BankruptApologies

JenniferK.Robbennolt UniversityofIllinois RobertM.Lawless UniversityofIllinois Abstract Apologies result in better outcomes for wrongdoers in a variety of legal contexts. Previous research, however, has primarily addressed settings in which a clear victim receives 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 repayment plan. This expands examination of apologies to a legal setting in which there is no clear victim and to decisions of a neutral (nonvictim) decision maker. We find that judges assessments of debtors were influenced by apologies. These assessments, in turn, affected judgesconfirmationdecisions.

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

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

BankruptApologies
JenniferK.Robbennolt UniversityofIllinois RobertM.Lawless UniversityofIllinois* I.Introduction Inmosteverycountry,filingbankruptcyisapublicactpossiblybecausemanypersons seebankruptcyasapublicwrong.Whenaconsumerfilesbankruptcysheessentiallysaystothe world, My financial situation is hopeless, and I will be breaking promises that I made to my creditors. Using a sample of U.S. bankruptcy judges, this paper asks whether a bankrupt consumer improves her situation by apologizing for breaching her promises. In the context of a particular U.S. consumer bankruptcy proceeding, we find an indirect effect of a debtors apology on judicial decisions, with apologies affecting perceptions of the debtor and those perceptions influencing confirmation decision making. When our respondent judges believed that the debtor was more remorseful, they were more likely to approve the debtors repayment planinbankruptcy.Thesefindingsprovideinsightintohowapologiesworkinthelegalcontext moregenerallyaswellashavingpolicyimplicationsforthebankruptcysystem. Contrary to the instincts of many lawyers, apologies can often improve financial (and nonfinancial) outcomes for defendants. Such benefits stem from the attributions that are made about a harmdoer who apologizes. Among other things, apologizing harmdoers are perceived to have acted less intentionally, are blamed less for their misdeeds, are thought to have experienced more regret, and are predicted to behave better in the future than are wrongdoers who do not apologize.1Accordingly, when a harmdoer apologizes, the injured party is less
Address correspondence to Jennifer K. Robbennolt, University of Illinois College of Law, 504 E. Pennsylvania Ave., Champaign, IL 61820; email: jrobbenn@illinois.edu. Robbennolt is Professor of Law and Psychology, University of Illinois.LawlessisProfessorofLaw,UniversityofIllinois.
*

WethankJosephDohertyforhishelpfulcommentsonapreviousversionofthispaperandparticipantsattheLaw& Society Conference (2012), the Conference on Empirical Legal Studies (2012), the American PsychologyLaw Society annual meeting (2012), the European Association for Psychology and Law (2012), and a faculty workshop at the University of Kansas for their feedback. We are especially appreciative to the many sitting bankruptcy judges who tooktimeoutoftheirbusyscheduletofilloutoursurveyandhelpadvanceunderstandingofthelegalsystem. See e.g., James R. Davis & Gregg J. Gold, An Examination of Emotional Empathy, Attributions of Stability, and the Link Between Perceived Remorse and Forgiveness, 50 PERSONALITY & INDIVIDUAL Differences 392 (2011); Gregg J. Gold & Bernard Weiner, Remorse, Confession, Group Identity, and Expectancies About Repeating a Transgression, 22 BASIC & APPLIED PSYCHOL. 291 (2000); Jennifer K. Robbennolt, Apologies and Settlement Levers, 3 J. EMPIRICAL LEGAL STUD. 333 (2006); Steven J. Scher & John M. Darley, HowEffectiveAretheThingsPeopleSaytoApologize?EffectsoftheRealizationof theApologySpeechAct,26PSYCHOLINGUISTICRES.127(1997).
1

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BankruptApologies

likely to feel the need to involve an attorney2and more likely to be amenable to settlement.3 These potential benefits of apologies have beendemonstrated across a number of legal settings, including general personal injury cases,4professional malpractice,5criminal law,6and landlord tenantdisputes.7 The effects 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 examined settings in which there is a dispute between private parties (or a defendant and the state) and in which there is a clear victim. Bankruptcy presents a different legal context with implications for how apologies operate. First, a group of creditors will often share the wrong that flows from a bankruptcy filing, perhaps ameliorating the perception of wrongdoing because there is no one clear victim.8Second, the harmdoer initiates a bankruptcy case, and the filing of a bankruptcy petition may itself be perceived as an acceptance of responsibility by the harmdoer.9The harm from bankruptcy the nonpayment of debt stems from the debtors
2

Kathleen Mazor et al., Health Plan Members Views About Disclosure or Medical Errors, 140 ANNALS OF INTERNAL MED. 409(2004).

Russell Korobkin & Chris Guthrie, Psychological Barriers to Litigation Settlement: An Experimental Approach, 93 MICH. L.REV.107(1994);Robbennolt,supranote1.
3

Jennifer K. Robbennolt, Apologies and Legal Settlement: An Empirical Examination, 102 MICH. L. REV. 460 (2003); Robbennolt,supranote1.
4

Kathleen Mazor et al., Health Plan Members Views About Disclosure or Medical Errors, 140 ANNALS OF INTERNAL MED. 409 (2004); Kathleen Mazor et al., MoreThanWords:PatientsViewsonApologyandDisclosureWhenThingsGoWrongin CancerCare, Patient Educ & Couns., Aug. 8, 2011 (Article in Press DOI: 10.1016/j.pec.2011.07.010); Amy B. Witman et al., How Do Patients Want Physicians to Handle Mistakes? A Survey of Internal Medicine Patients in an Academic Setting, 156ARCHIVESOFINTERNALMED.2565(1996).
5

See e.g., Theodore Eisenberg et al., But Was He Sorry? The Role of Remorse in Capital Sentencing, 83 CORNELL L. REV. 1599 (1998); Chris Kleinke et al., EvaluationofaRapistasaFunctionofExpressedIntentandRemorse, 132 J.SOC.PSYCHOL. 525 (1992); Randolph B. Pipes & Marci Alessi, Remorse and a Previously Punished Offense in Assignment of Punishment and Estimated Likelihood of a Repeated Offense, 85 PSYCHOL. REP. 246 (1999). See also Stephanos Bibas & Richard A. Bierschback, Integrating Remorse and Apology into Criminal Procedure, 114 YALE L.J. 101 (2004); Carrie J. Petrucci, Apology in the Criminal Justice Setting: Evidence for Including Apology as an Additional Component in the Legal System, 20 BEHAV.SCI.&L.337(2002).
6

Russell Korobkin & Chris Guthrie, Psychological Barriers to Litigation Settlement: An Experimental Approach, 93 MICH. L.REV.107(1994).
7

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

Previous research has found that one of the key features of an apologythe element that distinguishes an apology from other ways of accounting for ones behavior (such as offering an excuse or a justification)is the accepting of responsibility for having caused harm. See e.g., Barry R. Schlenker & Michael F. Weigold, Interpersonal Processes Involving Impression Regulation and Management, 43 ANN. REV. PSYCHOL. 133 (1992); Robbennolt, supra note 4; Marvin B. Scott & Stanford M. Lyman, Accounts, 33 AM. SOC. REV. 46 (1968); see also MARTHA MINOW, BETWEEN VENGEANCE AND FORGIVENESS 115 (1998) (Full acceptance of responsibility by the wrongdoer is the hallmark of an apology.). Although the U.S. Bankruptcy Code allows creditors to initiate involuntary bankruptcy cases against debtors, 11
9

