Loan Servicing

Data-Driven Dismissals for Servicing

Ryan Stone

Ryan Stone

Ryan Stone

Nov 05 202117 minute read

Automating and optimizing a bankruptcy process is hard. We’ve seen hundreds of companies approach the problem in different ways. A common factor in the most successful systems we’ve seen is adopting a data-driven strategy.

Companies that use a data-driven approach to bankruptcies are able to identify areas of opportunity and iterate approaches.

Let’s walk through an example of using data to inform dismissal processing.

The data behind dismissals

We pulled dismissal data focusing on cases dismissed between 2019-02-22 and 2021-03-01. Here is the breakdown of dismissals:

Dismissals data

We wanted to understand what happened after a case was dismissed, so we analyzed parties with a refiling within 6 months of their case being dismissed. Here are the results:

Party refiling rates (within 6 months):

Dismissal rates breakdown

Party refiling time (within 6 months):

Table with the metrics
Graph of the metrics

Using dismissal data to identify areas of opportunity

On average, 13.6% of cases were dismissed. Factor this into your servicing decisions. Consider taking the following actions:

  1. Monitor for dismissed cases. Subscribe to free case updates by filing a notice of appearance on the case. Automate and organize the dismissal monitoring on our Scrub website, through an integrated SOR, or using our API.
  2. Consider organizing your claims filing system to file far enough out to avoid filing for early dismissals but soon enough to avoid missing deadlines. Track the amount of time it takes to file a claim. Set reminders/due dates to file claims a set time after a case is filed.
  3. If you are selling or writing off your bankruptcy debt, consider creating a restoration process to reactivate and resume collections on the 13.6% of consumers with dismissed cases.

Using dismissal data to assess and iterate approaches

Benchmark your internal data to assess and iterate approaches. Here are some areas we recommend exploring:

  1. Track and prioritize collections in profitable stages of bankruptcy. Some creditors sell bankruptcy portfolios, others use the court as their collection system, and others pause collections to monitor for dismissals. Determine the costs and benefits for each method.
  2. Expect around 19% of dismissed cases to be refiled within 90 days. Many creditors in the unsecured space fail to catch these refilings, so claims for these refiled cases are more likely to be paid in full.
  3. Consider moving the timeline of your claims filing to fit your dismissal rates. Do this by assessing the cost of filing a claim on a dismissed case and comparing it to the risk of missing the timeline.
  4. Explore automating your claims filing. Automatic claims filing can dramatically improve your bankruptcy ROI. You can automatically file claims through an integrated LMS or through our API. We are also creating a tool to allow claims filing through a spreadsheet. Reach out to our product team for more information.

We’ve seen companies benchmark and iterate bankruptcy systems using the methods above to increase their recoveries by over 10x. We’d love to help you through the process. Reach out and our product team will provide a free consultation to build your data-driven bankruptcy system.