BK Apologies

7/28/2019 BK Apologies

1/29Electronic copy available at: http://ssrn.com/abstract=2208811

BankruptApologiesJenniferK.Robbennolt

UniversityofIllinois

RobertM.Lawless


AbstractApologies result in better outcomes for wrongdoers in a variety of legal contexts.

Previousresearch,however,hasprimarilyaddressedsettings inwhichaclearvictimreceives

the apology. This research examines the influence of apologies on a different kind of legal

decisionthe decision of a bankruptcy judge to confirm or not to confirm a proposed

repaymentplan.Thisexpandsexaminationofapologiestoa legalsetting inwhichthere isno

clearvictimand todecisionsofaneutral (nonvictim)decisionmaker.We find thatjudges

assessments of debtors were influenced by apologies. These assessments, in turn, affected

judgesconfirmationdecisions.



BankruptApologiesJenniferK.Robbennolt


RobertM.Lawless

UniversityofIllinois*

I.IntroductionInmosteverycountry,filingbankruptcyisapublicactpossiblybecausemanypersons

seebankruptcyasapublicwrong.Whenaconsumerfilesbankruptcysheessentiallysaystothe

world,Myfinancialsituation ishopeless,andIwillbebreakingpromisesthat Imade tomy

creditors. Using a sample of U.S.bankruptcyjudges, this paper asks whether abankrupt

consumerimproveshersituationbyapologizingforbreachingherpromises.Inthecontextofa

particular U.S. consumer bankruptcy proceeding, we find an indirect effect of a debtors

apology onjudicial decisions, with apologies affecting perceptions of the debtor and those

perceptions influencing confirmationdecisionmaking.When our respondentjudgesbelieved

thatthedebtorwasmoreremorseful,theyweremorelikelytoapprovethedebtorsrepayment

planinbankruptcy.Thesefindingsprovideinsightintohowapologiesworkinthelegalcontext

moregenerallyaswellashavingpolicyimplicationsforthebankruptcysystem.

Contrary to the instinctsofmany lawyers,apologiescanoften improve financial (and

nonfinancial)outcomesfordefendants.Suchbenefitsstemfromtheattributionsthataremade

aboutaharmdoerwhoapologizes.Amongotherthings,apologizingharmdoersareperceived

to have acted less intentionally, are blamed less for their misdeeds, are thought to have

experiencedmoreregret,andarepredictedtobehavebetterinthefuturethanarewrongdoers

who do not apologize.1Accordingly, when a harmdoer apologizes, the injured party is less

*Addresscorrespondence toJenniferK.Robbennolt,UniversityofIllinoisCollegeofLaw,504E.PennsylvaniaAve.,

Champaign, IL61820;email:[email protected] isProfessorofLawandPsychology,Universityof

Illinois.LawlessisProfessorofLaw,UniversityofIllinois.

WethankJosephDohertyforhishelpfulcommentsonapreviousversionofthispaperandparticipantsattheLaw&

SocietyConference(2012),theConferenceonEmpiricalLegalStudies(2012),theAmericanPsychologyLawSociety

annual meeting (2012), the European Association for Psychology and Law (2012), and a faculty workshop at theUniversityofKansasfortheirfeedback.Weareespeciallyappreciativetothemanysittingbankruptcyjudgeswho

tooktimeoutoftheirbusyscheduletofilloutoursurveyandhelpadvanceunderstandingofthelegalsystem.

1Seee.g.,JamesR.Davis&GreggJ.Gold,AnExaminationofEmotionalEmpathy,AttributionsofStability,andtheLinkBetween Perceived Remorse and Forgiveness, 50 PERSONALITY & INDIVIDUAL Differences 392 (2011); GreggJ. Gold &Bernard Weiner, Remorse, Confession, Group Identity, and ExpectanciesAbout Repeating a Transgression, 22 BASIC &APPLIEDPSYCHOL.291(2000);JenniferK.Robbennolt,ApologiesandSettlementLevers,3J.EMPIRICALLEGALSTUD.333(2006);StevenJ.Scher&JohnM.Darley,HowEffectiveAretheThingsPeopleSaytoApologize?EffectsoftheRealizationoftheApologySpeechAct,26PSYCHOLINGUISTIC RES.127(1997).


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2 BankruptApologieslikely to feel the need to involve an attorney2and more likely tobe amenable to settlement.3

Thesepotentialbenefitsofapologieshavebeendemonstratedacrossanumberoflegalsettings,

includinggeneralpersonalinjurycases,4professionalmalpractice,5criminallaw,6andlandlord

tenantdisputes.7

Theeffects

of

apologies

in

legal

contexts,

however,

have

primarily

been

explored

in

the

context of the negotiated settlement of a dispute between two parties. Prior research has

examinedsettings inwhichthere isadisputebetweenprivateparties(oradefendantandthe

state)and inwhich there isaclearvictim.Bankruptcypresentsadifferent legalcontextwith

implications forhowapologiesoperate.First,agroupofcreditorswilloftenshare thewrong

that flows from a bankruptcy filing, perhaps ameliorating the perception of wrongdoing

becausethereisnooneclearvictim.8Second,theharmdoerinitiatesabankruptcycase,andthe

filingofabankruptcypetitionmayitselfbeperceivedasanacceptanceofresponsibilitybythe

harmdoer.9The harm frombankruptcy the nonpayment of debt stems from the debtors

2KathleenMazoretal.,HealthPlanMembersViewsAboutDisclosureorMedicalErrors,140ANNALSOFINTERNALMED.409(2004).

3RussellKorobkin&ChrisGuthrie,PsychologicalBarrierstoLitigationSettlement:AnExperimentalApproach,93MICH.L.REV.107(1994);Robbennolt,supranote1.4Jennifer K. Robbennolt, Apologies and Legal Settlement:An Empirical Examination, 102 MICH. L. REV. 460 (2003);Robbennolt,supranote1.5KathleenMazoretal.,HealthPlanMembersViewsAboutDisclosureorMedicalErrors,140ANNALSOFINTERNALMED.409(2004);KathleenMazoretal.,MoreThanWords:PatientsViewsonApologyandDisclosureWhenThingsGoWronginCancerCare,PatientEduc&Couns.,Aug.8,2011(ArticleinPressDOI:10.1016/j.pec.2011.07.010); AmyB.Witmanetal.,HowDoPatientsWantPhysicianstoHandleMistakes?ASurveyofInternalMedicinePatientsinanAcademicSetting,156ARCHIVESOFINTERNALMED.2565(1996).

6Seee.g.,TheodoreEisenbergetal.,ButWasHeSorry?TheRoleofRemorseinCapitalSentencing,83CORNELLL.REV.1599(1998);ChrisKleinkeetal.,EvaluationofaRapistasaFunctionofExpressedIntentandRemorse,132J.SOC.PSYCHOL.525(1992);RandolphB.Pipes&MarciAlessi,RemorseandaPreviouslyPunishedOffenseinAssignmentofPunishmentand Estimated Likelihood of a Repeated Offense, 85 PSYCHOL. REP. 246 (1999). See also Stephanos Bibas & Richard A.Bierschback, Integrating Remorse andApology into Criminal Procedure, 114 YALE L.J. 101 (2004); CarrieJ. Petrucci,ApologyintheCriminalJusticeSetting:EvidenceforIncludingApologyasanAdditionalComponentintheLegalSystem,20BEHAV.SCI.&L.337(2002).

7RussellKorobkin&ChrisGuthrie,PsychologicalBarrierstoLitigationSettlement:AnExperimentalApproach,93MICH.L.REV.107(1994).

8 See generally, Karen E. Jenni & George Loewenstein, Explaining the Identifiable Victim Effect. 14 J. RISK &UNCERTAINTY235(1997).

9Previousresearchhasfoundthatoneofthekeyfeaturesofanapologytheelementthatdistinguishesanapology

fromotherwaysofaccountingforonesbehavior(suchasofferinganexcuseorajustification)istheacceptingof

responsibility for having caused harm. See e.g., Barry R. Schlenker & Michael F. Weigold, Interpersonal ProcessesInvolvingImpressionRegulationandManagement,43ANN.REV.PSYCHOL.133(1992);Robbennolt,supranote4;MarvinB.Scott&StanfordM.Lyman,Accounts,33AM.SOC.REV.46 (1968);seealsoMARTHAMINOW,BETWEENVENGEANCEANDFORGIVENESS115 (1998) (Fullacceptanceof responsibilityby thewrongdoer is thehallmarkofanapology.).

Although the U.S. Bankruptcy Code allows creditors to initiate involuntarybankruptcy cases against debtors, 11


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BankruptApologies 3financial condition, and debtors sometimes express the decision to file bankruptcy as an

owningup to theirfinancialcondition.Thus, itcouldbe that themoredispersedharmand

natureofvictimparticipationinbankruptcycaseswoulddampenanyeffectofanapology.

