A comparison of bankruptcy in six Montana cities fiscal 1973
by Carol Ann Kallio Hughes
A thesis submitted in partial fulfillment of the requirements for the degree of MASTER OF SCIENCE
in Home Economics
Montana State University
© Copyright by Carol Ann Kallio Hughes (1974)
Abstract:
The purpose of this study was to compile a picture of the bankruptcy situation in Montana and to
compare the bankruptcies in six Montana cities. Three cities have a Consumer Credit Counseling
Service and three do not have a service available.
A total of 449 bankruptcy files were examined and this represented a 100 percent total of the
bankruptcies filed in the six cities during the 1973 fiscal year. Data gathered included total
bankruptcies per 1000 population, types and dispositions of the cases, occupations of the bankrupts,
incomes for a two-year period prior to filing, losses incurred, bankruptcy exemptions, and reasons for
filing bankruptcy.
It was found that causes of Montana bankruptcies closely paralleled national causes. The leading
causes were found to be unemployment and high medical expenses without adequate insurance.
In Montana, there is a non-use of Chapter XIII filings with only two cases in operation in the study
area. There are indications of need to reform bankruptcy practices and need to publicize Consumer
Credit Counseling Services so that more persons would have an additional possible solution to their
financial problems without opting for bankruptcy. 
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I
A COMPARISON OF BANKRUPTCY IN SIX MONTANA CITIES
FISCAL 1973
by .
CAROL KALLIO HUGHES
A thesis submitted in partial fulfillment 
of the requirements for the degree
of
MASTER OF SCIENCE 
in
Home Economics
Approved:
Chairman, Examining Committee 
Head,/Major Department
Graduate Dean
MONTANA STATE UNIVERSITY 
■ Bozeman, Montana
August, 1974
-iii-
ACKNOWLEDGEMENTS
Gathering of data requires the involvement of many peo­
ple, Without their cooperation, a study of this type would 
be impossible. My very special thank you to Dr. Robert Lind, 
my committee chairman and advisor for his continual encourage­
ment and counsel throughout this project.. To Dr. Marjorie 
Keiser, Director of the School of Home Economics, a thank you 
for the initial stimulation provided and for the constructive 
comments concerning the paper. To Dr. Frank Seitz, thank you 
for your evaluation of the paper.
A special thank you to John L. Peterson, bankruptcy ref­
eree for the Western District of Montana, for giving so much 
time and information and for allowing me unrestricted access 
to all pertinent information in his office files.
A thank you also to John Pederson, Clerk of the District 
Court, for the pleasant manner in which he opened his files 
to me.
A heartfelt thank you to my husband who has been so sup­
portive during this entire project. His encouragement has 
been very much appreciated.
-iy-
TABLE OF CONTENTS
Chapter , Page
I. ■ INTRODUCTION   I
Importance of the Study   I
Purpose of the Study   3
II. REVIEW OF LITERATURE   5
Introduction   5
History of Bankruptcy ..... 5
Bankruptcy Laws of Montana   7
Causes of Bankruptcy '   8
Declaring Personal Bankruptcy   13
Views on Debt and Bankruptcy ..... 19
The Role of Financial Counseling   21
Financial Counseling Clinic   26
III. PROCEDURES OF THE STUDY   30
Selection of the Sample   30
Data Collection   31.
