Vanishing Trials: The Bankruptcy Experience

The federal bankruptcy system provides two critical points of comparison with data about the overall trends of federal lawsuits and trials. The first is the rising number of bankruptcy filings, which indicates that a growing number of collection actions and debtor‐creditor disputes are funneled into the bankruptcy system for relatively quick, cheap resolution. The second point of comparison focuses on adversary proceedings, the lawsuit‐like subset of disputes that sometimes are resolved within a bankruptcy. The trend lines here suggest that the number of adversary proceedings filed is climbing, while the number of such disputes that are actually resolved by trial is declining. Like the data about the federal court system generally, these data suggest that the trial is quietly vanishing from the bankruptcy system. Data about the number of judges and about business and nonbusiness bankruptcy cases make it possible to explore two competing hypotheses—a Judicial Workload Hypothesis and a Cost Hypothesis—to explain the overall findings. The data are not conclusive, but they are consistent with the view that judicial workloads explain less of the decline in the number of trials than an increase in litigants’ costs of resolving disputes in bankruptcy. The data are also consistent with a vision of bankruptcy as an evolving process that is increasingly standardized (and cheaper) for nonbusiness debtors, while it is highly individualized (and more costly) for business cases. If that vision is right, it has implications both for understanding the changing role of the trial and for considering various statutory proposals to differentiate further the treatment of large business, small business, and nonbusiness cases.