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financial condition, and debtors sometimes express the decision to file bankruptcy as an owning up to their financial condition. Thus, it could be that the more dispersed harm and natureofvictimparticipationinbankruptcycaseswoulddampenanyeffectofanapology. Ontheotherhand,itisnotclearwhybankruptcyshouldbeanydifferentthananyother legal settingwe 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 section of the Bankruptcy Code that directs bankruptcy judges to consider a debtors apology, there are situations in which a debtors remorse may be relevant. For example, in chapter 7 proceedings, bankruptcy judges can dismiss cases that would be an abuse of the bankruptcy system.11Althoughin2005Congressincorporatedamathematicalformulaintothedefinitionof abuse,12the formula only creates a presumption, and bankruptcy judges retain discretion in determining whether a case constitutes abuse. More significantly, the U.S. Trustee and chapter 7 bankruptcy trustees have even greater discretion over when to challenge cases as abusive. Similarly, in considering whether to approve a repayment plan under chapter 13, bankruptcy judges are specifically directed to consider the debtors good faith in filing the case initially and in crafting the proposed repayment plan. In addition, judges are to consider whether the debtor will be able to make the payments under the proposed plan.13The debtors remorse would often be relevant to both the assessment of good faith and the prediction about futurebehaviorastoplanpayments. There is one noteworthy feature of the bankruptcy system that makes it an especially useful setting within which to study particular aspects of how apologies operate in the legal context. Because the typical consumer bankruptcy filing offers the prospect of only a small percentage recovery on a small claim,14creditors do not actively participate in most consumer bankruptcy cases. Thus,in the bankruptcy setting, any apology would usually haveto be given to a judge or a bankruptcy 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, involuntary cases are exceedingly rare, so rare that the Administrative Office of U.S. Courts no longer releasesstatisticsonthenumberofinvoluntarycasesfiledannually.
10 11 12 13

E.g.,KARENGROSS,FAILUREANDFORGIVENESS(1999). 11U.S.C.707(a). Id.at707(b)(2). Id.at1325(a)(6).

14Over 90% of chapter 7 cases are no asset cases that result in zero recovery for creditors. Dalie Jimnez, The DistributionofAssetsinConsumerChapter7Cases, 83 AM.BANKR.L.J.795 (2009). In a national probability sample from 2007, the mean proposed repayment to creditors in chapter 13 was 28% of the debt. SeeJean Braucher, Dov Cohen & RobertM.Lawless,Race,AttorneyInfluence,andBankruptcyChapterChoice,9J.EMPIRICALLEGALSTUD.393(2012).

BankruptApologies

victims of the harm. In particular, third party observers are not subject to the same social constraints as are victimssocial norms that prescribe that when one receives an apology the proper response is to accept it. Thus, third parties have been found to be more critical of apologies.15 In addition, research has found that attorneys respond differently to apologies than do lay people. To be sure, lay people and attorneys tend to understand the content of apologies in similar ways. But while apologies tend to make lay people more amenable to settlement, apologies are more likely to be seen by attorneys as admissions that bolster their bargaining position.16Thus, it is possible that bankruptcy judges, as attorneys, might be less swayed by apologies. The few studies that have examined the effects of apologies on judges have had mixed results. In a series of experimental studies conducted by Rachlinksi, Guthrie, and Wistrich, judges were found to be relatively unaffected by apologies offered by litigants.17In contrast, a recent experimental study of labor arbitrators found that sincere apologies by grievants in employmentcasesresultedinincreasedgrievantwinrates.18 Only one prior study has specifically examined the role of apologies in the decision making of bankruptcy judges. In the context of a broader study on bankruptcy judges use of decisionmaking heuristics such as anchoring and framing, Rachlinski, Guthrie, and Wistrich asked judges to assess a chapter 7 bankruptcy problem in which a bank objected to the

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

Jennifer K. Robbennolt, Attorneys, Apologies, and Settlement Negotiation, 13 HARV. NEGOT. L. REV. 349 (2008). See also Russell Korobkin & Chris Guthrie, Psychology,Economics,andSettlement:ANewLookattheRoleoftheLawyer,76TEX.L. REV.77(1997).
16 17 18

JeffreyJ.Rachlinski,ChrisGuthrie,&AndrewWistrich,DoApologiesAffectTrialJudges,draft.

Michele Hoyman, Lamont Stallworth, & David Kershaw, The Decision Making of Labor Arbitrators in Discipline and DischargeCasesWhereaGrievantOffersanApology:APolicyCapturingStudy, paper presented at the annual meeting of the MPSA Annual National Conference, May 23, 2009 (N = 180 National Academy of Arbitrators members). Seealso Dafna Eylon et al., BeyondContractualInterpretation:BiasinArbitratorsCasePerceptionsandAwardRecommendations, 21 J.ORG.BEHAV. 513 (2000); Daniel J. Kaspar & Lamont E. Stallworth, TheImpactof a GrievantsOfferofApologyandthe Decision Making Process of Labor Arbitrators: A Case Analysis, 17 HARV. NEGOT. L. REV. 1 (2012). The research on the effects of apologies on juror decision making is similarly mixed. Seee.g.,Marc T. Boccaccini et al.,IWanttoApologize, But I Dont Want Everyone to Know: A Public Apology as Pretrial Publicity Between a Criminal and Civil Case, 32 LAW & PSYCHOL.REV. 31 (2008); Brian Bornstein et al., TheEffectsofDefendantRemorseonMockJurorDecisionsinaMalpractice Case, 20 BEHAV.SCI.&L. 393 (2002); KeithE.Niedermeier et al., ExceptionstotheRule:TheEffectsofRemorse,Status,and GenderonDecisionMaking, 31 J.APPLIEDSOC.PSYCHOL. 604 (2001); Scott E. Sundby, TheCapitalJuryandAbsolution:The IntersectionofTrialStrategy,Remorse,andtheDeathPenalty,83CORNELLL.REV.1557(1998).

BankruptApologies

discharge of a credit card debt the debtor had incurred while on a Cancun vacation. 19 An apologybythedebtordidnotaffectthejudgesdecisionsondischargeability.20 To understand this null result, it is important to examine the details of the Rachlinski, Guthrie, and Wistrich study. The judges were told the following about the debtors (Jareds) decision:

Despite his financial problems, Jared was able to obtain a new credit card with a credit limit of $3000. Jared used the card to book his trip. When he asked for time off, his employer informed him that he would be fired if he tooka week off so early in his new job. Jared went anyway. While there, he generously charged drinks and meals for friends on his new credit card,maxingthecardoutatatotalof$2976,allofwhichwasrelatedtothetrip.Jaredargues thatalthoughheknewhewasdeeplyindebt,hebelievedthathisnewjobwouldenablehim to repay the debt, as he had in the past. He asserts that he had never considered bankruptcy beforediscussinghissituationwiththecreditcounselor.21

The judges were instructed that the bank that had issued the credit card was opposing the discharge, arguing that Jared never had any intention of repaying this debt and that it was thereforenotdischargeableunder11U.S.C.523(a)(2)(A)(whichexceptsfromdischargeadebt forfalsepretenses,afalserepresentation,oractualfraud). Importantly, the statutory section cited in the fact pattern is concerned, not about fraud relatedtothedebtorsfinancialcondition,butratheraboutfraudrelatedtothedebtorsintentto repay.22If a creditor can show the debtor obtained goods or services with an intention not to repay, then grounds would exist to find the debt nondischargeable under section 523. Such a showingisincrediblydifficultasanevidentiarymatter.Asexplainedbytheleadingbankruptcy treatise, The debtors insolvency or inability to pay does not by itself provide a sufficient basis for inferring the debtors intent. A debtors honest belief that a debt would be repaid in the future, even if in hindsight found to have been very unrealistic, negates any fraudulent

Jeffrey J. Rachlinski, Chris Guthrie & Andrew Wistrich, Inside the Bankruptcy Judges Mind, 86 B.U. L. REV. 1227 (2006).
19 20 21 22

Id.at1254. Id.at1264.

