Bankruptcy Reform

Pursuant to a congressional request, GAO reviewed the use of the homestead exemption by bankruptcy debtors in Texas and Florida, focusing on statistically valid probability samples of chapter 7 bankruptcy cases that were closed in 1998 in the Northern District of Texas and the Southern District of Florida. GAO used the data from these samples to estimate for each district the (1) the proportion of chapter 7 personal bankruptcy debtors who claimed a homestead exemption; (2) average and median amount of the homestead exemptions claimed; (3) average and median amount of total scheduled debts for those debtors who claimed a homestead exemption; and (4) estimated average and median amount of debts discharged by debtors who claimed a homestead exemption. GAO noted that: (1) about 52 percent of the chapter 7 cases closed in 1998 in the Northern District of Texas–6,999 cases–involved a homestead exemption claim; (2) about 46 percent of the chapter 7 cases closed in 1998 in the Southern District of Florida–or 9,532 cases–involved a homestead exemption claim; (3) of the estimated 6,999 cases in Texas that involved a homestead exemption, 83 involved homestead exemptions of $100,000 or more, and the remaining 6,916 involved homestead exemptions of less than $100,000; (4) of the estimated 9,532 cases in Florida that involved a homestead exemption, 73 involved homestead exemptions of $100,000 or more, and the remaining 9,459 involved homestead exemptions of less than $100,000; and (5) because of the relatively small number of cases involving homestead exemption claims of $100,000 or more, GAO could not project to the population for each of the districts with adequate statistical confidence.