Littwin on Bankruptcy Without a Lawyer

A few weeks ago, Katie Porter noted the release of the new book, Broke: How Debt Bankrupts the Middle Class. We are trying to feature posts from the authors of Broke about their contributions. Today's post comes from Professor Angela Littwiin of the University of Texas School of Law and a founding member of Credit Slips:

After a long absence, I am temporarily back on Credit Slips, blogging about my contribution to Broke, the new book edited by Credit Slips’ own Katie Porter. My chapter is about consumers who file for bankruptcy without a lawyer (known as filing “pro se”). The chapter is entitled The Do-it-Yourself Mirage: Complexity in the Bankruptcy System. which should give you a pretty good idea of my take on the matter. Using data from the 2007 Consumer Bankruptcy Project, I found that pro se filers were significantly more likely to have their cases dismissed than their represented counterparts. My most interesting result deals with education. My analysis suggests that consumers with more education were significantly more likely than others to try filing for bankruptcy on their own, but that their education didn’t appear to help them navigate the process. Pro se debtors with college degrees fared no better than those who had never set foot inside a college classroom. I argue that bankruptcy has become so complex that even the most potentially sophisticated consumers are unable to file correctly.

This bad news, however, is not the entire story.

As I wrote my chapter, I started to think about how remarkable it was that the consumer bankruptcy system processes more than a million cases per year with relatively little fuss. Yes, things almost certainly got worse in the wake of the 2005 amendments. (When I compared data from the 2001 and 2007 iterations of the Consumer Bankruptcy Project, I found that the percentage of dismissals had increased between the two years and that the 2007 debtors were plagued by motions to dismiss on technical grounds.) But my background is in poverty law, and when I compared consumer bankruptcy to other programs that serve financially struggling individuals – such as welfare or disability benefits – the bankruptcy system started to look pretty good.

The more I thought about it, the more I became convinced that the reason consumer bankruptcy worked so well might relate to the very problem I had started off with: the role of lawyers. Being unable to afford a lawyer puts some consumer debtors at disadvantage in our current bankruptcy system, but the fact that most debtors have lawyers – and paid lawyers, at that – may partially account for the fact that consumers don’t emerge from bankruptcy feeling abused and humiliated, as they do with the poverty programs. I called this observation “the affordability paradox” and expanded on it in a law review article by that name.