The next partofthestatute dealswith falserepresentationsaboutthedebtors financialconditionandrequiresthat such representations have been in writing before they are actionable by a creditor. 11 U.S.C. 523(a)(2)(B). Although the requirement of a writing may seem curious at first blush, it is important to remember that bankruptcy debtors always arrive in bankruptcy court in bad financial shape. The writing requirement serves an evidentiary purpose of filtering out weak claims that the debtor falsely represented his or her financial condition. The fact pattern in the Rachlinski,Guthrie&Wistrichstudydidnotmentionawrittenrepresentationoffinancialconditionanddirectedthe bankruptcyjudgestothesectiondealingwithintenttorepay.

BankruptApologies

intent.23The only evidence offered in the fact pattern is that the debtor had a mistaken belief abouthisabilitytorepayandindeeddidnotconsiderbankruptcyuntilafterincurringthedebt. Thehypotheticalcreditoroffersnoevidencetocontradictthedebtorsexplanationofhismental state at the time the debt was incurred. Given the evidence, the creditors burden, and the governinglaw,thedebtorwouldseemtohaveastrongchanceofwinningthecase. Curiously, however, the debtor fares very poorly among the respondents. Across both 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 hypothetical vignette with bankruptcy judges, the difference between the two studies findings merits further discussion. The high rate of nondischarge and null result in the Rachlinski, Guthrie & Wistrich study may reflect the way that specialist judges reacted to a questionnaire thatusedanontechnicalpresentationandnontechnicalwording. First, Rachlinski, Guthrie & Wistrich asked respondents, Would you discharge Jareds debt for his Cancun vacation, and were given options ranging from very likely to discharge to very unlikely to discharge.24The question and response options, however, ask something different than what would be asked in a bankruptcy proceeding. The Bankruptcy Code statutorily discharges all of a bankruptcy filers prebankruptcy debts. An individual creditor can bring a lawsuit within a bankruptcy case, known as an adversary proceeding, to object to the dischargeability of a particular debt. Section 523 lists twentyone separate grounds for nondischargeability,oneofwhichisthereasonatissuehereadebtincurredwithafraudulent intent to repay. The judges role is only to determine whether the creditor has satisfied its burden of showing the appropriate elements of section 523. If the judge determines that the elements of section 523 are not present, the debt is automatically discharged. The judge has no discretion to deny the debts discharge on some general principle, and the judges views about theappropriatenessofdischargingthedebtarenotlegallyrelevant.Yet,theRachlinski,Guthrie & Wistrich paper asks its respondents if they would discharge the debt, not how they would rule in the adversary proceeding. Indeed, the question itself may have been confusing to these expert respondents. To answer the question as posed, a bankruptcy specialist would have to translate the question in her mind. If she thought the adversary proceeding objecting to dischargeability was very unlikely to be successful, then she would need to answer that the debt was very likely to be discharged. It is possible that the high rate of nondischargeability reflectsthisconfusion.
23 24

4COLLIERONBANKRUPTCY523.08[1][d](16thed.2012). Rachlinski,Guthrie&Wistrich,supranote19,at1265.

BankruptApologies

The questionnaire also uses nonspecialist language in describing the creditors claim. 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 objection to the discharge of all debts under section 727, not just one debt under section 523 for which the word dischargeability is generally used. Although this difference in phrasing may seem like a minor quibble, the juxtaposition of these two disparate concepts in one sentence along with the other signals in the questionnaire might have suggested to the specialist respondents that the questionnaire was not looking for their expert opinion but their personal views on discharging this particular debt. The debtor, Jared, is not a particularly sympathetic character, having run up a credit card bill for a vacation many people would not have taken. If the question was understood as being up to the respondents individual sense of justice, then the low rate of discharge would not be particularly surprising.25Overall, the questionnaires nontechnicalpresentationmakesitdifficulttoascribemeaningtothenullresult. In this study, we workwith a poolof respondent pool of federal bankruptcy judges and endeavor to construct a fact pattern with verisimilitude to the judges everyday experiences such that an apology would have room to affect the judges discretion. Part II of this paper continueswithadescriptionofourmethodologyandthefactpatternweused,whichpresented judges with a married couple seeking court approval of their proposed chapter 13 repayment plan.Judgeswerepresentedwithexperimentalconditionsinwhichthecoupleeitherdidordid
The 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 bankruptcy are presumed fraudulent. 11 U.S.C. 523(a)(2)(C). At the time of the survey administration in 2004, see Rachlinski, et al., supranote 19, at 1231, the presumption arose for amounts over $1,225 and incurred within 60 days offiling.Sincethattime,theamounthasbeenloweredto$500andthetimeframeexpandedto90days.Althoughthe timelineofthehypotheticalisnotentirelyclear,respondentsweretoldthattwomonthselapsedbetweenthedebtors return from thetripthat hadcreatedthe debtandthetimeatwhich thedebtorconsultedacreditcounselorandthen (shortly thereafter) filed bankruptcy. The amount of the debt was $2,976. Thus, there appears to be room for respondents to conclude that both the timeframe and debt threshold were met for the statutory presumption to apply. If the presumption applies, there is little room for judicial discretion in the fact pattern, and the high rate at whichjudgesfoundthedebtnondischargeableisunderstandable.
25

Given the statutory presumption, perhaps the more curious result is that 24.3% of the bankruptcy judges said they were somewhat likely, likely, or very likely to discharge the debt. We can think of three reasons why a bankruptcy judge might still discharge thedebt despitethe statutory presumption. First, a permissible interpretation of the hypotheticals timeline is that the bankruptcy filing occurred just after the expiration of 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 fact pattern. See generally NORBERT SCHWARTZ, COGNITION AND COMMUNICATION: JUDGMENTAL BIASES, RESEARCH METHODS, AND THE LOGIC OF CONVERSATION (1996). Third, the statutory presumption can be overcome. In the fact pattern, the debtor testified he did not contemplate filing bankruptcy 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).