IV. RESULTS   34
Sample . • .... 34
Number of Bankruptcies per 1000
Population   35
Occupations of Bankrupts   38
Types of Bankruptcy and Disposition
of Cases ,   42
Income of Petitioners Prior to
Filing Bankruptcy   46
Reasons for Declaring Bankruptcy   48
Losses Involved in Bankruptcy   53
Bankruptcy Exemptions ...... 62
V. SUMMARY, CONCLUSIONS AND RECOMMENDATIONS ......  64
' Summary ..... 64
Conclusions   67
Recommendations   69
APPENDIX    75
LIST OF TABLES '
Table , Page
I. Bankruptcy Filings per 1000 Population
in Six Montana Cities .............. ........... 37
II. Types of Employment of Bankrupts in Six'
Montana Cities ..........   39
III. Number of Persons Employed Within- a House­
hold Declaring Bankruptcy ......................  42
IV. Disposition of Discharge in Bankruptcy
Cases . .........................................  44
V. Method of Payment of Bankruptcy Fees ........... 46
VI. Total, Average, Range, Median, and Change
in Income of Bankrupts .........................   49
VII. Primary Reasons for Declaring Bankruptcy .......  52
VIII. Average Dollar Amount of Secured Debt per
. Filing ............................   .55
IX. Total Dollar Amounts of Secured Debts .........  56
X. Total Dollar Amounts of Unsecured Debts ........ 57
XI. Total Dollar Amounts of Debts .................  59
XII. Types of Debts Owed in Bankruptcy Cases ........ 61
XIII. Exemptions Given Through the Bankruptcy
Court .........................................  63
-vi-.
■ , ' LIST OF FIGURES
Figure . Page
I. Location of Montana Cities Included
in the Study ......................... ......... 36
-vii-
ABSTRACT
The purpose of this study was to compile a picture of 
the bankruptcy situation in Montana and to compare the bank­
ruptcies in six Montana cities. Three cities have a Consumer 
Credit Counseling Service and three do not have a service 
available.
A total of 449 bankruptcy files were examined and this 
represented a 100 percent total of the bankruptcies filed in 
the six cities during the 1973 fiscal year. Data gathered 
included total bankruptcies per 1000 population, types and 
dispositions of the cases, occupations of the bankrupts, in­
comes for a two-year period prior to filing, losses incurred, 
bankruptcy exemptions, and reasons for filing bankruptcy.
It was found that causes of Montana, bankruptcies closely 
paralleled national causes. The leading causes were found to 
be unemployment and high medical expenses without adequate in- ■ 
surance.
In Montana, there is a non-use of Chapter XIII filings 
with only two cases in operation in the study area. There 
are indications of need to reform bankruptcy practices and 
need to publicize Consumer Credit Counseling Services.<so that 
more persons would have an additional possible solution to 
their financial problems without opting for bankruptcy.
CHAPTER I
. INTRODUCTION 
Importance of the Study
Credit, when it is wisely used, is a growth-promoting 
force in the American economy. Widespread use of credit in 
the United States is one of the factors which has enabled 
us to raise our standard of living beyond that of any other 
peoples in the world). Consumer debt has meant more material 
comfort for.people and also more jobs through increased pro­
duction (Black, 1961).
Credit is a democratizing force in that people with mod­
est incomes do not usually have the cash to buy cars, furni­
ture, homes and appliances. Time-buying allows people to 
marry earlier, raise families while they are young, and enjoy 
many benefits that would otherwise be reserved for upper-in­
come families (Black, 1961).
The use of credit brings responsibility and if its use 
"is wisely controlled, the consumer can plan and project his- 
buying beyond the purchasing power of a single paycheck. How 
ever, the misuse of credit can bring financial difficulties 
(Campbell, Journal of Home Economics, 1968).
The original function of consumer credit was to sell 
merchandise and services. That purpose has been changed be­
cause of the huge profits to be made by selling debts. Sell­
- 2 -
ers of credit have found that more profit can be made from 
the debt itself than from the goods sold. Consumers, for 
the most part, do not understand the cost of credit and they 
are sold more debt than they can afford at exhorbitant prices, 
of which they may not even be aware (Black, 1961).
In many cases, debts are too overwhelming and bankruptcy 
seems the only way to get out from under. People often do 
not learn from their experience, as is evidenced by the fact 
that nationally seventeen percent of those declaring bankrupt­
cy are repeaters (Daly, Better Homes and Gardens, June, 1974).
The high bankruptcy and debt rates in the United States 
show that there is a definite need to help those in finan­
cial difficulties. These losses ultimately affect not only 
the bankrupt, but also, through increased costs, the people 
who follow sound financial practices. Businesses, industry, 
government, and private citizens feel the repercussions of 
unwise spending.
