Web posted and Copyright© April 23, 1998, American Bankruptcy Institute.

April 6, 1998

Mr. Samuel J. Gerdano
American Bankruptcy Institute
44 Canal Center Plaza, Ste. 404
Alexandria, VA 22314-1592

Dear Sam:

Please forgive us if we ask you once more to post a reply to Mr. Wallace's letter on the website. There are many other fora for the current political debates, and we have no desire to engage in them here, but we do want to set the record straight as to our study, As We Forgive Our Debtors.

Mr. Wallace in his letter says:

  1. "Their data indicated that in 1981 there was a group of Chapter 7 filers who disclosed they had the ability to pay a substantial part of their debts."

  2. "In the debate, I pointed out the SWW's data confirm the results of the recent Ernst & Young and Barron and Staten studies, adding to the considerable credibility those two studies already have."

Both these statements are inaccurate. In our book we started with the obvious fact that if you pressed debtors hard enough, some debtors would repay something. Our analysis was aimed at trying to discover how hard we would have to press debtors in order to generate some repayment. The calculation to which Mr. Wallace refers was based on the minimal budget from the Bureau of Labor Statistics, not on an estimate of the debtors' expenses, as he asserts. As we explain in the chapter he cites, in 1981 the statute did not require debtors to file budgets and expenses. As we also explained, it was not possible from the information in the files to correct for family size, regional cost-of-living differences, medical expenditures, or other family circumstances. The calculation he cites was based on a one-size-fits-all austerity budget. For reasons we explained, it was also limited to full repayment. In short, it was designed to provide an insight into the outer limits of repayment possibilities. Our data did not demonstrate how many debtors could in fact pay their debts.

In addition, because we analyzed different data based on different premises, our study could not "confirm" the recent studies cited by Mr. Wallace, even if an earlier study could somehow "confirm" a later one.

Mr. Wallace is perfectly free to draw such inferences and make such arguments as he likes from our data. Indeed, if he quotes what we said or refers to it accurately, his use of it to support his normative and political position is precisely the use to which we hoped our data would be put. It was so that people of all political persuasions could use our data that we tried hard to disclose every element of our data fully and to ask questions of our data that would be useful to every point of view. Because we did that, Mr. Wallace is able to make his arguments. He should, however, cite the data accurately and distinguish clearly between our data and his inferences.

Sincerely yours,

Elizabeth Warren
Leo Gottlieb
Professor of Law
Harvard Law School

Jay L. Westbrook
Benno C. Schmidt
Chair of Business Law
University of Texas