BankruptApologies

not offer an apology. Part III presents our results. We find no simple main effect of the apology on the likelihood the judge would approve the plan. We do, however, find an indirect effect of the debtors apology on the likelihood that a judge would approve the plan, with the effect of apology on confirmation mediated by the judges perception of the debtors remorse. Part IV concludes and offers some thoughts on what our findings mean for the administration of bankruptcy cases as well as for the broader psychology literature on the effect of apologies in differentlegalcontexts. II.Method We administered the survey instrument to 137 bankruptcy judges, either as part of a judicialeducationseminarthatoccurredinthefallof2010oronlineintheearlypartof2011.In 2010, there were 337 active bankruptcy judges and another 29 senior judges still hearing cases onrecallstatus.Thus,approximately37.4%ofallbankruptcyjudgesrespondedtooursurvey. Each judge was asked to make a decision in a realistic chapter 13 bankruptcy problem involving a married couple who had filed bankruptcy. 26 To understand the problem, the research design, and the judges responses, a basic understanding of the bankruptcy law the judgeshadtoapplyisneeded. Most every consumer considering bankruptcy must choose between chapter 7 bankruptcyandchapter13bankruptcy.Achapter7bankruptcyrequiresthedebtortoturnover any assets not exempted by law or not fully encumbered by a lien. A bankruptcy trustee sells these assets and distributes the proceeds to creditors. In practice, very few consumer debtors have any assets to distribute and do not even see the insideof a courtroom. For most consumer debtors, chapter 7 resembles a very quick administrative proceeding where a discharge of indebtedness comes within a few months after the filing of forms and a meeting with a bankruptcytrustee. Chapter13,incontrast,requiresadebtortodevoteallofhisorherdisposableincometo repayment of creditors over a three to fiveyear period. Because chapter 13 leaves the debtors assetsinplaceandcontemplatesrepaymentoutofthedebtorsfutureincome,itcanbeauseful toolfordebtorsseekingtoprotectavaluableasset.Byfarthemostcommonuseofchapter13is to protect the debtors residence. We chose to present the judges a fact pattern representing issues in chapter 13 because the terms of the repayment plan can present legal issues over whichajudgemightbeabletoexerciseconsiderablediscretion,thusprovidingacontextwithin which an apology by the debtor might influence decision making. The fact pattern was loosely designed on a problem from a leading lawschool bankruptcy textbook intended to present studentswithtoughissuesrelatedtoconfirmationofachapter13plan.27
26 27

Indeed,onejudgecommentedthatthescenariopresentedwasalltooreal. ELIZABETHWARREN&JAYLAWRENCEWESTBROOK,THELAWOFDEBTORSANDCREDITORS324(6thed.2009).

BankruptApologies

Inourfactscenario,amarriedcouplewithtwodaughters(ages10and13)hasaskedthe judge to approve (or confirm in bankruptcy parlance) a chapter 13 repayment plan. The couple was described as having modest debts and assets. They had a $180,000 home with a $1,200 mortgage payment and a $26,000 automobile with a $550 car payment. The couple had $25,500 in credit card debts, some of which was incurred for a reason that would likely be viewed more sympathetically (the husbands medical expenses) and some of which was incurred for a reason that would likely be viewed with more skepticism (a vacation). The full factpatternisreproducedintheAppendix. The respondents were told that the chapter 13 trustee, a private attorney hired by the Department of Justice to supervise chapter 13 cases, had objected to the plan for lack of good faithandforfailuretodevoteallofthedebtorsdisposableincometorepaymentasrequiredby theBankruptcyCode.28Therespondentsweretoldthatacourthearinghadtakenplaceatwhich the debtors testified, thus giving a plausible context in which the debtors might apologize. The fact pattern also told the respondents that the debtors were belowmedianincome debtors, meaning they were below the median income for a household of their size in their state. For a bankruptcy specialist, the debtors income status would be 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 necessary for the debtors household expenses, charitable contributions up to 15% of income, and business expenses (if the debtor operates a business).29The respondents were told that the debtorsbankruptcyschedulesshowed$3,420inmonthlypayments(includingpaymentsonthe mortgageandcarloan)against$3,550inmonthlyincome.Thebalanceof$130permonthwould allowarepaymentof18%ofthecreditcarddebtover5years.Thefactpatternfurtherspecified that the couples claimed monthly expenses included $270 per month for gym 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 reasonable judges could differ in assessing whether the plan had been proposed in good faith and whether the debtors expenses were reasonably necessary for support of the debtors or their dependents. Respondents were randomly assigned to one of two versions of the survey. In one version,
11 U.S.C. 1325(a)(3) requires, as a prerequisite to confirmation, that the plan has been proposed in good faith not by any means not forbidden by law, while 11 U.S.C. 1325(b) requires the plan to devote all of the debtors disposableincometorepaymentundertheplan.
28 29

Id.1325(b)(2).

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respondents were told the debtors offered an apology: We have no way of keeping up with our bills and repaying everything. It is all we can do to pay the mortgage and keep food on the table.Weknowthatweareresponsibleforthemesswearein.Wearetrulysorry.Intheother version,thefinaltwosentenceswereomittedsuchthatnoapologywasoffered. We asked 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: 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 debtors had accepted responsibility for their bad financial situation, (3) the extent to which the debtors regretted their spending patterns, (4) the seriousness of the debtors financial distress, (5) confidence in the debtors ability to be 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 sitting bankruptcy judges, we believed anonymity was important to ensure a sufficient response rate. Extensive demographic questionseven something as simple as genderwould have made it likely that individual respondents could be identified. Consequently, the only demographic information captured was the number of years a respondent had been serving as a bankruptcy judge. Our respondents tended to be experiencedbankruptcyjudges.Themean(median)reportednumberofyearsonthebenchwas 13.45(11.00).Therewasasubstantialvariationinjudicialexperiencewiththebottom10%ofthe judges reporting experience of 5 years or less experience and the top 10% reporting 25 years or more. $550carpaymentonaoneyearoldautomobile $1,050inmonthlyhouseholdexpensesforutilities,foodandclothing,transportation, andotherbasicneeds $270inmonthlygymnasticsexpenses $250inanticipatedmonthlyorthodontiaexpenses $4,000creditcarddebtfromavacation $9,000creditcarddebtfrommedicalexpenses

 III.Findings

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11

A. DiscretioninConfirmationDecisions The construction of the scenario was successful in producing differing opinions among the respondent judges. Across conditions, 37.6% of our respondents indicated that they would confirm the proposed repayment plan, while 62.4% indicated that they would not confirm the plan. Despite the difficulty of the problem, judges were quite confident in their judgment. On a scale of 1 to 7 (with 7 being highly confident), the mean level of confidence was 5.53 and the median was 6.30Figure 1 shows the confidence of the judges responses interacted with their confirmation decision where7 indicates extreme confidence in a decision to denyconfirmation and+7indicatesthesamelevelofconfidenceinadecisiontograntconfirmation. Figure1.DecisiontoConfirmandConfidenceinDecision
Theresponsesof137bankruptcyjudgestoafactpatternaskingwhethertheywouldconfirmachapter13repayment plan are displayed below. Judges were asked to rate their confidence in their decision on a scale from 1 to 7. Judges whowerethemostconfidentintheir decision not toconfirmwere recodedas ascoreof7, andjudgeswhowere the most confident in a decision to grant confirmation were given a score of +7. The figure shows that, although judges differed in their opinions of whether confirmation was appropriate in this case, they tended to be confident in their owndecision.

25%

20%

15%

10%

5%

0% 7 6 5 4 3 2 1 decisionsto denyconfirmation 1 2 3 4 5 6 7 decisionsto grantconfirmation

30A variety of previous work explores the ways in which decisions become more coherent and decision makers become more confident in their decisions once they have made them. See e.g., Dan Simon, A Third View of the Black Box: Cognitive Coherence in Legal Decision Making, 71 U. CHI. L. REV. 511 (2004); Mara Mather et al., Misremembrance of OptionsPast:SourceMonitoringandChoice,11PSYCHOL.SCI.132(2000).