Ontheotherhand,itisnotclearwhybankruptcyshouldbeanydifferentthananyother

legalsettingwe

might

expect

that

apologies

have

similar

ameliorative

effects

across

settings.

Indeed,bankruptcy is often thought of as a rehabilitative system, one which entails some

considerationofhowwemightexpectthedebtortobehaveinthefuture.10Althoughthereisno

sectionoftheBankruptcyCodethatdirectsbankruptcyjudgestoconsideradebtorsapology,

there are situations in which a debtors remorse maybe relevant. For example, in chapter 7

proceedings,bankruptcyjudgescandismisscasesthatwouldbeanabuseofthebankruptcy

system.11Althoughin2005Congressincorporatedamathematicalformulaintothedefinitionof

abuse,12the formulaonlycreatesapresumption,andbankruptcyjudgesretaindiscretion in

determining whether a case constitutes abuse. More significantly, the U.S. Trustee and

chapter

7bankruptcy

trustees

have

even

greater

discretion

over

when

to

challenge

cases

as

abusive. Similarly, in considering whether to approve a repayment plan under chapter 13,

bankruptcyjudgesarespecificallydirectedtoconsiderthedebtorsgoodfaithinfilingthecase

initially and in crafting the proposed repayment plan. In addition,judges are to consider

whetherthedebtorwillbeabletomakethepaymentsundertheproposedplan.13Thedebtors

remorsewouldoftenberelevanttoboththeassessmentofgoodfaithandthepredictionabout

futurebehaviorastoplanpayments.

There is onenoteworthy featureof thebankruptcy system thatmakes it an especially

useful setting within which to study particular aspects ofhow apologies operate in the legal

context. Because the typical consumerbankruptcy filing offers the prospect of only a smallpercentagerecoveryonasmallclaim,14creditorsdonotactivelyparticipate inmostconsumer

bankruptcycases.Thus,inthebankruptcysetting,anyapologywouldusuallyhavetobegiven

to ajudge or abankruptcy trustee as a proxy for the creditor victims. This raises several

complications for apologies. First, as a general matter, psychological research in nonlegal

settings has found that third party observers respond differently to apologies than do the

U.S.C.303,involuntarycasesareexceedinglyrare,sorarethattheAdministrativeOfficeofU.S.Courtsnolonger

releasesstatisticsonthenumberofinvoluntarycasesfiledannually.

10E.g.,KARENGROSS,FAILUREANDFORGIVENESS(1999).1111U.S.C.707(a).

12Id.at707(b)(2).13Id.at1325(a)(6).14Over 90% of chapter 7 cases are no asset cases that result in zero recovery for creditors. DalieJimnez, TheDistributionofAssetsinConsumerChapter7Cases,83AM.BANKR.L.J.795(2009).Inanationalprobabilitysamplefrom2007,themeanproposedrepaymenttocreditorsinchapter13was28%ofthedebt.SeeJeanBraucher,DovCohen&RobertM.Lawless,Race,AttorneyInfluence,andBankruptcyChapterChoice,9J.EMPIRICALLEGALSTUD.393(2012).


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4 BankruptApologiesvictims of the harm. In particular, third party observers are not subject to the same social

constraintsasarevictimssocialnorms thatprescribe thatwhenonereceivesanapology the

proper response is to accept it. Thus, third parties havebeen found tobe more critical of

apologies.15

Inaddition,

research

has

found

that

attorneys

respond

differently

to

apologies

than

do

laypeople.Tobesure,laypeopleandattorneystendtounderstandthecontentofapologiesin

similar ways. But while apologies tend to make lay people more amenable to settlement,

apologies are more likely tobe seenby attorneys as admissions thatbolster theirbargaining

position.16Thus, it is possible thatbankruptcyjudges, as attorneys, mightbe less swayedby

apologies.

Thefewstudiesthathaveexaminedtheeffectsofapologiesonjudgeshavehadmixed

results. In a series of experimental studies conductedby Rachlinksi, Guthrie, and Wistrich,

judgeswerefoundtoberelativelyunaffectedbyapologiesofferedby litigants.17Incontrast,a

recent

experimental

study

of

labor

arbitrators

found

that

sincere

apologiesby

grievants

in

employmentcasesresultedinincreasedgrievantwinrates.18

Only one prior study has specifically examined the role of apologies in the decision

makingofbankruptcyjudges. Inthecontextofabroaderstudyonbankruptcyjudgesuseof

decisionmaking heuristics such asanchoring and framing, Rachlinski, Guthrie, and Wistrich

asked judges to assess a chapter 7 bankruptcy problem in which a bank objected to the

15Jane L. Risen & Thomas Gilovich, Target and Observer Differences in theAcceptance of QuestionableApologies, 92J.PERSONALITY &SOC.PSYCHOL.418(2007).

16JenniferK.Robbennolt,Attorneys,Apologies,andSettlementNegotiation,13HARV.NEGOT.L.REV.349(2008).SeealsoRussellKorobkin&ChrisGuthrie,Psychology,Economics,andSettlement:ANewLookattheRoleoftheLawyer,76TEX.L.REV.77(1997).

17JeffreyJ.Rachlinski,ChrisGuthrie,&AndrewWistrich,DoApologiesAffectTrialJudges,draft.18MicheleHoyman,LamontStallworth,&DavidKershaw,TheDecisionMakingofLaborArbitratorsinDisciplineandDischargeCasesWhereaGrievantOffersanApology:APolicyCapturingStudy,paperpresentedattheannualmeetingoftheMPSAAnnualNationalConference,May23,2009(N=180NationalAcademyofArbitratorsmembers).SeealsoDafnaEylonetal.,BeyondContractualInterpretation:BiasinArbitratorsCasePerceptionsandAwardRecommendations,21

J.ORG.BEHAV.513(2000);DanielJ.Kaspar&LamontE.Stallworth,TheImpactofaGrievantsOfferofApologyandtheDecisionMakingProcessofLaborArbitrators:ACaseAnalysis,17 HARV.NEGOT.L.REV.1 (2012).The researchon theeffectsofapologiesonjurordecisionmakingissimilarlymixed.Seee.g.,MarcT.Boccaccinietal.,IWanttoApologize,ButIDontWantEveryonetoKnow:APublicApologyasPretrialPublicityBetweenaCriminalandCivilCase,32LAW&PSYCHOL.REV.31(2008);BrianBornsteinetal.,TheEffectsofDefendantRemorseonMockJurorDecisionsinaMalpracticeCase,20BEHAV.SCI.&L.393(2002);KeithE.Niedermeieretal.,ExceptionstotheRule:TheEffectsofRemorse,Status,andGenderonDecisionMaking,31J.APPLIEDSOC.PSYCHOL.604(2001);ScottE.Sundby,TheCapitalJuryandAbsolution:TheIntersectionofTrialStrategy,Remorse,andtheDeathPenalty,83CORNELLL.REV.1557(1998).


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BankruptApologies 5discharge of a credit card debt the debtor had incurred while on a Cancun vacation.19 An

apologybythedebtordidnotaffectthejudgesdecisionsondischargeability.20

Tounderstand thisnullresult, it is important toexamine thedetailsof theRachlinski,

Guthrie,andWistrichstudy.Thejudgesweretoldthefollowingaboutthedebtors(Jareds)

decision:

Despitehisfinancialproblems,Jaredwasabletoobtainanewcreditcardwithacreditlimit

of $3000.Jared used the card tobook his trip. When he asked for time off, his employer

informedhimthathewouldbefiredifhetookaweekoffsoearlyinhisnewjob.Jaredwent

anyway.Whilethere,hegenerouslychargeddrinksandmealsforfriendsonhisnewcredit

card,maxingthecardoutatatotalof$2976,allofwhichwasrelatedtothetrip.Jaredargues

thatalthoughheknewhewasdeeplyindebt,hebelievedthathisnewjobwouldenablehim

torepaythedebt,ashehadinthepast.Heassertsthathehadneverconsideredbankruptcy

beforediscussinghissituationwiththecreditcounselor.21

Thejudges were instructed that thebank that had issued the credit card was opposing the

discharge, arguing thatJared never had any intention of repaying this debt and that it was

thereforenotdischargeableunder11U.S.C.523(a)(2)(A)(whichexceptsfromdischargeadebt

forfalsepretenses,afalserepresentation,oractualfraud).