As far as it can be determined, there have been no sys­
tematic studies of bankruptcy in Montana nor have there been 
any studies which have compared bankruptcy in cities which 
have a Consumer Credit Counseling Service and cities which 
do not have this service available. This indicates a need 
for such a study and. it is hoped that this study will present 
a clearer picture of the bankruptcy situation in Montana and
- 3 -
that it will supply insights into possible methods of re­
ducing the bankruptcy rates and the bankruptcy losses in 
Montana.
Purpose of the Study
The purpose of this study was to compare the bankruptcy 
rates in three Montana cities which have Consumer Credit 
Counseling Services available and three Montana Cities, simi­
lar in nature, which do not have these services available. 
This comparison was done to find out if the cities that have 
the service available have a lower bankruptcy rate than the 
other cities.
There have been three studies done evaluating the three 
Consumer Credit Counseling Services in Montana. In 1970,
Lola Krueger evaluated the Butte operation. The following 
year, Cynthia Bryson completed a parallel study in Missoula. 
Sereta Taylor completed the trio of studies in 1973 with her 
thesis on the Cascade County (Great Falls) service. It is 
hoped that this study on bankruptcy added to the three above 
studies will provide a more complete picture of the credit 
situation in Montana. The four studies may prove useful to 
persons who might be thinking of starting a Consumer Credit 
Counseling Service in their communities. They also would be 
beneficial in providing good background material for school
—  4 -
districts setting up a curriculum for a money management 
or consumer education class.
. CHAPTER II 
REVIEW OF LITERATURE
Introduction
The act of declaring bankruptcy has been described as 
"fortune that goes the other way . . . from riches to rags" 
(Sullivan, 1968). To the cognoscenti, bankruptcy is known, 
as "taking a bath" or "going through the wringer". The 
bankrupt himself may state that he has "crashed and burned". 
Others feel that bankruptcy is the "great national cop-out". 
Whatever the feelings involved, the classical definition of 
bankruptcy is that it is "a law for the benefit and relief of 
creditors and their debtors in cases in which the latter are 
unable or unwilling to pay their debts" (Sullivan, 1968).
In 1970, financial counselors estimated that twenty 
million families were so seriously in debt that they were 
virtually bankrupt by ordinary standards. This group rep­
resents many of the nation's poor as well as many belonging 
to the affluent society (Ebony, December, 1970).
.History of Bankruptcy
Bankruptcy legislation had its roots in Mosaic law in 
approximately 1500 B.C. in connection with releasing a per­
son from his Indebtedness at the end of every seven years.
An early liberal attitude was developed in the twenty-fifth
- 6—
chapter of Leviticus. . This was in connection with each 
fiftieth or jubilee year in which liberty was to be "pro­
claimed throughout all the land" and people were ordered to 
"return every man unto his possession" and "every man unto 
his family".
The Ancient Laws of the Twelve Tablets in Rome, 459 
B.C., states that creditors could have a delinquent debtor 
put to death or they could sell him and his family into slav­
ery. In Rome, in 239 B.C., corporal punishment for indebted­
ness was prohibited but imprisonment was still permitted. 
Until comparatively recent times, English laws permitted im­
prisonment for debtors and this practice was carried into the 
early period of the American Republic.
The nineteenth century brought a change in the views of 
the debtor-creditor relationship. A spirit of commercial 
interdependence gave rise to the idea that the creditor was 
a partner of the debtor. A more humanitarian feeling devel­
oped. Laws held that the debtor was responsible merely to 
the extent of the amount of the property he possessed at the 
time of the failure.
The Constitution of the United States: Article I,
Section 8, provided that "Congress shall have the power to 
establish . . . uniform laws on the subject of bankruptcy
— 7-
throughout the United States. This was interpreted to mean 
that a Federal Bankruptcy Act would supersede any act.of 
the individual states.
Early bankruptcy legislation did not prove successful.
The first bankruptcy law was passed in 1800. It was repeal­
ed three years later. Congressional action occurred again in 
1841. This was repealed in 1843. The third bankruptcy law 
was passed in 1867, amended in 1874, and repealed in 1878. 
Finally, 1898 saw Congress pass the National Bankruptcy Act. 