12

BankruptApologies B. MainEffect:ApologyOutcome

Judges who heard an apology from the debtors were slightly more likely to grant

confirmationofthedebtorsplan(40.6%)thanjudgeswhodidnothearanapology(34.4%).This difference was not significant, however, whether confirmation was analyzed as a dichotomous variable(2=0.545,p=0.460)orasacontinuousvariableonascalefrom7to+7(t(130)=0.942, p = 0.348; Wilcoxon Z =1.642, p = 0.101). Thus, we did not find a simple main effect from the apologyontherespondentsdecisiontoconfirmthedebtorschapter13plan. C. MediatedEffects:ApologyPerceptionsCaseOutcome Although 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 in our data the effect of an apology on confirmation decisions is indirect, mediated through the respondentsassessments of the debtors. Focusing only on main effects while ignoring mediated effects can miss important causal pathways for a phenomenon under investigation.31This section explores several different analyses by which this mediated effectofapologiesonbankruptcydecisionmakingcanbeseen. The apology affected the judges 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) as well as having greater regret for their spending patterns (4.44 (1.29) vs. 3.53 (1.37), t(129) = 3.919, p < .001). In addition, an apology had a marginally statistically significant effect on the extent to which judges believed that the debtors would exercise more care with their finances in the future (3.83 (1.31) vs. 3.42 (1.19), t(128) = 1.873, p = 0.063). An apology had no statistically significant effect on the respondents perceptions of the extent to which the debtors were realistic (4.22 (1.13) vs. 3.94 (1.16),t(129)=1.432,p=.155),selfdisciplined(3.59(1.10)vs.3.59(1.26),t(130)=0.027,p=.979), or had good values (4.11 (0.97) vs. 4.26 (1.00), t(124) = 0.881, p = 0.380).32These results are summarizedinFigure2.

See Andrew F. Hayes, Beyond Baron and Kenny: Statistical Mediation Analysis in the New Millennium, 76 COMMUNICATIONS MONOGRAPHS 408 (2009); David P. MacKinnon, Mediation Analysis, 58 ANN. REV. OF PSYCH. 593 (2007); David P. MacKinnon, et al., ConfidenceLimitsfortheIndirectEffect:DistributionandoftheProductandResampling Methods, 39 MULTIVARIATE BEHAVIORAL RESEARCH 99 (2004); Jason Williams & David P. MacKinnon, Resampling and DistributionoftheProductMethodsforTestingIndirectEffectsinComplexModels, 15 STRUCTURALEQUATIONMODELING 23 (2008).
31 32

Anumberofjudgesspecificallycommentedthattheyfeltillequippedtoassessthedebtorsvalues.

BankruptApologies Figure2.EffectofApologyonRespondentsPerceptionsofDebtors

13

Perceptions of 137 bankruptcy judges about hypothetical debtors varied depending on whether the judges were given a fact scenario that contained an apology. In the fact scenario, a married couple asked the judge to confirm a chapter 13 repayment plan over the objection of the bankruptcy trustee. Judges were asked to rate, on 1 to 7 scales, thedegreetowhichthedebtors had acceptedresponsibility, hadregret for theirspendingpatterns, wouldtakemore care with their finances in the future, were realistic, were selfdisciplined, were persons of good values, had caused theirownproblems,andhadseriousfinancialdistress.Asindicatedbytheasterisks,thefirsttwovariablesproduced statisticallysignificantdifferencesatthe5%levelorless.Thethirdvariable,CareintheFuture,producedadifference thatapproachedstatisticalsignificance(indicatedbythedagger).

* *

1
Accept Resp. Regret Carein Future Realistic Disci plined Good Values Caused Own Problems Distress Serious ness

Apology

NoApology

The effects triggered by the debtors apology are consistent with the effects of apologies

found in other contexts. Although the debtors delivered their apology to the bankruptcy judge and not to the creditors who were actually harmed by the debtors conduct, the apology nevertheless led to an increased perception that the debtor had accepted responsibility and felt regret. Similarly, apologies seemed to have an effect on judges expectations about future

14

BankruptApologies

behaviorone of the key inferences that tends to be drawn from apologies.33The apology did 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. In both instances, the respondents are assessing the debtors present mental state regarding past events. Therefore, we combined these two items into an index we labeled remorse (alpha = .713). As would be expected from the relationship of the individual items in remorse to the offering of an apology, Remorse is significantly higher in the presence of an apology (4.34 (1.07) vs. 3.59 (1.21), t(128) = 3.778, p < .001). In turn, respondents who perceived higher levels of remorse were more likely to confirm the debtors chapter 13 plan. Judges who made abovemedian evaluations of the debtors remorse were more likely to confirm the chapter 13 plan (44.4%) than were judges who made belowmedian evaluations of the debtors remorse (20.0%), 2= 7.050, p = .008).34Similarly, judges who made abovemedian evaluations of the debtors remorse scored higher on the continuous measure of confirmation,t(100)=2.941,p=.004. Before confirming a chapter 13 plan, a judge must determine that the debtors are likely to complete the plan payments, making legally relevant the perceptions of whether the debtors are realistic and whether they are likely to make careful financial decisions in the future.35As we saw above, when the debtors apologized, judges believed that they would exercise more carewiththeirfinancesinthefuture.Inturn,respondentswhomadeabovemedianevaluations of the degree to which the debtors would be careful with their finances in the future were significantly more likely to confirm the proposed plan (50.0%) than were those with less positive expectations (28.8%) using both the dichotomous,2 = 4.445, p = 0.035, and continuous measures of confirmation, t(69) = 2.195, p = .031. Respondents perceptions of whether the debtorswererealisticwerenotaffectedbytheapology,butwereassociatedwiththedecisionto confirm the plan. Respondents with abovemedian evaluations of whether the debtors were
SeeGold & Weiner, supra note 1; Robbennolt, supra note 1. SeealsoRandolph B. Pipes & Marci Alessi, Remorseanda Previously Punished Offense in Assignment of Punishment and Estimated Likelihood of a Repeated Offense, 85 PSYCHOL. REP. 246 (1999); Dawn T. Robinson et al., HeinousCrimeorUnfortunateAccident?TheEffectsofRemorseonResponsestoMock CriminalConfessions,73SOC.FORCES175(1994).
33

The individual components of remorse varied in their effect on plan confirmation. Respondents who made abovemedian assessments of the debtors regret were significantly more likely to confirm the proposed repayment plan (51.1% vs. 20%, chisquare = 9.644, p = 0.002). However, while respondents who made above median assessments of the degree to which the debtors had accepted responsibility confirmed the plan at a higher rate than those who were less inclined to believe that the debtors had taken responsibility, this difference was not statistically significant (37.3% vs. 26%, chisquare = 1.478, p = 0.224). Respondents who said they would confirm the plan rated the debtors more highly for having regret (4.46 vs. 3.72, t = 3.019, p = .003) and marginally more highly for accepting responsibility(4.24vs.3.84,t=1.668,p=0.098).
34 35Because these two variables did not produce a cohesive index (alpha = .409), we analyze each of these variables separately.

BankruptApologies

15

realistic were more likely to confirm the proposed plan (46.4%) than were respondents who believed that the debtors were more unrealistic (22.0%) using both the dichotomous,2 = 6.149, p=.013.andcontinuousmeasuresofconfirmation,t(93)=2.840,p=.006.Perceptionsofwhether the debtors were disciplined, or had good values did not have any effect on the confirmation decision. 36 Figure 3 displays the effects of these different judgments about the debtors on judgesconfirmationdecision. Thus, the existence of an apology affected the respondents perception of the debtors remorseandtheirexpectationsabouthowthedebtorwouldmanagetheirfinancesinthefuture. Both of these sets of perceptions in turn were associated with a higher likelihood that the proposedplanwouldbeconfirmed.

36

Respondents who made above median evaluations of whether the debtors had good values were no more likely to confirm the chapter 13 plan (42%) than respondents below the median (42.5%),2 < 0.001, p = .988). The same was trueforevaluationsofwhetherthedebtorsweredisciplined(38.7%vs.27.0%,2=1.339,p=0.247).