Importantly,thestatutorysectioncitedinthefactpatternisconcerned,notaboutfraud

relatedtothedebtorsfinancialcondition,butratheraboutfraudrelatedtothedebtorsintenttorepay.22If a creditor can show the debtorobtained goods or services with an intention not to

repay, thengroundswouldexist to find thedebtnondischargeableundersection523.Sucha

showingisincrediblydifficultasanevidentiarymatter.Asexplainedbytheleadingbankruptcy

treatise,Thedebtorsinsolvencyorinabilitytopaydoesnotbyitselfprovideasufficientbasis

for inferring the debtors intent. A debtors honestbelief that a debt wouldbe repaid in the

future, even if in hindsight found to have been very unrealistic, negates any fraudulent

19JeffreyJ. Rachlinski, Chris Guthrie & Andrew Wistrich, Inside the BankruptcyJudgesMind, 86 B.U.L. REV. 1227(2006).

20Id.at1254.

21Id.at1264.

22Thenextpartofthestatutedealswithfalserepresentationsaboutthedebtorsfinancialconditionandrequiresthat

suchrepresentationshavebeeninwritingbeforetheyareactionablebyacreditor.11U.S.C.523(a)(2)(B).Although

therequirementofawritingmayseemcuriousatfirstblush, it is importanttorememberthatbankruptcydebtors

alwaysarriveinbankruptcycourtinbadfinancialshape.Thewritingrequirementservesanevidentiarypurposeof

filteringoutweakclaims that thedebtor falsely representedhisorher financialcondition.The factpattern in the

Rachlinski,Guthrie&Wistrichstudydidnotmentionawrittenrepresentationoffinancialconditionanddirectedthe

bankruptcyjudgestothesectiondealingwithintenttorepay.


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6 BankruptApologiesintent.23Theonlyevidenceoffered inthefactpattern isthatthedebtorhadamistakenbelief

abouthisabilitytorepayandindeeddidnotconsiderbankruptcyuntilafterincurringthedebt.

Thehypotheticalcreditoroffersnoevidencetocontradictthedebtorsexplanationofhismental

state at the time the debt was incurred. Given the evidence, the creditorsburden, and the

governinglaw,

the

debtor

would

seem

to

have

astrong

chance

of

winning

the

case.

Curiously,however, thedebtor faresverypoorlyamong therespondents.Acrossboth

the apology and no apology conditions, 75.7% of the bankruptcy judges said they were

somewhat unlikely, unlikely, or very unlikely to discharge the credit card debt. There

was virtually no effect of the apology (75.9% discharged in the apology condition vs. 75.4%

dischargedinthenonapologycondition).Becausewedofindaneffectfromanapologyusinga

hypotheticalvignettewithbankruptcyjudges,thedifferencebetweenthetwostudiesfindings

merits further discussion. The high rate of nondischarge and null result in the Rachlinski,

Guthrie&Wistrichstudymayreflectthewaythatspecialistjudgesreactedtoaquestionnaire

thatused

anontechnical

presentation

and

nontechnical

wording.

First,Rachlinski,Guthrie&Wistrichaskedrespondents,WouldyoudischargeJareds

debtforhisCancunvacation,andweregivenoptionsrangingfromverylikelytodischarge

toveryunlikelytodischarge.24Thequestionandresponseoptions,however,asksomething

different than what would be asked in a bankruptcy proceeding. The Bankruptcy Code

statutorilydischargesallofabankruptcy filersprebankruptcydebts.An individualcreditor

canbringa lawsuitwithinabankruptcycase,knownasanadversaryproceeding,toobjectto

the dischargeability of a particular debt. Section 523 lists twentyone separate grounds for

nondischargeability,oneofwhichisthereasonatissuehereadebtincurredwithafraudulent

intent to repay. Thejudges role is only to determine whether the creditor has satisfied itsburden of showing the appropriate elements of section 523. If thejudge determines that the

elementsofsection523arenotpresent,thedebtisautomaticallydischarged.Thejudgehasno

discretiontodenythedebtsdischargeonsomegeneralprinciple,andthejudgesviewsabout

theappropriatenessofdischargingthedebtarenotlegallyrelevant.Yet,theRachlinski,Guthrie

&Wistrichpaperasks itsrespondents if theywoulddischarge thedebt,nothow theywould

ruleintheadversaryproceeding.Indeed,thequestionitselfmayhavebeenconfusingtothese

expert respondents. To answer the question as posed, abankruptcy specialist would have to

translate the question in her mind. If she thought the adversary proceeding objecting to

dischargeabilitywasveryunlikelytobesuccessful,thenshewouldneedtoanswerthatthedebtwasverylikelytobedischarged.Itispossiblethatthehighrateofnondischargeability

reflectsthisconfusion.

234COLLIERONBANKRUPTCY523.08[1][d](16thed.2012).

24Rachlinski,Guthrie&Wistrich,supranote19,at1265.


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BankruptApologies 7Thequestionnairealsousesnonspecialistlanguageindescribingthecreditorsclaim.It

citessection523(a)(2)(A)innotingthecreditormaintainsthedebtwasincurredbyfraud.Inthe

same sentence, however, the questionnaire states the creditor is opposing the discharge. A

bankruptcy specialist would understand the phrase opposing the discharge to refer to an

objectionto

the

discharge

of

all

debts

under

section

727,

not

just

one

debt

under

section

523

for

whichtheworddischargeabilityisgenerallyused.Althoughthisdifferenceinphrasingmay

seem like a minor quibble, thejuxtaposition of these twodisparate concepts in one sentence

along with the other signals in the questionnaire might have suggested to the specialist

respondentsthatthequestionnairewasnotlookingfortheirexpertopinionbuttheirpersonal

viewsondischarging thisparticulardebt.Thedebtor,Jared, isnotaparticularlysympathetic

character,havingrunupacreditcardbillforavacationmanypeoplewouldnothavetaken.If

thequestionwasunderstoodasbeingupto therespondents individualsenseofjustice, then

the low rate of discharge would notbe particularly surprising.25Overall, the questionnaires

nontechnicalpresentation

makes

itdifficult

to

ascribe

meaning

to

the

null

result.

Inthisstudy,weworkwithapoolofrespondentpooloffederalbankruptcyjudgesand

endeavor to construct a fact pattern with verisimilitude to thejudges everyday experiences

such that an apology would have room to affect thejudges discretion. Part II of this paper

continueswithadescriptionofourmethodologyandthefactpatternweused,whichpresented

judgeswithamarriedcoupleseekingcourtapprovaloftheirproposedchapter13repayment

plan.Judgeswerepresentedwithexperimentalconditionsinwhichthecoupleeitherdidordid

25The questionnaire also hints at the applicability of a statutory presumption not mentioned in the hypothetical.

Purchases of luxury goods or services aggregating more than $1,225 and incurred within 60 days of filing

bankruptcyarepresumed fraudulent.11U.S.C.523(a)(2)(C).At the timeof thesurveyadministration in2004, seeRachlinski,etal.,supranote19,at1231,thepresumptionaroseforamountsover$1,225andincurredwithin60daysoffiling.Sincethattime,theamounthasbeenloweredto$500andthetimeframeexpandedto90days.Althoughthe

timelineofthehypotheticalisnotentirelyclear,respondentsweretoldthattwomonthselapsedbetweenthedebtors

returnfromthetripthathadcreatedthedebtandthetimeatwhichthedebtorconsultedacreditcounselorandthen

(shortly thereafter) filedbankruptcy. The amount of the debt was $2,976. Thus, there appears tobe room for

respondents to conclude thatboth the timeframe and debt threshold were met for the statutory presumption to

apply.Ifthepresumptionapplies,thereis littleroomforjudicialdiscretion inthefactpattern,andthehighrateat

whichjudgesfoundthedebtnondischargeableisunderstandable.

Giventhestatutorypresumption,perhapsthemorecuriousresultisthat24.3%ofthebankruptcyjudgessaidthey

were somewhat likely, likely, or very likely to discharge the debt. We can think of three reasons why a

bankruptcyjudgemightstilldischargethedebtdespitethestatutorypresumption.First,apermissibleinterpretation

of thehypotheticals timeline is that thebankruptcy filingoccurredjustafter the expirationof the 60day period.Second, expert bankruptcy judges may have responded to a survey from nonexperts by assuming that the

researchers were not asking about the applicability of the presumption that was not cited in the factpattern. Seegenerally NORBERT SCHWARTZ, COGNITION AND COMMUNICATION:JUDGMENTAL BIASES, RESEARCH METHODS, AND THE

LOGICOFCONVERSATION (1996). Third, the statutory presumption canbe overcome. In the fact pattern, the debtor

testified he did not contemplate filingbankruptcy until after incurring the debt, and a few cases suggest such

testimonycanbeevidencenegatingthepresumption,seeBankOneColumbusv.Fulginit(InreFulginiti),201B.R.730(Bankr.E.D.Pa.1996);SearsRoebuck&Co.v.Johannsen,(InreJohannsen),160B.R.328(Bankr.W.D.Wis.1993);J.C.PenneyCo.v.Leaird(InreLeaird),106B.R.177(Bankr.E.D.Wis.1989).