There have been many amendments through the years, but it is 
still in force to date. Because the act was revised so many 
times and in so many respects, it is often referred to as the 
Bankruptcy Act of 1938 or as the Chandler Act. This too has 
been amended several times, most recently in 1966. Even today, 
under the conditions of straight bankruptcy, the estate (if 
any remains beyond exemptions) of the bankrupt debtor is seiz­
ed and liquidated, and, therefore, ceases to exist. In ad­
dition, a debtor can be imprisoned for nonpayment of alimony 
(Beckman and Foster, 1969). Perhaps our progress has not been 
as great as one would believe.
Bankruptcy Laws of Montana
According, to John L. Peterson, District Bankruptcy Judge 
for the State of. Montana, the bankruptcy laws of Montana are 
patterned so that the head of a household and his family will
— 8-
not be rendered helpless after a bankruptcy but rather that 
he will be able to pick up the pieces and be able to make a 
new start. This attitude toward the bankrupt is a liberal 
one and allows the bankrupt more property and assets than do 
the laws in many states. This also alleviates an additional 
tax burden upon the state because the bankrupt and his family 
are not indigent and do not have to depend upon the State for 
welfare or other aid. (This information was obtained from 
Mr. Peterson in a personal Interview.)
The complete bankruptcy laws of Montana are contained 
in the Revised Codes of Montana, 1947, Title 93, 5810-5820. 
This is a replacement volume which wa.s revised following the 
thirty-seventh Legislative Assembly, 1961. In essence, a 
bankrupt has these exemptions: wearing apparel; all neces­
sary household furniture, including a three-month fuel sup­
ply; certain domestic animals; an automobile with value not 
to exceed three hundred dollars; and all tools necessary to 
the trade or profession of the bankrupt. The final exemp­
tion is that of the bankrupt's homestead. This is covered 
under Title 33-124 and allows the bankrupt the equity he 
holds on his home if he has filed for the exemption.
Causes of Bankruptcy
In primitive society, there were no concepts relating
— 9—
to bankruptcy or insolvency as we know these concepts today. 
The reason for this is that debtors and creditors were 
largely unknown. Primitive man had no faith in his neighbor. 
Payment, of necessity, had to be immediate and in full. As 
man’s social awareness developed, the theory of credit grad­
ually evolved. At first, this trust was held in highest re­
gard and any violations of this trust were dealt'with harshly 
(Sullivan, 1968).
The United States was settled partly on credit. Many 
of the passengers on the Mayflower bought their passage on 
the installment plan (Black, 1961). Early settlers in James 
Oglethorpe's colony in Georgia came from a debtor's prison 
in England. It is not the use of credit that causes bank­
ruptcy, but rather it is the misuse and misunderstanding.
Dr. Ernest Dichter, President of the Institute of Moti­
vational Research, has said that our society has been "shift­
ing from a puritanical culture to a hedonistic one". We are 
more concerned with immediate happiness rather than delayed 
satisfactions in life. The credit card is a symbol of the 
hedonistic age. We are getting pleasures, purchases, and 
entertainment before we've earned them. The credit card is 
the modern Lamp of Aladdin. All one has to do is show it, 
sign it, rub it, and— presto— the thing you wish for appears 
and it is yours (Black, 1961) .
As a result of the consumer credit explosion, total 
private debt today is.greater, than the combined private debt 
of man throughout history. "Never have so many owed so much." 
Never has so much profit been made out of debt itself (Black, 
1961).
The major causes of insolvency leading to bankruptcy, in 
the order of their frequency, are as follows: I) a decline
in income due to a "lay-off" from work; 2) high medical ex­
penses of families not having medical insurance or not having 
enough insurance to see them through a major illness; 3) a 
decline in family income due to a wife's leaving the employ­
ment market because of illness or pregnancy; 4) divorce, 
which is often partially, at least, precipitated by financial 
problems; and 5) fraudulent debt consolidation (Lane, 1969).
Estes Snedecor, bankruptcy referee in Portland, Oregon, 
and a member of the Advisory Committee on General Orders in 
Bankruptcy, declares that the "underlying causes of personal 
or consumer bankruptcy are: unemployment, over-extension of
credit, deficiency claims arising from repossessions of auto­
mobiles and appliances sold on contract, excessive interest 
rates and unusual medical and hospital bills" (Sullivan, 1968).