16

BankruptApologies Figure3.EffectofRespondentsPerceptionsofDebtorsonConfirmationDecision

Federal bankruptcy judges (n = 137) were given a hypothetical fact pattern about a married couple who was asking the judge to confirm their chapter 13 plan. The judges were asked to make several assessments about the married couple on 1 to 7 scales. The bar chart represents median splits on judges assessments of the extent to which the couple had accepted responsibility, regretted their spending, felt remorse (which was a 2item index of the first two items), would take greater care with their finances in the future, and were realistic. The yaxis represents the percentage of respondents who said they would confirm the couples chapter 13 plan. Statistical significance at the 5%levelorlessisindicatedbyasterisks.

60%

50%

40%

30%

20%

10%

0% Accept Resp. Regret Remorse (indexof firsttwo} CareinFuture Realistic

Abovemedian

Belowmedian

We used structural equation models to test the indirect effects of the apology on confirmation decisions through these perceptions of the debtors. We found an indirect effect of 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 model were good,2 = .01, p = .921, RMSEA < .001, CFI = 1.00. The indirect effect of apology on confirmation decision was significant (p = .028). Similar results were obtained for a model that used the continuous measure of confirmation. The model fit indices for this model were also

BankruptApologies

17

good, 2 < .001, p = .986, RMSEA < .001, CFI = 1.00. The indirect effect of apology on confirmationinthismodelwasalsosignificant(p=.019).TheseresultsarerepresentedinFigure 4. Figure4.MediatedEffectofApologyonBankruptcyCaseOutcome
The mediated effect of an apology on outcomes in a study of bankruptcy judges (n = 137) is modeled below. The apologys effect on the outcome of a hypothetical chapter 13 case is mediated through the respondents perceptions of the debtors remorse. Coefficients above the line represent paths in a model that uses the dichotomous confirmation decision as the dependent variable. Coefficients below the lines represent paths in a model that uses a continuousmeasureofjudgesinclinationsaboutwhethertoconfirmtheproposedrepaymentplan.

Apology

.75 .77

Remorse

.24 1.14 Confirm

Models that included as mediators judges perceptions of whether the debtors are realistic and whether they are likely to make careful financial decisions in the future did not findsignificantindirecteffectsofapologyonconfirmationdecisionsthroughthesevariables.37 D. ClaimedExpenses The ultimate decision for the respondents was whether to confirm the hypothetical debtors proposed chapter 13 plan, but the fact pattern also embedded other decision points for the respondents. Specifically, judges were told about several specific monthly expenses the couple had factored into their chapter 13 plan: routine household expenses, a car payment, planned orthodontia treatment for their oldest daughter, and gymnastics club fees for both daughters. Because of the different nature of each of these expenses, respondents could interpret the expenses as relevant not only to the debtors ability to repay but also as indicating something about the debtors values. As explained in the Introduction, the Bankruptcy Code gives judges discretion in determining whether the claimed expenses are reasonable and whether the overall plan is in good faith. The judges were asked to indicate on 1 to 7 scales whethereachexpensehadmadethemlesslikelyormorelikelytoconfirmthechapter13plan.38
37 38

Allps>.25.

Judges were also asked to assess two debts that were not expected to be controversial: debt associated with a vacationandmedicaldebt.Judgesevaluationsofthesedebtswerenotinfluencedbytheapology(F(1,129)=.022,p= .881 and F(1,130) = .131, p = .718, respectively). Judges assessments of the vacation debt were not associated with confirmation decisions (2 = .045, p = .832); judges assessments of the medical debt were marginally related to confirmationdecisions(2=3.22,p=.073).

18

BankruptApologies The respondents were told that the couple had listed $1,050 as monthly household

expenses for utilities, food and clothing, transportation, and other basic 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, the amount of household expenses is highly dependent on the debtors income. Using a simple linear regression analysis from the CBP data, realworld debtors with the same income as our hypothetical couple would have had expenses of $1,290, a figure which approaches $1,400 once adjustedforthefouryearsofinflationbetweentheCBPdataandthetimeofoursurveys.Thus, the hypothetical debtors household expenses are not excessive as compared to realworld bankruptcy filers and suggest some level of frugality. Not surprisingly, we will see that of the four expenses listed in the hypothetical our respondents reacted most favorably to the householdexpenses. Incomparison,weintendedthe$550carpaymenttobemoreimmoderatebutnotoverly excessive.Thecarwasthefamilysonlyvehicleandwasnotanexpensivemake(aFord).Onthe 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, which bankruptcy 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 discretionary medical expense or at least as a medical treatment that could be put off until the couple had finished their repayment plan. Although someone new to the problems of the overindebted might see the postponement of medical treatment as a severe hardship, it is not uncommon. The CBP asked bankruptcy debtors what things they had to do without because of affordability in the two years prior to filing bankruptcy. Of these realworld bankruptcy debtors, 57.6% reported they had to go without needed dental care, and 36.9% 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
One of this papers authors (Lawless) participated in the 2007 CBP, and the data reported in the text are his calculations from the 2007 CBP data. For a full methodology as well as a presentation of the basic findings from the 2007 CBP, see Robert M. Lawless, et al., Did Bankruptcy Reform Fail?: An Empirical Study of Consumer Debtors, 82 AM. BANKR.L.J.349(2008).
39

Bob Lawless, Cars in Bankruptcy, Credit Slips http://www.creditslips.org/creditslips/2006/08/cars_in_bankrup.html).

40 41

(Aug.

4,

2006)

(available

at

The figure in the text is from the IRS Guidelines for the fallof 2010, which can be found on the web siteof the U.S. TrusteeProgramattheDepartmentofJustice:http://www.justice.gov/ust/eo/bapcpa/meanstesting.htm.

BankruptApologies

19

orthodontiatopayacreditcardcompanyisnotsomethingajustbankruptcysystemwouldask debtorstodo. The final expense was $270 per month for gym fees, training fees, and travel for the couplesdaughterswhocompetedasmembersofthelocalgymnasticsclub.Weestimatedthe amount based on personal experience with a YMCA club in the Midwest as well as conversations with parents from the club about their own costs. The costs for the daughters gymnastics represented a low to midtier option and were not the top of the line. Also, this proposed expenditure was not for the couple themselves but for the daughters, and respondents could have viewed the expense as reflecting the couples good parenting. At the same time, the gymnastics expense was clearly the least essential item among the debtors expenses. Moreover, the $270 monthly expense for gymnastics was more than twice the $130 monthlypaymentthedebtorswereproposingtosendtotheircreditors.

20

BankruptApologies Figure5.EffectofApologyonExpenses andEffectofExpensesonConfirmation

Bankruptcy judges (n = 137) were asked how they would rule on the request of a hypothetical couple to confirm a chapter 13 plan. In one version of the survey instrument, the couple offered an apology. The fact pattern specified four monthly expenses the judges could consider in reaching their decision: $1,050 in routine household expenses; a $550 car payment, $250 in orthodontia for a teenage daughter, and $270 for gymnastics fees for two daughters. On a 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 the judges responded on the 17 scale based on whether the judges were exposed to the apology. None of the differences are statistically significant. Panel B shows the rate at which judges confirmed the chapter 13 repayment play depending on how they evaluated each expense (mediansplit).Statisticalsignificanceatthe5%levelorlessisshownbytheasterisks.Together,theresultsshowthat, judges perceptions of the claimed expenses affected their confirmation decisions, but that the apology did not directlyaffectthejudgesperceptionoftheseexpenses.