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8 BankruptApologiesnotofferanapology.PartIIIpresentsourresults.Wefindnosimplemaineffectoftheapology

onthelikelihoodthejudgewouldapprovetheplan.Wedo,however,findanindirecteffectof

thedebtorsapologyonthe likelihoodthatajudgewouldapprovetheplan,withtheeffectof

apologyonconfirmationmediatedby thejudgesperceptionof thedebtorsremorse.Part IV

concludes

and

offers

some

thoughts

on

what

our

findings

mean

for

the

administration

of

bankruptcycasesaswellasforthebroaderpsychology literatureon theeffectofapologies in

differentlegalcontexts.

II.MethodWe administered the survey instrument to 137bankruptcyjudges, either as part of a

judicialeducationseminarthatoccurredinthefallof2010oronlineintheearlypartof2011.In

2010,therewere337activebankruptcyjudgesandanother29seniorjudgesstillhearingcases

onrecallstatus.Thus,approximately37.4%ofallbankruptcyjudgesrespondedtooursurvey.

Eachjudge

was

asked

to

make

adecision

in

arealistic

chapter

13

bankruptcy

problem

involving a married couple who had filed bankruptcy. 26 To understand the problem, the

research design, and thejudges responses, abasic understanding of thebankruptcy law the

judgeshadtoapplyisneeded.

Most every consumer considering bankruptcy must choose between chapter 7

bankruptcyandchapter13bankruptcy.Achapter7bankruptcyrequiresthedebtortoturnover

anyassetsnotexemptedby lawornotfullyencumberedbyalien.Abankruptcytrusteesells

theseassetsanddistributes theproceeds tocreditors. Inpractice,very fewconsumerdebtors

haveanyassetstodistributeanddonotevenseetheinsideofacourtroom.Formostconsumer

debtors, chapter 7 resembles a very quick administrative proceeding where a discharge ofindebtedness comes within a few months after the filing of forms and a meeting with a

bankruptcytrustee.

Chapter13,incontrast,requiresadebtortodevoteallofhisorherdisposableincometo

repaymentofcreditorsoverathree tofiveyearperiod.Becausechapter13leavesthedebtors

assetsinplaceandcontemplatesrepaymentoutofthedebtorsfutureincome,itcanbeauseful

toolfordebtorsseekingtoprotectavaluableasset.Byfarthemostcommonuseofchapter13is

to protect the debtors residence. We chose to present thejudges a fact pattern representing

issues in chapter 13because the terms of the repayment plan can present legal issues over

whichajudgemightbeabletoexerciseconsiderablediscretion,thusprovidingacontextwithinwhichanapologybythedebtormightinfluencedecisionmaking.Thefactpatternwasloosely

designed on a problem from a leading lawschoolbankruptcy textbook intended to present

studentswithtoughissuesrelatedtoconfirmationofachapter13plan.27

26Indeed,onejudgecommentedthatthescenariopresentedwasalltooreal.

27ELIZABETHWARREN&JAYLAWRENCEWESTBROOK,THELAWOFDEBTORSANDCREDITORS324(6thed.2009).


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BankruptApologies 9Inourfactscenario,amarriedcouplewithtwodaughters(ages10and13)hasaskedthe

judge to approve (or confirm inbankruptcy parlance) a chapter 13 repayment plan. The

couple was described as having modest debts and assets. They had a $180,000 home with a

$1,200mortgagepaymentanda$26,000automobilewitha$550carpayment.Thecouplehad

$25,500

in

credit

card

debts,

some

of

which

was

incurred

for

a

reason

that

would

likelybe

viewed more sympathetically (the husbands medical expenses) and some of which was

incurredforareason thatwould likelybeviewedwithmoreskepticism(avacation).Thefull

factpatternisreproducedintheAppendix.

The respondentswere told that thechapter13 trustee,aprivateattorneyhiredby the

DepartmentofJustice tosupervisechapter13cases,hadobjectedto theplanfor lackofgood

faithandforfailuretodevoteallofthedebtorsdisposableincometorepaymentasrequiredby

theBankruptcyCode.28Therespondentsweretoldthatacourthearinghadtakenplaceatwhich

thedebtorstestified,thusgivingaplausiblecontextinwhichthedebtorsmightapologize.The

factpattern

also

told

the

respondents

that

the

debtors

were

below

median

income

debtors,

meaningtheywerebelowthemedianincomeforahouseholdoftheirsizeintheirstate.Fora

bankruptcy specialist, the debtors income status wouldbe crucial as different rules apply

dependingonwhetherthedebtorisaboveorbelowthemedianincome.

Importantlyforourresearchdesign,theBankruptcyCodespecifiesaflexiblecalculation

to determine disposable income for belowmedianincome debtors. Under this flexible

calculation, disposable income is simply the debtors income minus amounts reasonably

necessaryforthedebtorshouseholdexpenses,charitablecontributionsupto15%of income,

andbusinessexpenses(ifthedebtoroperatesabusiness).29Therespondentsweretoldthatthe

debtorsbankruptcyschedulesshowed$3,420inmonthlypayments(includingpaymentsonthemortgageandcarloan)against$3,550inmonthlyincome.Thebalanceof$130permonthwould

allowarepaymentof18%ofthecreditcarddebtover5years.Thefactpatternfurtherspecified

that thecouplesclaimedmonthlyexpenses included$270permonth forgym fees, training

fees, and travel for the [couples] daughters who both compete as members of the local

gymnastics club and $250 per month for anticipated orthodontia treatment for the oldest

daughter.

Thus, the survey instrument presented several issues about which reasonablejudges

coulddiffer inassessingwhether theplanhadbeenproposed ingood faithandwhether the

debtorsexpenseswerereasonablynecessaryforsupportofthedebtorsortheirdependents.Respondents were randomly assigned to one of two versions of the survey. In one version,

2811U.S.C.1325(a)(3)requires,asaprerequisitetoconfirmation, thattheplanhasbeenproposedingoodfaithnot

by any means not forbiddenby law, while 11 U.S.C. 1325(b) requires the plan to devote all of the debtors

disposableincometorepaymentundertheplan.

29Id.1325(b)(2).


12/29

10 BankruptApologiesrespondentswere told thedebtorsofferedanapology:Wehavenowayofkeepingupwith

ourbillsandrepayingeverything.Itisallwecandotopaythemortgageandkeepfoodonthe

table.Weknowthatweareresponsibleforthemesswearein.Wearetrulysorry.Intheother

version,thefinaltwosentenceswereomittedsuchthatnoapologywasoffered.

Weasked

our

respondents

whether

they

would

confirm

the

debtors

proposed

chapter

13 repayment plan and, on a scale of 1 to 7, how confident they were in their confirmation

decision.Inmakingtheirdecisions,thefollowingfactsshouldhavebeenthemostsalienttoour

respondents:

$550carpaymentonaoneyearoldautomobile $1,050inmonthlyhouseholdexpensesforutilities,foodandclothing,transportation,

andotherbasicneeds

$270inmonthlygymnasticsexpenses

$250in

anticipated

monthly

orthodontia

expenses

$4,000creditcarddebtfromavacation $9,000creditcarddebtfrommedicalexpenses

Respondentswereasked,onscalesof1to7,whethereachofthesefactsmadethemsignificantly

more likely or significantly less likely to confirm the proposed chapter 13 plan. Respondents

were also asked about their perceptions of the debtors and their situation: (1) the extent to

which the debtors were responsible for the financial situation, (2) the extent to which the

debtorshadacceptedresponsibilityfortheirbadfinancialsituation,(3)theextenttowhichthe

debtorsregrettedtheirspendingpatterns,(4)theseriousnessofthedebtorsfinancialdistress,(5) confidence in the debtors ability tobe careful in the future, (6) the extent to which the

debtors were realistic, (7) the extent to which the debtors were selfdisciplined, and (8) the

extent to which the debtors had good values. Variables were coded so that higher numbers

always indicate that respondents believed the debtors possessed more of the given

characteristic.

Because the respondents were sittingbankruptcyjudges, webelieved anonymity was

important to ensure a sufficient response rate. Extensive demographic questionseven

somethingassimpleasgenderwouldhavemadeitlikelythatindividualrespondentscould

be identified. Consequently, the only demographic information captured was the number ofyears a respondent hadbeen serving as abankruptcyjudge. Our respondents tended tobe

experiencedbankruptcyjudges.Themean(median)reportednumberofyearsonthebenchwas

13.45(11.00).Therewasasubstantialvariationinjudicialexperiencewiththebottom10%ofthe

judgesreportingexperienceof5yearsorlessexperienceandthetop10%reporting25yearsor

more.