To some extent, retailers are responsible for their own 
credit difficulties. The battle for the consumer dollar has 
often led to overly lenient credit policies. Rather than see
li­
the customer go across the street to a rival store, many 
merchants have opened a charge account for the customer known 
to be a bad risk and lived.to regret it (Phalon, 1963). This 
premise lends to a theory on the rising rate of bankruptcy 
that retailers are at fault by virtue of their improvident 
credit selling. This is coupled with the consumer and his un­
controlled itch to spend. Further complicating the picture 
is an evolving new morality, bringing about a lack of respon­
sibility on the part of some people to pay their debts. The 
drawing is further colored by the harsh collection laws in 
some states and by the nature of the Bankruptcy Law itself 
(Sullivan, 1968).
Ebony magazine presents .two schools of thought on the 
question of who is to blame for mass financial overextension - 
by American consumers. Leonard Rose, President of National 
Accounts Systems, the nation's largest chain of collection 
services, blames the wage earner who cannot resist tempta­
tion to add one more monthly installment to his budget. "The 
major problem", says Rose, "comes from irresponsible con­
sumers who use easy credit to buy themselves into a hole they 
can barely pay their way out of". Conversely, Robert E. . 
Burger and Jan J. Slovicek, who have for years helped debt 
burdened families take advantage of the country's bankruptcy
-12-
laws and who authored How to Get Out from Under, believe 
that the creditors themselves bear at least an equal por­
tion of the blame, having been responsible for an explosion 
of credit cards, easy loans, and a barrage of television 
blandishments inducing everyone with an urge for the better 
life to enter the rolls of heavy debt (Ebony, December,
1970).
The advertising industry itself has made a sizable con­
tribution to the growing amount of bankruptcy in the United 
States. Appetites are so whetted for the good things of 
life that patience has gone. To wait a month or so for some­
thing is unheard of. To suggest waiting for years is vir­
tually subversive. This is in great contrast to the atti­
tude of our forefathers. They were willing to wait, not just 
for years, but often for generations. They were willing to 
build not just for themselves, but for their children. In 
the meantime, they would simply do without. This attitude 
did not. destroy the nation. It gave it a depth and continu­
ity: it gave it purpose. Today's, generation likes to pre­
tend that times have changed, that the prosperity of our 
country depends upon all of us spending as fast as the money 
comes in, perhaps faster. That pretense shows up in adver­
tising, in textbooks, in government pronouncements, and in
-13-
editorials. All too often the pretense i£> not that at all; 
the opinion is sincerely held. "Keeping up with the Joneses" 
is no joke; it is the very essence of modern-day American 
living (Neal, 1967).
Declaring Personal Bankruptcy 
In the fiscal year ending June 30, 1973, there were 
155,643 non-business bankruptcies filed in the United.States. 
The State of Montana contributed 704 of these cases. The 
national figure (which included the fifty states and the 
District of Columbia) shows a decrease of 5.5 percent from 
the total of 164,660 filed in the fiscal year ending June 30, 
1972. During the same period, the total for Montana was 791. 
This is a decrease of 87 cases. Montana's 1973 figures show 
a great imbalance between straight bankruptcy filings and 
Chapter XIII filings. There were 697 of the former and only 
seven of the latter. This information was compiled by the 
Research Services Division of the National Consumer Finance 
Association. The following chart shows a comparison between 
the number of proceedings commenced in key years on the nation 
al and state levels.
1963 1968 1970 1971 1972 1973
U.S.A. 139,174 181,241 178,118 182,143 164,660 155,643
Montana 499 628 821 863 791 704
— 14—
Theoretically, anyone can declare bankruptcy. The only 
qualification is that the petitioner must have debts that . 
amount to at least one dollar more than his assets. Also, 
he cannot have been granted a discharge within the previous 
six years (Sullivan, 1968).