A.EffectofApologyonExpenses 6 80% 70% 5 60% 50% 40% 3 30% 20% 2 10% 1 House holdExp. Car Pmt. Ortho dontia NoApology Gym nastics 0%

B.EffectofExpensesonConfirmation

* *

House holdExp.

Car Pmt.

Ortho dontia

Gym nastics

Apology

Abovemedian

Belowmedian

BankruptApologies

21

Figure5showsourresults.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, and the gymnastics fees were significantly more likely to say they would confirm the debtors proposed chapter 13 plan.42This is perhaps not surprising as such expenses are, of course, directly relevant to the legal standards for confirmation of a chapter 13 plan. The lower the expenses, the more debtors can return to creditors. In turn, debtors who can pay more to theirchapter13debtorsaremorelikelytobeconsideredtohaveproposedaplanthatisingood faithandthatdevotesanappropriateamountoftheirdisposableincometocreditorrepayment. Interestingly, as noted above, the judges reacted most negatively to the gymnastics expense, and their reaction to this expense was a particularly strong indicator of whether they would confirm the plan. Although the apology did not directly affect the how the judges perceived the gymnastics expense, judges perceptions of this expense were associated with their sense of the debtors remorse. Judges who had abovemedian perceptions of the debtors remorseviewedthedebtorsgymnasticsexpensemorefavorably(2.54vs.1.90,t(102)=2.812,p= .006).Theotherexpenseshadnosignificantrelationshipwithremorse. IV.Implications,Recommendations,&Conclusion This research examined the decisions of a set of decision makersbankruptcy judges who are specialized and sophisticated. The judges were presented with a hypothetical but realistic fact pattern involving a married couple who were asking the judge 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. We find that apologies influence judicial confirmation decisions indirectly through their effect on judges 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 as compared to debtors who do not offer an apology. These perceptions of the debtors, in turn,
Judges with abovemedian ratings of the household expenses said they would confirm the plan 57.9% of the time comparedto21.9%ofthetimeforjudgeswithbelowmedianratings(2=17.640,p<.001).Higherconfirmationrates also occurred for judges with abovemedian ratings of the orthodontia expense (44.0% vs. 24.4%,2 = 4.598, p = .032) and gymnastics fees (72.0% vs. 17.1%,2 = 39.824, p < .001). The effect of judges assessment of the car payment was inthesamedirection(43.2%vs.31.0%)butwasnotstatisticallysignificant(2=2.060,p=.151).
42

22

BankruptApologies

influence judges confirmation decisionsjudges were more likely to confirm a proposed repaymentplan when they perceived the debtors as experiencing moreremorse and when they expectedthedebtorstomorecarefulwiththeirmoneygoingforward. We also find that judges evaluations of the debtors claimed expenses were not influenced by 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 the judges expenses related to the daughters gymnastics teamwere associated with the degree of remorse judges perceived the debtors as experiencing and were in turn strongly related to whetherjudgesconfirmedtheproposedchapter13repaymentplan. Thus, we find that apologies have effects on judges in bankruptcy cases that are similar to the effects that apologies have on individuals in a variety of other contexts and also extend this previous research in important ways. In particular, debtors who apologize are perceived more positively and experience better outcomes. This is the case even though bankruptcy involves a harm that differs somewhat from the harms involved in many other legal settings that is, the harm in bankruptcy is directed toward a group of creditors and can be, thus, somewhat more diffuse. In addition, the specific harm involved in bankruptcy is the nonpayment of an obligation. This harm occurs because the debtor lacks the resources to pay. Presumably, in most cases the debt would have gone unpaid even in the absence of a legal declaration of bankruptcy. Thus, the formal judicial proceeding of bankruptcy could even be seenasevidencingsometakingofresponsibilityfortheharmcaused.Thisisespeciallythecase for a chapter 13 bankruptcy proceeding because it involves some repayment to creditors. The apology in this case influenced judicial decision making over and above any signaling of responsibility taking that may be inherent in the decision to file chapter 13 bankruptcy. This finding is consistent with research that has found that the effects of apologies increase as additionalcomponentsofapologiesareadded.43 In addition, apologies influenced the perceptions and decisions of judgesthird parties to the dispute or the wrong at issue and actors who receive the apology, in a sense, as proxies for the injured parties (the creditors). Previous research has found that third parties tend to be more critical of apologies44and we might have expected judges to be suspicious of the motives underlying an apology offered in this context. 45 Despite this likely skepticism, judges perceptionswerepositivelyinfluencedbytheapology.
43 44 45

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

See Jennifer K. Robbennolt, The Effects of Negotiated and Delegated Apologies in Settlement Negotiation, __ L. & HUM. BEHAV.__(forthcoming).

BankruptApologies

23

Previous research has explored the effects of apologies on another set of legally trained actorspracticing attorneys rather than judges. This research has found that apologies can put one who apologizes in a worse position in the eyes of an attorney for the other side.46But there are at least two distinctions that might explain why these two sets of legally trained actors responddifferentlytoapologies.First,thejudgesinthisstudywereactinginaneutralcapacity, while the attorneys in the previous study were acting as partisan agents for their clients. Second,thedecisiontobemadeinthisstudywasnotultimatelyadecisionaboutresponsibility, butratheradecisionabouttheappropriatenessandlikelysuccessofplansgoingforward. In many legal contexts,parties (and their lawyers) can be reluctant to offer apologies for fear that the apology will be interpreted by 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 bankruptcy context offers a glimpse of how apologies operate in a different legal environment. In particular, (absent bad faith) the focus in bankruptcy is less on the debtors responsibility for having incurred the debt (such responsibility typically being clear) and more on how to best allow creditors to recover at least some of their losses while allowing the debtor a fresh start. Thus, the plan confirmation decision more closely resembles a sentencing decisionin that it has atleastoneeyeonthefuture.And, indeed,ourfindingsareconsistentwithprior workthathas foundthatcriminaldefendantsfarebetterintermsofsentencingwhentheyexpressremorse.49 The papers findings also have value for discussions of the purposes of the consumer bankruptcy laws. Many scholars have advocated a utilitarian justification for consumer bankruptcy, especially the bankruptcy discharge, emphasizing the ways in which the discharge
46 47 48

Robbennolt,supranote16. SeeJonathanCohen,AdvisingClientstoApologize,72S.CAL.L.REV.1009(1999);Robbennolt,supranote16.