13/29

BankruptApologies 11III.FindingsA. DiscretioninConfirmationDecisionsTheconstructionofthescenariowassuccessfulinproducingdifferingopinionsamong

therespondentjudges.Acrossconditions,37.6%ofourrespondentsindicatedthattheywould

confirmtheproposedrepaymentplan,while62.4%indicatedthattheywouldnotconfirmthe

plan.Despitethedifficultyoftheproblem,judgeswerequiteconfidentintheirjudgment.Ona

scaleof1 to7 (with7beinghighlyconfident), themean levelofconfidencewas5.53and the

median was 6.30Figure 1 shows the confidence of thejudges responses interacted with their

confirmationdecisionwhere 7indicatesextremeconfidenceinadecisiontodenyconfirmation

and+7indicatesthesamelevelofconfidenceinadecisiontograntconfirmation.

Figure1.DecisiontoConfirmandConfidenceinDecisionTheresponsesof137bankruptcyjudgestoafactpatternaskingwhethertheywouldconfirmachapter13repayment

planaredisplayedbelow.Judgeswereaskedtoratetheirconfidenceintheirdecisiononascalefrom1to7.Judges

whowerethemostconfidentintheirdecisionnottoconfirmwererecodedasascoreof 7,andjudgeswhowerethe

mostconfidentinadecisiontograntconfirmationweregivenascoreof+7.Thefigureshowsthat,althoughjudges

differedintheiropinionsofwhetherconfirmationwasappropriateinthiscase,theytendedtobeconfidentintheir

owndecision.

30A variety of previous work explores the ways in which decisionsbecome more coherent and decision makers

becomemoreconfident in theirdecisionsonce theyhavemade them.Seee.g.,DanSimon,AThirdViewoftheBlackBox:CognitiveCoherenceinLegalDecisionMaking,71U.CHI.L.REV.511 (2004);MaraMatheretal.,MisremembranceofOptionsPast:SourceMonitoringandChoice,11PSYCHOL.SCI.132(2000).

0%

5%

10%

15%

20%

25%

7 6 5 4 3 2 1 1 2 3 4 5 6 7

decisionsto denyconfirmation decisionsto grantconfirmation


14/29

12 BankruptApologiesB. MainEffect:Apology OutcomeJudges who heard an apology from the debtors were slightly more likely to grant

confirmationofthedebtorsplan(40.6%)thanjudgeswhodidnothearanapology(34.4%).This

differencewasnotsignificant,however,whetherconfirmationwasanalyzedasadichotomous

variable(2

=0.545,

p=0.460)

or

as

acontinuous

variable

on

ascale

from

7to

+7

(t(130)

=

0.942,

p=0.348;WilcoxonZ= 1.642,p=0.101).Thus,wedidnotfindasimplemaineffectfromthe

apologyontherespondentsdecisiontoconfirmthedebtorschapter13plan.

C. MediatedEffects:Apology Perceptions CaseOutcomeAlthough there was no simple main effect of apology on confirmation decisions, the

apology did affect the judges assessment of the debtors which in turn affected the case

outcome.Thus,we find that inourdata theeffectofanapologyonconfirmationdecisions is

indirect,mediatedthroughtherespondentsassessmentsofthedebtors.Focusingonlyonmain

effectswhileignoringmediatedeffectscanmissimportantcausalpathwaysforaphenomenon

under investigation.31This section explores several different analysesby which this mediated

effectofapologiesonbankruptcydecisionmakingcanbeseen.

The apology affected thejudges perception of the debtors along several dimensions.

When the debtors apologized, the respondents rated the debtors as having accepted more

responsibility(4.32(1.29)vs.3.64(1.33),t(130)=3.003,p=.003)aswellashavinggreaterregret

for their spendingpatterns (4.44 (1.29)vs.3.53 (1.37), t(129)=3.919,p


15/29

BankruptApologies 13Figure2.EffectofApologyonRespondentsPerceptionsofDebtors

Perceptions of 137bankruptcyjudges about hypothetical debtors varied depending on whether thejudges were

givenafactscenariothatcontainedanapology.Inthefactscenario,amarriedcoupleaskedthejudgetoconfirma

chapter13repaymentplanovertheobjectionofthebankruptcytrustee.Judgeswereaskedtorate,on1to7scales,

thedegreetowhichthedebtorshadacceptedresponsibility,hadregretfortheirspendingpatterns,wouldtakemore

carewiththeirfinancesinthefuture,wererealistic,wereselfdisciplined,werepersonsofgoodvalues,hadcaused

theirownproblems,andhadseriousfinancialdistress.Asindicatedbytheasterisks,thefirsttwovariablesproduced

statisticallysignificantdifferencesatthe5%levelorless.Thethirdvariable,CareintheFuture,producedadifference

thatapproachedstatisticalsignificance(indicatedbythedagger).

Theeffectstriggeredbythedebtorsapologyareconsistentwiththeeffectsofapologies

foundinothercontexts.Althoughthedebtorsdeliveredtheirapologytothebankruptcyjudge

and not to the creditors who were actually harmed by the debtors conduct, the apology

neverthelessledtoanincreasedperceptionthatthedebtorhadacceptedresponsibilityandfelt

regret. Similarly, apologies seemed to have an effect on judges expectations about future

1

2

3

4

5

Accept

Resp.

Regret Carein

Future

Realistic Disci

plined

Good

Values

Caused

Own

Problems

Distress

Serious

ness

Apology NoApology

* *


16/29

14 BankruptApologiesbehavioroneofthekey inferencesthattendstobedrawnfromapologies.33Theapologydid

not increase the respondents perceptions about the debtors along dimensions less closely

associatedwithapologies(beingrealistic,beingselfdisciplined,andhavinggoodvalues).

Conceptually, respondents perceptions of the debtors regret and acceptance of

responsibility

tap

into

similar

ideas.

Inboth

instances,

the

respondents

are

assessing

the

debtorspresentmental state regardingpastevents.Therefore,wecombined these two items

intoanindexwelabeledremorse(alpha=.713).Aswouldbeexpectedfromtherelationship

oftheindividualitemsinremorsetotheofferingofanapology,Remorseissignificantlyhigher

in the presence of an apology (4.34 (1.07) vs. 3.59 (1.21), t(128) = 3.778,p


17/29

BankruptApologies 15realistic were more likely to confirm the proposed plan (46.4%) than were respondents who

believedthatthedebtorsweremoreunrealistic(22.0%)usingboththedichotomous, 2=6.149,

p=.013.andcontinuousmeasuresofconfirmation,t(93)=2.840,p=.006.Perceptionsofwhether

thedebtorsweredisciplined,orhadgoodvaluesdidnothaveanyeffecton theconfirmation

decision.36

Figure

3

displays

the

effects

of

these

differentjudgments

about

the

debtors

on

judgesconfirmationdecision.

Thus, theexistenceof anapologyaffected the respondentsperceptionof thedebtors

remorseandtheirexpectationsabouthowthedebtorwouldmanagetheirfinancesinthefuture.

Both of these sets of perceptions in turn were associated with a higher likelihood that the

proposedplanwouldbeconfirmed.

36Respondentswhomadeabovemedianevaluationsofwhetherthedebtorshadgoodvalueswerenomorelikelyto

confirmthechapter13plan(42%)thanrespondentsbelowthemedian(42.5%), 2


18/29

16 BankruptApologiesFigure3.EffectofRespondentsPerceptionsofDebtorsonConfirmationDecision

Federalbankruptcyjudges(n=137)weregivenahypotheticalfactpatternaboutamarriedcouplewhowasasking

thejudge toconfirm theirchapter13plan.Thejudgeswereasked tomakeseveralassessmentsabout themarried

coupleon 1 to 7 scales.Thebar chart representsmedian splits onjudges assessments of the extent to which the

couplehadacceptedresponsibility,regrettedtheirspending,feltremorse(whichwasa2itemindexofthefirsttwo

items), would take greater care with their finances in the future, and were realistic. The yaxis represents the

percentageofrespondentswhosaidtheywouldconfirmthecoupleschapter13plan.Statisticalsignificanceatthe

5%levelorlessisindicatedbyasterisks.