Bankruptcy has been divided into two main types: vol­
untary and involuntary. Under voluntary bankruptcy, the 
debtor himself files a petition admitting his inability to 
meet his obligations. Under involuntary bankruptcy, the 
debtor is forced into bankruptcy 5y his creditorsThis is 
presumably against his will (Beckman and Foster, 1969).
Once a borrower decides to file for bankruptcy, he can 
choose one of two methods. He can choose to file a straight 
voluntary bankruptcy and agree to let all of his attachable 
assets be sold off for the benefit of his creditors. Two- 
thirds of these are no asset cases where nothing is recov­
ered, however. His other option is to file a Chapter XIII 
(Phalon, 1963).
Chapter XIII filings are sometimes referred to as wage - 
earner bankruptcy. The national amendment concerning this 
type of filing was passed in 1938. The original restriction 
was that persons with incomes of not over $3,600.00 annually 
could .avail themselves of the plan. In 1950, the limit was
-15- .
raised to a $5,000.00 annual income. In 1959, all monetary 
restrictions were eliminated (Sullivan, 1968).
For the plan to become operable, the majority of the 
unsecured creditors must give their confirmation to the plan. 
They must agree to recover their investment at a lower monthly 
rate of return, over a longer period of time, and usually 
without any interest. In addition, success is due, in part, 
to the willingness of the employers to cooperate by sending 
wages of the petitioner to a trustee. This allows the planned 
money allotments to be made by the trustee or a Consumer Credit 
Counseling Service (Sullivan, 1968) .
Chapter XIII is legal debt consolidation. The wage- 
earner 1s plan is a way of taking existing debts, combining 
them, and paying them off over a long period of time. A 
trustee, appointed by the court//}.,takes charge of these debts 
and pays them off with a fixed amount of money that the debt­
or has over the normal costs of living. The usual time peri­
od is three years. The cost to the debtor is relatively low, 
a fee of ten percent is paid off as the debt is paid off.
Some Consumer Credit Counseling Centers do not charge the 
client any fee (Ebony, December, 1970).
Most importantly., the courts are behind Chapter XIII
I
filings and creditors cannot put any pressure on a petitioner
'I
— 16—
once the filing has been made. Without the protection of a 
Chapter XIII filing, many, especially the poor, find them­
selves the victims of unscrupulous collection agencies who 
often have subpoenas signed ficticiously and then have court 
notices sent to the victim stating that a judgment has been 
won against him by default, since he failed to appear in 
court. Soon the sheriff appears to attach the debtor's prop­
erty to settle the judgment. Often collection agencies will 
fire off a barrage of semi-legal bombshells to panic the debt­
or into paying— 4:00 a.m. phone calls, threatening letters on 
a lawyer's letterhead, implications that friends, neighbors, 
and relatives will soon know that the person involved is a 
deadbeat. Agents may badger a man at his job. Repossession 
of goods and attachment of salaries are the basic weapons in 
the collection agency's arsenal. To the debtor, relief from 
harassment more than justifies filing for a Chapter XIII 
(Ebony, December, 1970).
The advantages of a Chapter XIII filing are obvious to 
both debtor and creditor. The wage earner gets relief from 
garnishment and other collection pressures and he receives 
added time to pay his debts. Throughout the program, the 
debtor receives basic training in money management. The 
creditor receives the benefit of being paid, at least in part
-17-
(Sullivan, 1968).
The Federal Bankruptcy law is designed to protect both
' )
the individual and his creditors. The law endeavors to give 
the man who is hopelessly in debt a chance to start over, 
relieved of his debts while his creditors equitably divide 
his assets. However, there are certain exemptions to the com­
plete freedom from all debts after completing a bankruptcy. 
Federal statutes provide that a bankrupt is obligated to pay 
the following:
1) taxes due the government
2) liabilities for obtaining money or property 
by false pretense . ... or for willful and 
malicious injuries.to the person or property
?
) x
/
of another, or for alimony due or to become 
due, or for maintenance or support of wife or 
child, or for seduction of an unmarried female, 
or for breach of promise of marriage accompanied 
by seduction, or for criminal conversation.