Prior research has found that apologies canmoderate judgments of responsibility. Seee.g.,Bruce W. Darby & Barry R. Schlenker, ChildrensReactionsto Apologies, 43 J.PERSONALITY&SOC.PSYCHOL. 742 (1982); Bruce W. Darby & Barry R. Schlenker, Childrens Reactions to Transgressions: Effects of the Actors Apology, Reputation, & Remorse, 28 BRIT. J. SOC. PSYCHOL. 742 (1989); Kenichi Ohbuchi et al., Apology as Aggression Control: Its Role in Mediating Appraisal of and ResponsetoHarm, 56 J.PERSONALITY&SOC.PSYCHOL. 219 (1989); Kenichi Ohbuchi & Kobun Sato, ChildrensReactions to Mitigating Accounts: Apologies, Excuses, and Intentionality of Harm, 134 J. SOC. PSYCHOL. 5 (1984); Scher & Darley, supra note 1; Bernard Weiner et al., PublicConfessionandForgiveness, 59 J.PERSONALITY 281(1991). On the other hand, in the criminal context, confession evidence proves to be quite powerful. See e.g., Saul M. Kassin & Katherine Neumann, On the Power of Confession Evidence: An Experimental Test of the Fundamental Difference Hypothesis, 21 L. & HUM. BEHAV. 469 (1997); Saul Kassin & Gisli H. Gudjonsson, The Psychology of Confessions: A Review of the Literature andIssues,5 PSYCHOL.SCI.PUB.INT. 33 (2004). Seealsostudies of apologies and juror decision making cited supra note 18.
49Seee.g.,Eisenbergetal.,supranote6;ChrisL.Kleinkeetal.,supranote6(findingthatrecommendedsentenceswere predicted by perceived remorse); Pipes & Alessi, supra note 6. But see Christy Taylor & Chris L. Kleinke, Effects of Severity of Accident, History of Drunk Driving, Intent, and Remorse on Judgments of a Drunk Driver, 22 J. APPLIED SOC. PSYCHOL. 1641 (1992) (finding a relationship between remorse and perceptions of the defendant, but finding no significanteffectofremorseonsentencing).

24

BankruptApologies

can operate as insurance against income and the general, lastresort social safety net that bankruptcy canbeforsome.50Otherscholars,however,haveofferedamodelofthebankruptcy discharge that rests on the debtor owning up to financial failure and the rehabilitation that comes from an acknowledgement of wrongdoing. 51 Our findings suggest that a debtors apology and 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 scholarly debate about bankruptcys purposes is largely normative, but for this scholarship to succeedinchangingthenormativeviewofbankruptcy,itwillneedtoengagewiththerealityof bankruptcyinpractice. The paper also sheds some light on how judges actually decide cases and the effect of apologies on those decisions. First, while bankruptcy law does not formally consider apology andremorse,theBankruptcyCodedoesdirectjudgestotakeintoaccountwhetherthedebtoris likely to be able to successfully fulfill the terms of the plan over a period 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 good faith,53another place where apology and remorse may play an appropriate role. The term good faith allows the consideration of most any factor a court might deem legally relevant, and the controlling precedent directs as much for the chapter 13 good faith requirement.54To the extent good faith includes a consideration of desert of the debtors worthiness for bankruptcyreliefanapologyandremorsewouldbelegallyrelevant. Thesurvey design,however,alsoaskedthejudgesaboutadecisionwhereapology and remorseshouldnotbelegallyrelevant.Inarrivingathowmuchdisposableincomethedebtor
Hynes offers an excellent summary of the competing justifications offer for consumer bankruptcy, see Richard M. Hynes, Why (Consumer) Bankruptcy?, 56 ALA. L. REV. 121, 14853 (2004). Feibelman also has offered an extended analysis and critique of the social insurance justification for consumer bankruptcy. Adam Feibelman, Defining the SocialInsuranceFunctionofConsumerBankruptcy,13AM.BANKR.INST.L.J.129,passim(2005)
50

GROSS,supra note 10; Jason J. Kilborn, Mercy, Rehabilitation, and Quid Pro Quo: A Radical Reassessment of Individual Bankruptcy, 64 OHIO ST. L.J. (2003). See generally Jonathan R. Cohen, The Culture of Legal Denial, 84 NEB. L. REV. 247 (2005).
51 52 53 54

11U.S.C.1325(a)(6). Id.1325(a)(3).

8 COLLIER ON BANKRUPTCY, supra note 23, at 1325.04[1] (In examining whether there has been a serious abuse of the Code, many courts have continued to use the factsensitive all of the circumstances type of analysis developed bytheappellatecourtspriortothe1984amendments.).

BankruptApologies

25

has to devote to creditor repayment, the judges were asked to consider four separate expenses. The formal statement of law in the Bankruptcy Code allows the deduction of expenses that are reasonably necessary to support the debtors or the debtors dependents,55a formulation that should not allow consideration of remorse. Although the apology did not directly affect how judges perceived the various expenses, the judges perception of the debtors remorse was related to how they perceived the claimed expense for their daughters gymnastics fees, which was the most discretionary of the debtors proposed expenses and consequently turned out to havethelargesteffectontheconfirmationdecision. Academicsoftendebatehowmuchlawmatters,thatis,towhatdegreejudgesfollowthe written law as opposed to their own preferences. Our findings suggest legal doctrine matters a lotthe claimed expenses were a major component of the judges decisionsbut that other factors also entered into the decision. These other factors had effects within the contemplation 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 practicing bankruptcy lawyers. We find that a perception of remorse makes the judge more disposed to the debtors case, 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 commercial lawyersthatpigsgetfatandhogsgetslaughteredselfinterestistobeexpected but the courts will hammer clients who display excessive selfinterest. Many debtors do not see the inside of the bankruptcy court room and would not often have a chance to formally apologize. But while an apology can be important, it is the overall perception of remorse that appears to matter more. Thus, even when obvious opportunities for showing remorsesuch as 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

55 56

Id..1325(b)(2).

Anecdotally, one of the judges involved in the study told one of the authors (Robbennolt) that he made inferences aboutthedebtorsdegreeofremorsefromthecontentoftherepaymentplanthatwasproposed.

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BankruptApologies APPENDIX:FACTPATTERN

The first case on your docket today is a confirmation hearing for the chapter 13 plan of Bethany and Mark Miller. The chapter 13 trustee has objected to confirmation for lack of good faith ( 1325(a)(3)) and for failure to devote all of the debtors projected disposable income to repayment of unsecured claims ( 1325(b)). The Millers are belowmedianincome debtors. The Millers were the only witnesses to testify at the confirmation hearing. Based on their testimony andtheirbankruptcyschedules,youunderstandthefactstobethefollowing. Mark, a high school graduate, is a custodian at a local middle school. Bethany, who has an associates degree from a community college, has worked off and on as a teachers aide in elementary schools and now has a steady position in one of the local schools. The Millers have 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. They have two months of arrearages that they will cure through the plan with a $100 monthly payment. The other secured debt is for $26,100 for a oneyear old Ford Explorer SUV. This debt is not in default, and the plan proposes to continue the $550 monthly carpayment.TheMillershavenononexemptassets. Unsecured debt totals $25,500 and is owed to various credit card companies. At the confirmation hearing, Bethany testified that most of the debt piled up during the fourmonths when I didnt have a job. We had to charge a lot of basic expenses just to get by. Another $9,000 of the credit card debt represents medical expenses resulting from complications due to Marksdiabetes.Bethanyalsoadmittedthatabout$4,000ofthecreditcardbalancecamefroma 2week vacation they took last year to the Caribbean. We took the girls and stayed in an all inclusive resort, she testified. Bethany then tried to explain, We have no way of keeping up withourbillsandrepayingeverything.Itisallwecandotopaythemortgageandkeepfoodon thetable. The Millers Schedule I shows $3,550 in combined monthlyaftertax income. In addition to their mortgage and car payments, their Schedule J lists $1,050 as monthly household expenses for utilities, food and clothing, transportation, and other basic needs. In addition, the Millers list expenses of $270 per month for gym fees, training fees, and travel for the Millers daughters who both compete as members of the local gymnastics club, and $250 per month for orthodontic treatment the Millers plan to begin 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

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repayment of unsecured claims ( 1325(b)). The trustee objects to the size of the car payment and the expenses for orthodontia and gymnastics. If these expenses were disallowed and if the Millers were able to find an automobile with just $60 in lower car payments, unsecured creditorswouldbepaidinfull.