We

used

structural

equation

models

to

test

the

indirect

effects

of

the

apology

on

confirmationdecisionsthroughtheseperceptionsofthedebtors.Wefoundanindirecteffectof

apology on confirmation decisions that is mediated through remorse. We first used the

dichotomous confirmation decision as the dependent variable. The model fit indices for this

modelweregood, 2=.01,p=.921,RMSEA


19/29

BankruptApologies 17good, 2


20/29

18 BankruptApologiesThe respondents were told that the couple had listed $1,050 as monthly household

expenses for utilities, food and clothing, transportation, and otherbasic needs. According to

data from the Consumer Bankruptcy Project (CBP), a national random sample of 2007

bankruptcyfilers,debtorshadamean(median)of$1,128($1,031)forsuchexpenses.39Ofcourse,

theamount

of

household

expenses

ishighly

dependent

on

the

debtors

income.

Using

asimple

linearregressionanalysisfromtheCBPdata,realworlddebtorswiththesame incomeasour

hypotheticalcouplewouldhavehadexpensesof$1,290,afigurewhichapproaches$1,400once

adjustedforthefouryearsofinflationbetweentheCBPdataandthetimeofoursurveys.Thus,

the hypothetical debtors household expenses are not excessive as compared to realworld

bankruptcyfilersandsuggestsomeleveloffrugality.Notsurprisingly,wewillseethatofthe

four expenses listed in the hypothetical our respondents reacted most favorably to the

householdexpenses.

Incomparison,weintendedthe$550carpaymenttobemoreimmoderatebutnotoverly

excessive.The

car

was

the

familys

only

vehicle

and

was

not

an

expensive

make

(a

Ford).

On

the

other hand, the car was a oneyear old sports utility vehicle (SUV), and a family looking to

economize probably could find less expensive options. Bankruptcy court files suggest most

debtors have cars that are seven years old or more.40The IRS Guidelines, whichbankruptcy

courts must use for abovemedian income debtors, would have allowed a $496 automobile

payment.41

The$250orthodontiaexpensefora13yearoldchildallowedtherespondentstoexercise

their discretion in different ways. On the one hand, some respondents might see this as a

discretionarymedicalexpenseoratleastasamedicaltreatmentthatcouldbeputoffuntilthe

couple had finished their repayment plan. Although someone new to the problems of theoverindebtedmightsee thepostponementofmedicaltreatmentasaseverehardship, it isnot

uncommon.TheCBPaskedbankruptcydebtorswhatthingstheyhadtodowithoutbecause

of affordability in the two years prior to filingbankruptcy. Of these realworldbankruptcy

debtors,57.6% reported theyhad togowithoutneededdentalcare,and36.9%reported they

hadtogowithoutneededmedicalcarefromadoctor.Ontheotherhand,respondentscouldsee

the orthodontia expense as a necessary medical treatment for a child and conclude that,

although many bankruptcy debtors may do without dental treatment, skipping a childs

39One of this papers authors (Lawless) participated in the 2007 CBP, and the data reported in the text are hiscalculationsfromthe2007CBPdata.Forafullmethodologyaswellasapresentationofthebasicfindingsfromthe

2007CBP,seeRobertM.Lawless,etal.,DidBankruptcyReformFail?:AnEmpiricalStudyofConsumerDebtors,82AM.BANKR.L.J.349(2008).

40 Bob Lawless, Cars in Bankruptcy, Credit Slips (Aug. 4, 2006) (available athttp://www.creditslips.org/creditslips/2006/08/cars_in_bankrup.html).

41ThefigureinthetextisfromtheIRSGuidelinesforthefallof2010,whichcanbefoundonthewebsiteoftheU.S.

TrusteeProgramattheDepartmentofJustice:http://www.justice.gov/ust/eo/bapcpa/meanstesting.htm.


21/29

BankruptApologies 19orthodontiatopayacreditcardcompanyisnotsomethingajustbankruptcysystemwouldask

debtorstodo.

Thefinalexpensewas$270permonth forgym fees, training fees,andtravelfor the

couplesdaughterswhocompetedasmembersofthelocalgymnasticsclub.Weestimatedthe

amount

based

on

personal

experience

with

a

YMCA

club

in

the

Midwest

as

well

as

conversations withparents from theclubabout theirowncosts. Thecosts for the daughters

gymnasticsrepresentedalow tomidtieroptionandwerenotthetopoftheline.Also,this

proposed expenditure was not for the couple themselves but for the daughters, and

respondentscouldhaveviewed theexpenseasreflecting thecouplesgoodparenting.At the

same time, the gymnastics expense was clearly the least essential item among the debtors

expenses.Moreover, the$270monthlyexpense forgymnasticswasmore than twice the$130

monthlypaymentthedebtorswereproposingtosendtotheircreditors.


22/29

20 BankruptApologiesFigure5.EffectofApologyonExpensesandEffectofExpensesonConfirmation

Bankruptcyjudges(n=137)wereaskedhowtheywouldruleontherequestofahypotheticalcoupletoconfirma

chapter13plan. Inoneversionofthesurvey instrument,thecoupleofferedanapology.Thefactpatternspecified

fourmonthlyexpensesthejudgescouldconsiderinreachingtheirdecision:$1,050inroutinehouseholdexpenses;a

$550carpayment,$250inorthodontiaforateenagedaughter,and$270forgymnasticsfeesfortwodaughters.Ona

scale of 1 to 7, respondents could identify whether each expense made them significantly less likely/significantly

more likely to confirm the chapter 13 plan. Panel A shows how thejudges responded on the 17 scalebased on

whetherthejudgeswereexposedtotheapology.Noneofthedifferencesarestatisticallysignificant.PanelBshows

therateatwhichjudgesconfirmedthechapter13repaymentplaydependingonhowtheyevaluatedeachexpense

(mediansplit).Statisticalsignificanceatthe5%levelorlessisshownbytheasterisks.Together,theresultsshowthat,

judges perceptions of the claimed expenses affected their confirmation decisions,but that the apology did not

directlyaffectthejudgesperceptionoftheseexpenses.

A.EffectofApologyonExpenses B.EffectofExpensesonConfirmation

1

2

3

4

5

6

House

holdExp.

Car

Pmt.

Ortho

dontia

Gym

nastics

Apology NoApology

0%

10%

20%

30%

40%

50%

60%

70%

80%

House

holdExp.

Car

Pmt.

Ortho

dontia

Gym

nastics

Abovemedian Belowmedian

* * *


23/29

BankruptApologies 21Figure5showsourresults.Overall,judgesviewedtheroutinehouseholdexpensesmost

favorably(M=4.9)andthegymnasticsfeesleastfavorably(M=2.2),withthecarpayment(M=

3.6) and orthodontics costs (M = 3.9) in the middle. There was no effect of the apology on

judgesevaluationsofanyoftheclaimedexpenses.

Although

there

was

no

evidence

that

judges

perceptions

of

the

expenses

were

influenced by the apology, the claimed expenses were clearly important to the judges

confirmation decisions.Judges who had abovemedian views of the household expenses, the

orthodontia,andthegymnasticsfeesweresignificantlymorelikelytosaytheywouldconfirm

thedebtorsproposedchapter13plan.42Thisisperhapsnotsurprisingassuchexpensesare,of

course,directlyrelevanttothelegalstandardsforconfirmationofachapter13plan.Thelower

theexpenses, themoredebtorscanreturn tocreditors. In turn,debtorswhocanpaymore to

theirchapter13debtorsaremorelikelytobeconsideredtohaveproposedaplanthatisingood

faithandthatdevotesanappropriateamountoftheirdisposableincometocreditorrepayment.

Interestingly,

as

noted

above,

thejudges

reacted

most

negatively

to

the

gymnastics

expense,andtheirreactiontothisexpensewasaparticularlystrongindicatorofwhetherthey

would confirm the plan. Although the apology did not directly affect the how thejudges

perceived the gymnastics expense,judges perceptions of this expense were associated with

theirsenseofthedebtorsremorse.Judgeswhohadabovemedianperceptionsofthedebtors

remorseviewedthedebtorsgymnasticsexpensemorefavorably(2.54vs.1.90,t(102)=2.812,p=

.006).Theotherexpenseshadnosignificantrelationshipwithremorse.

IV.Implications,Recommendations,&ConclusionThisresearchexaminedthedecisionsofasetofdecisionmakersbankruptcyjudges

who are specialized and sophisticated. Thejudges were presented with a hypotheticalbut

realistic fact pattern involving a married couple who were asking thejudge to confirm their

proposedchapter13repaymentplan.Inoneversionofthefacts,themarriedcoupleapologized

for their financial problems.Judges were asked to indicate whether they would confirm the

proposed plan, to indicate their confidence in that decision, and to make a variety of

assessmentsofthedebtorsandtheirfinancialsituation.