Thus, the bankruptcy, laws aid and protect people from the 
financial consequences of only some of their sins and indis­
cretions. A person who attempts to secrete part of his as­
sets and thereby profit from his own bankruptcy,. or other­
wise violates this law, is subject to fine and imprisonment
— 18—
(Leavitt and Hansonz 1950).
Following.bankruptcy, a person's credit is usually far 
better than it was before the filing. Some avenues of 
credit are closed for a time, but most merchants are willing 
to extend credit at once. The reason for this is because 
they know that the debtor cannot go bankrupt for a period of 
six years (Ebony, December, 1970)..
Whether rooted in puritanism, pride, or ego, the general 
attitude toward bankruptcy is negative and a person may find 
that it is a difficult lifestyle to live with. There are 
other aspects than social ones to be considered:
1) Secured debts must be paid or the merchandise 
returned.
2) Co-signed loans become the debts of the co-signers.
3) The cost of going into bankruptcy may reach $300.00 
or more.
4) The bankrupt may have trouble obtaining a job, 
especially if it requires bonding (Nuccio, 1967).
Bankruptcy occupies a position of extreme last resort for 
creditors in their collection procedures and for honest debt­
ors in seeking relief from their overwhelming indebtedness.
For honest debtors, it is a way of securing permanent relief 
f;rom a financial embarrassment (Beckman and Foster, 1969) .
-19-
Bankruptcy is not always the chosen .solution to an 
untenable problem. Many people appeal to their families 
for help. Some run away from their families and their jobs 
along with their, financial problems. A few steal. Many ad­
just and remain in involuntary servitude to their creditors 
for all of their lives (Sullivan, 1968).
Views on Debt and Bankruptcy 
The viewpoints by which debt and bankruptcy are held are 
many and varied. They range from one end of the spectrum to 
the other. The Montana Credit Unions League puts out a lesson 
sheet as a service to member Credit Unions. The philosophy 
held by this group is that bankruptcy is legal thievery in 
nine cases out of ten. The prevailing feeling is that the 
creditors of America need to harden their attitude toward the 
ex-bankrupt. Most bankrupts, when asked why they have found 
themselves in this untenable position, will give a variety of 
answers. Few will admit to a lack of integrity and only a 
few more will concede that they lack emotional maturity. 
Instead, a prospective bankrupt dreams about the day when he 
will not have to explain to a multitude of creditors nor will 
he have to evade them. This is faulty reasoning, for wiping 
the slate clean, does not keep it clean. There are actually 
two principal reasons why an individual elects to take bank­
-20-
ruptcy. Possibly he may be harassed with garnishments. On 
the other hand, some unscrupulous lender may have an arrange­
ment with some, equally unscrupulous lawyer to guarantee the 
court costs and legal fee if the lawyer will protect him by 
getting a note signed in blank to be used after the bankrupt­
cy. Thus, fraud and deceit are involved in many instances 
(The Credit and Collection Lesson Sheet, May 25, 1972).
Ebony Magazine has a very different point of view con­
cerning bankruptcy. It states that creditors, merchants, 
and even Federal officials have carefully cultivated the myth 
that bankruptcy is somehow morally wrong. They have succeeded 
in making this basic legal protection a punishment. They fear 
bankruptcy laws because widespread, free use of these protec­
tive laws could overturn the present easy credit economy. Un­
scrupulous lenders, .too, realize that the bankruptcy laws are 
about the only legal weapons with which overburdened debtors 
can fight back against usury, fraudulent sales, .and over­
charging. ' Anyone concerned with the morality of going bank­
rupt should be reminded that business firms and business spec­
ulators use the bankruptcy laws freely. Motion picture stars 
and other public personalities feel only the slightest qualms 
about going to court to shake off their debts. In a sense, 
the family is a business and why should it feel immoral when
-21-
its business .fails and it must seek relief? The "vast ma­
jority of personal bankruptcies are honest attempts by 'lit­
tle people1 to get a fresh start" (Ebony, December, 1970) .
Bankruptcy is being made increasingly attractive to the 
nation's poor. In Washington, D. C., leaders of a militant 
civil rights organization called ACT (Associated Community 
Teams) campaigned to inform Negroes of the existence of the 
bankruptcy law and to help them in filing their petitions. 
