN exploring apologies in the bankruptcy context. Jennifer has done some of the leading studies on apologies in different legal contexts. Contrary to the instincts of many lawyers, apologies tend to produce better outcomes for defendants. For example, victims who hear an apology are less likely to feel they need to invoke legal process and are generally more amenable to settlements. Researchers have demonstrated these effects in a variety of legal settings such as personal injury, professional malpractice, and criminal law. We wondered whether we would see similar effects in bankruptcy.

On one hand, there might be no reason to think that bankruptcy should be any different than the other legal contexts where apologies have been shown to have effects. On the other hand, the harm from bankruptcy is perhaps more diffuse than, say, the typical personal injury suit and involves a loss to a group of people. Also, in the bankruptcy context, the debtor would typically have to deliver the apology to a representative of the creditors such as a bankruptcy judge or trustee.

We developed an experimental vignette designed to present a close case for confirmation of a chapter 13 plan with the trustee objecting to confirmation for lack of good faith and for failure to devote all disposable income to repayment. The "below-median" income debtors had some expenses that were more sympathetic such as below-average household expenses and some expenses that were less sympathetic such as gym fees for preteen daughters who competed on a traveling gymnastics team. In one version of the vignette, the debtors' testimony at the confirmation hearing included an apology, and the other version had no apology at all.

We were able to ask 137 sitting bankruptcy judges how they would rule on the case as well as other questions about the scenario. The judges split approximately 40-60 against confirmation, suggesting we did construct a scenario on which professional judgment would differ. Interestingly, both sides were equally confident in their decisions.

We did not find a main effect of apology on the judges' decisions. We did find that the judges' perception of the debtors' remorse did affect the decisions, and the apology in turn affected how remorseful the judges perceived the debtors to be. In academic lingo, the effect of the apology was mediated through the perceptions of remorse. The debtors who apologized were seen as more remorseful and were more likely to have their chapter 13 plan confirmed. It is not necessarily inconsistent with the legal doctrine for bankruptcy judges to consider the remorse of chapter 13 debtors. The confirmation decision, after all, is partially a prediction about the future, and more remorseful debtors might expend more effort to make the plan payments.

There is more detail in the full paper, including the limitations of the research and the implications we see for social science research on apologies generally as well as for bankruptcy practice specifically. Our paper is hardly the final word on the subject of apologies in bankruptcy, but we hope it advances  knowledge a little bit further down the road. In addition to the self-serving goal of drawing some attention to our paper, the blog post allows us to say thank you to the bankruptcy judges who responded to our survey and made the work possible.