Wefindthatapologiesinfluencejudicialconfirmationdecisionsindirectlythroughtheir

effect onjudges perceptions of the debtors. Specifically, debtors who apologize are seen as

more remorseful and are expected to more carefully manage their finances in the future ascompared todebtorswhodonotofferanapology.Theseperceptionsof thedebtors, in turn,

42Judgeswithabovemedianratingsofthehouseholdexpensessaidtheywouldconfirmtheplan57.9%ofthetime

comparedto21.9%ofthetimeforjudgeswithbelowmedianratings(2=17.640,p


24/29

22 BankruptApologiesinfluence judges confirmation decisionsjudges were more likely to confirm a proposed

repaymentplanwhentheyperceivedthedebtorsasexperiencingmoreremorseandwhenthey

expectedthedebtorstomorecarefulwiththeirmoneygoingforward.

We also find that judges evaluations of the debtors claimed expenses were not

influencedby

apologies.

The

judges

evaluations

of

these

expenses,

however,

significantly

and

appropriately influenced their inclination to confirm or disconfirm the proposed plan. In

addition, perceptions of the expense that generated the most skepticism among thejudges

expenses related to the daughters gymnastics teamwere associated with the degree of

remorsejudges perceived the debtors as experiencing and were in turn strongly related to

whetherjudgesconfirmedtheproposedchapter13repaymentplan.

Thus,wefindthatapologieshaveeffectsonjudgesinbankruptcycasesthataresimilar

totheeffectsthatapologieshaveon individualsinavarietyofothercontextsandalsoextend

thisprevious research in importantways. Inparticular,debtorswhoapologizeareperceived

more

positively

and

experiencebetter

outcomes.

This

is

the

case

even

thoughbankruptcy

involvesaharmthatdifferssomewhatfromtheharmsinvolvedinmanyotherlegalsettings

that is, the harm inbankruptcy is directed toward a group of creditors and canbe, thus,

somewhat more diffuse. In addition, the specific harm involved in bankruptcy is the

nonpaymentofanobligation.Thisharmoccursbecausethedebtorlackstheresourcestopay.

Presumably, in most cases the debt would have gone unpaid even in the absence of a legal

declaration ofbankruptcy.Thus, the formaljudicial proceeding ofbankruptcycouldevenbe

seenasevidencingsometakingofresponsibilityfortheharmcaused. Thisisespeciallythecase

forachapter13bankruptcyproceedingbecause it involvessomerepayment tocreditors.The

apology in this case influenced judicial decision making over and above any signaling ofresponsibility taking that maybe inherent in the decision to file chapter13bankruptcy. This

finding is consistent with research that has found that the effects of apologies increase as

additionalcomponentsofapologiesareadded.43

Inaddition,apologiesinfluencedtheperceptionsanddecisionsofjudgesthirdparties

tothedisputeorthewrongatissueandactorswhoreceivetheapology,inasense,asproxies

fortheinjuredparties(thecreditors).Previousresearchhasfoundthatthirdpartiestendtobe

morecriticalofapologies44andwemighthaveexpectedjudgestobesuspiciousofthemotives

underlying an apology offered in this context. 45 Despite this likely skepticism, judges

perceptionswerepositivelyinfluencedbytheapology.

43Seee.g.,Scher&Darley,supranote1.44Risen&Gilovich,supranote15.

45SeeJenniferK.Robbennolt,TheEffectsofNegotiatedandDelegatedApologies inSettlementNegotiation,__L.&HUM.BEHAV.__(forthcoming).


25/29

BankruptApologies 23Previousresearchhasexploredtheeffectsofapologiesonanothersetoflegallytrained

actorspracticingattorneysratherthanjudges.Thisresearchhasfoundthatapologiescanput

onewhoapologizesinaworsepositionintheeyesofanattorneyfortheotherside.46Butthere

are at least two distinctions that might explain why these two sets of legally trained actors

responddifferently

to

apologies.

First,

the

judges

in

this

study

were

acting

in

aneutral

capacity,

while the attorneys in the previous study were acting as partisan agents for their clients.

Second,thedecisiontobemadeinthisstudywasnotultimatelyadecisionaboutresponsibility,

butratheradecisionabouttheappropriatenessandlikelysuccessofplansgoingforward.

Inmanylegalcontexts,parties(andtheirlawyers)canbereluctanttoofferapologiesfor

fear that the apology willbe interpretedby opponents and factfinders as an admission of

responsibility, guilt, or liability. 47 While it remains to be seen whether and under what

circumstances apologies adversely affect legal decisions involving guilt or liability, 48 the

bankruptcycontextoffersaglimpseofhowapologiesoperateinadifferentlegalenvironment.

Inparticular,

(absent

bad

faith)

the

focus

in

bankruptcy

isless

on

the

debtors

responsibility

for

having incurred the debt (such responsibility typicallybeing clear) andmoreonhow tobest

allowcreditors torecoverat leastsomeoftheir losseswhileallowingthedebtora freshstart.

Thus,theplanconfirmationdecisionmorecloselyresemblesasentencingdecisioninthatithas

atleastoneeyeonthefuture.And,indeed,ourfindingsareconsistentwithpriorworkthathas

foundthatcriminaldefendantsfarebetterintermsofsentencingwhentheyexpressremorse.49

The papers findings also have value for discussionsof the purposes of the consumer

bankruptcy laws. Many scholars have advocated a utilitarian justification for consumer

bankruptcy,especiallythebankruptcydischarge,emphasizingthewaysinwhichthedischarge

46Robbennolt,supranote16.47SeeJonathanCohen,AdvisingClientstoApologize,72S.CAL.L.REV.1009(1999);Robbennolt,supranote16.48Priorresearchhasfoundthatapologiescanmoderatejudgmentsofresponsibility.Seee.g.,BruceW.Darby&BarryR.Schlenker,ChildrensReactionstoApologies,43J.PERSONALITY &SOC.PSYCHOL.742(1982);BruceW.Darby&BarryR.Schlenker,ChildrensReactionstoTransgressions:EffectsoftheActorsApology,Reputation,&Remorse,28BRIT.J.SOC.PSYCHOL. 742 (1989); Kenichi Ohbuchi et al.,Apology asAggression Control: Its Role inMediatingAppraisal of andResponsetoHarm,56J.PERSONALITY &SOC.PSYCHOL.219(1989);KenichiOhbuchi&KobunSato,ChildrensReactionstoMitigatingAccounts:Apologies, Excuses, and Intentionality of Harm, 134J.SOC.PSYCHOL. 5 (1984); Scher & Darley,supranote1;BernardWeineretal.,PublicConfessionandForgiveness,59J.PERSONALITY281(1991).Ontheotherhand,in the criminal context, confession evidence proves tobe quite powerful. See e.g., Saul M. Kassin & KatherineNeumann,OnthePowerofConfessionEvidence:AnExperimentalTestoftheFundamentalDifferenceHypothesis,21L.&HUM.BEHAV.469 (1997);SaulKassin&GisliH.Gudjonsson,ThePsychologyofConfessions:AReviewoftheLiteratureandIssues,5PSYCHOL.SCI.PUB.INT.33(2004).Seealsostudiesofapologiesandjurordecisionmakingcitedsupranote18.

49Seee.g.,Eisenbergetal.,supranote6;ChrisL.Kleinkeetal.,supranote6(findingthatrecommendedsentenceswerepredictedbyperceived remorse);Pipes&Alessi, supranote6.ButseeChristyTaylor&ChrisL.Kleinke,EffectsofSeverity ofAccident, History of Drunk Driving, Intent, and Remorse onJudgments of a Drunk Driver, 22J.APPLIEDSOC.PSYCHOL. 1641 (1992) (finding a relationshipbetween remorse and perceptions of the defendant,but finding no

significanteffectofremorseonsentencing).


26/29

24 BankruptApologiescan operate as insurance against income and the general, lastresort social safety net that

bankruptcycanbeforsome.50Otherscholars,however,haveofferedamodelofthebankruptcy

discharge thatrestson thedebtorowningup to financial failureand therehabilitation that

comes from an acknowledgement of wrongdoing. 51 Our findings suggest that a debtors

apologyand

the

decision

makers

perception

of

the

debtors

remorse

can

be

important

for

how

much bankruptcy relief the debtor will receive. In practice, bankruptcy may be about

forgivenessat least for some actors in the bankruptcy in some contexts. To be fair, the

scholarlydebateaboutbankruptcyspurposes is largelynormative,butfor thisscholarship to

succeedinchangingthenormativeviewofbankruptcy,itwillneedtoengagewiththerealityof

bankruptcyinpractice.

Thepaperalsoshedssome lightonhowjudgesactuallydecidecasesandtheeffectof

apologieson thosedecisions.First,whilebankruptcy lawdoesnot formallyconsiderapology

andremorse,theBankruptcyCodedoesdirectjudgestotakeintoaccountwhetherthedebtoris

likelyto

be

able

to

successfully

fulfill

the

terms

of

the

plan

over

aperiod

of

years.

52Although

ourhypotheticaldidnotdirecttherespondentstothisspecificstatutoryprovision,itwouldnot

besurprisingiftheytookitintoaccountwhileformulatingtheirdecisions.Asnotedabove,one

ofthekeyinferencesthatpeopletendtomakefromasincereapologyisthattheoffenderisless

likely to reoffend in the future. Judges may make a similar inference about a sincerely

apologeticdebtorsfuturecompliancewithabankruptcyplan.Wediddirectthejudgestotherequirementthatthedebtorproposeachapter13planin

goodfaith,53anotherplacewhereapologyandremorsemayplayanappropriaterole.Theterm

good faithallows theconsiderationofmostany factoracourtmightdeem legallyrelevant,

and thecontrollingprecedentdirectsasmuch for thechapter13good faithrequirement.54

Tothe extent good faith includes a consideration of desert of the debtors worthiness for

bankruptcyreliefanapologyandremorsewouldbelegallyrelevant.

Thesurveydesign,however,alsoaskedthejudgesaboutadecisionwhereapologyand

remorseshouldnotbelegallyrelevant.Inarrivingathowmuchdisposableincomethedebtor

50Hynesoffersanexcellentsummaryofthecompetingjustificationsofferforconsumerbankruptcy,seeRichardM.Hynes, Why (Consumer) Bankruptcy?, 56 ALA. L. REV. 121, 14853 (2004). Feibelman also has offered an extendedanalysisandcritiqueofthesocial insurancejustificationforconsumerbankruptcy.AdamFeibelman,DefiningtheSocialInsuranceFunctionofConsumerBankruptcy,13AM.BANKR.INST.L.J.129,passim(2005)51GROSS,supra note 10;JasonJ. Kilborn,Mercy,Rehabilitation,andQuidProQuo:A RadicalReassessment of IndividualBankruptcy,64OHIOST.L.J. (2003).SeegenerallyJonathan R.Cohen,TheCultureofLegalDenial,84NEB.L.REV.247(2005).

5211U.S.C.1325(a)(6).

53Id.1325(a)(3).548COLLIERONBANKRUPTCY,supranote23,at1325.04[1](InexaminingwhethertherehasbeenaseriousabuseoftheCode,manycourtshavecontinuedtousethefactsensitiveallofthecircumstancestypeofanalysisdeveloped

bytheappellatecourtspriortothe1984amendments.).


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BankruptApologies 25hastodevotetocreditorrepayment,thejudgeswereaskedtoconsiderfourseparateexpenses.

TheformalstatementoflawintheBankruptcyCodeallowsthedeductionofexpensesthatare

reasonablynecessarytosupportthedebtorsorthedebtorsdependents,55aformulationthat

shouldnotallowconsiderationof remorse.Although theapologydidnotdirectlyaffecthow

judges

perceived

the

various

expenses,

thejudges

perception

of

the

debtors

remorse

was

relatedtohowtheyperceivedtheclaimedexpensefortheirdaughtersgymnasticsfees,which

wasthemostdiscretionaryofthedebtorsproposedexpensesandconsequentlyturnedoutto

havethelargesteffectontheconfirmationdecision.

Academicsoftendebatehowmuchlawmatters,thatis,towhatdegreejudgesfollowthe

writtenlawasopposedtotheirownpreferences.Ourfindingssuggestlegaldoctrinemattersa

lotthe claimed expenses were a major component of thejudges decisionsbut that other

factorsalsoenteredintothedecision.Theseotherfactorshadeffectswithinthecontemplation

oftheformalrules,suchasremorseshapingthelikelihoodoffuturepaymentortheexistenceof

good

faith,but

also

had

effects

not

mandated

by

formal

law,

such

as

remorse

affecting

the

judges assessment of whether a proposed expense was reasonably necessary. Thus, our

findings suggest, perhaps not surprisingly, that judges decisions can be complex and

multidimensional.Lawmatters,butsodootherthings.

Finally, this research may have practical relevance for practicingbankruptcy lawyers.

We find thataperceptionof remorsemakes thejudgemoredisposed to thedebtorscase,at

least in consumer bankruptcy. Our findings may formally confirm a folk wisdom of the

professional community that serves the bankruptcy courts. There is an old saying among

commerciallawyersthatpigsgetfatandhogsgetslaughteredselfinterestistobeexpected

butthecourtswillhammerclientswhodisplayexcessiveselfinterest.Manydebtorsdonotseethe inside of the bankruptcy court room and would not often have a chance to formally

apologize.Butwhileanapologycanbe important, it istheoverallperceptionofremorse that

appearstomattermore.Thus,evenwhenobviousopportunitiesforshowingremorsesuchas

hearings or written pleadingsare not available in a given case,bankruptcy attorneys can

convey remorse through honest acknowledgement and transparent disclosure in the many

schedulesandformsfiledinthebeginningofeverybankruptcycase.56

55Id..1325(b)(2).

56Anecdotally, oneofthejudgesinvolvedinthestudytoldoneoftheauthors(Robbennolt)thathemadeinferences

aboutthedebtorsdegreeofremorsefromthecontentoftherepaymentplanthatwasproposed.


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26 BankruptApologiesAPPENDIX:FACTPATTERN

Thefirstcaseonyourdockettodayisaconfirmationhearingforthechapter13planof

BethanyandMarkMiller.Thechapter13trusteehasobjectedtoconfirmationforlackofgood

faith(

1325(a)(3))

and

for

failure

to

devote

all

of

the

debtors

projected

disposable

income

to

repaymentofunsecuredclaims(1325(b)).TheMillersarebelowmedianincomedebtors.The

Millersweretheonlywitnessestotestifyattheconfirmationhearing.Basedontheirtestimony

andtheirbankruptcyschedules,youunderstandthefactstobethefollowing.

Mark,ahighschoolgraduate,isacustodianatalocalmiddleschool.Bethany,whohas

anassociatesdegreefromacommunitycollege,hasworkedoffandonasa teachersaide in

elementaryschoolsandnowhasasteadypositioninoneofthelocalschools.TheMillershave

twochildren,bothgirls,ages10and13.

TheMillershavetwosecureddebts.First,theyowe$180,400onafirstmortgagefortheir

residence.

The

current

market

value

of

the

residence

is

$180,000,

and

the

monthly

mortgage

payment is$1,200.Theyhave twomonthsofarrearages that theywillcure through theplan

witha$100monthlypayment. Theother secureddebt is for $26,100 foraoneyear oldFord

ExplorerSUV.Thisdebtisnotindefault,andtheplanproposestocontinuethe$550monthly

carpayment.TheMillershavenononexemptassets.

Unsecured debt totals $25,500 and is owed to various credit card companies. At the

confirmationhearing,Bethanytestifiedthatmostofthedebtpiledupduringthefourmonths

when I didnt have ajob. We had to charge a lot ofbasic expensesjust to getby. Another

$9,000ofthecreditcarddebtrepresentsmedicalexpensesresultingfromcomplicationsdueto

Marksdiabetes.Bethanyalsoadmittedthatabout$4,000ofthecreditcardbalancecamefroma2weekvacation theytook lastyeartotheCaribbean.Wetookthegirlsandstayed inanall

inclusiveresort,shetestified.Bethanythentriedtoexplain,Wehavenowayofkeepingup

withourbillsandrepayingeverything.Itisallwecandotopaythemortgageandkeepfoodon

thetable.

TheMillersScheduleIshows$3,550incombinedmonthlyaftertaxincome.Inaddition

to their mortgage and car payments, their Schedule J lists $1,050 as monthly household

expensesforutilities,foodandclothing,transportation,andotherbasicneeds.Inaddition,the

Millers listexpensesof$270permonth forgym fees, training fees,and travel for theMillers

daughterswhobothcompeteasmembersofthelocalgymnasticsclub,and$250permonthfororthodontic treatment the Millers plan tobegin for their 13year old child within the next

several months. Thus, they show total monthly payments of $3,420 against $3,550 monthly

income. They propose a 36month plan with a payment to unsecured creditors of $130 per

month(foratotalof$4,680andan18%dividendtounsecuredcreditors).

Asnotedabove,thechapter13trusteehasobjectedtoconfirmationforlackofgoodfaith

( 1325(a)(3)) and for failure to devote all of the debtors projected disposable income to


29/29

BankruptApologies 27repaymentofunsecuredclaims (1325(b)).The trusteeobjects to thesizeof thecarpayment

andtheexpensesfororthodontiaandgymnastics.Iftheseexpensesweredisallowedandifthe

Millers were able to find an automobile with just $60 in lower car payments, unsecured

creditorswouldbepaidinfull.

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