Their leaflets urge people to "eliminate almost all your 
debts". They even point out that the fifty dollar filing 
fee is payable in installments with no down-payment (Sullivan, 
1968).
The Role of Financial Counseling 
Bankruptcy referee Ronald Walker of the Los Angeles 
District Court says, "Bankrupts don't know how to handle 
their money. They cannot budget. They cannot say no. They 
are a pushover for the hard-sell guys" (Sullivan, 1968) .
With credit so widely used today, debt counseling is 
becoming an important specialty in our society. Money man­
agement is the blind spot in our educational system. Debt 
problems can be so pressing as to lead to divorce, drugs, 
alcoholism, and even suicide (Neal, 1967).
In a 1966 study in Portland, Oregon, three out of four
— 2 2-
petitioners said their problems could have been avoided by- 
better financial management or avoidance of credit. These 
individuals either did not know how to apply financial man­
agement or they did not have enough self-discipline to deny 
their wants. The conclusions drawn were that a lack of ori­
entation toward the future and the inability to identify fi­
nancial danger signals led to not knowing how to realistically 
solve the problem. Also, education for the financial aspect 
of family life is of great importance (Matsen, Journal of 
Home Economics, January, 1968).
Emphasis should be placed on getting to the debtor early 
before the problem has become acute. "Financial difficulties 
are something like medical ills— the earlier they are detected, 
the less painful the remedy and the more permanent the cure," 
stated George Sullivan in The Boom in Going Bust. Sullivan 
further believes that there are going to be families in debt 
trouble as long as credit is available, but that the number 
of families in crisis situations can be reduced and one way 
to do it is through education; not only consumer education 
as it is now practiced but also by means of formal instruc­
tion in high schools in family budgeting, buymanship, and 
the use of credit. These subjects should be mandatory for 
all youngsters, girls and boys, college preparatory students
-23-
and vocational trainees. In many cases, money today is 
easier to earn.than it is to manage and it is unrealistic 
that an individual devote years to preparing himself for a 
good paying job but scarcely any time at all to the use and 
management of the money he plans to earn. Many young people 
today never stop to realize that the high standard of living 
they enjoy is partly the result of perhaps a decade or more 
of diligent saving and some self-denial on the part of their 
parents. Young people need instructional aid the most. Every 
study ever prepared shows that it is the young families that 
are the ones that are most bankruptcy prone (Sullivan, 1968).
It is estimated that counseling services can help about 
one-half of the people who come to them. Some are having 
money problems and many of these can be helped. Others may 
be involved in family or emotional problems and money prob­
lems may be the manifestation (Changing Times, July, 1966).
A Michigan State University study indicated that seventy- 
five percent of those declaring bankruptcy could have paid 
off their debts in three years. It would have taken self- 
discipline and a certain amount of work to accomplish this.
Of this number, twenty-five percent.could have pulled them­
selves out of debt while living comfortably (Changing Times,
July, 196 6) . Almost without exception, the person who is
-24-
heavily in debt and 'a likely candidate for bankruptcy can be 
saved from that fate if he gets help. Before his financial 
tangle becomes hopeless, he needs to have someone take an ob­
jective look at his situation and help him set a course back . 
toward solvency (Sullivan, 1968).
Often, families with adequate incomes have as much trou­
ble managing their money as poorer families do because of 
the role of emotions in money use. Often people with good 
incomes declare listing minimal debts (Journal of Home Eco­
nomics , January, 1968). For others, the deeper in debt they 
become, often the more frenziedly they spend. One man bought 
four sets of encyclopedias on time (Changing Times, July,
1966).
Consumer Credit Counseling Services have kept many fam­
ilies away from bankruptcy courts and from other troubles 
when pressure from too many debts becomes unbearable. These 
credit clinics do not coddle deadbeats; they help delinquent 
debtors pay their bills and regain their self-respect (Nation's 
Business, December, 1967). The failure of community debt coun­
seling programs is that they focus their service on families 
who are in the gravest difficulty. The person in debt usu­
ally turns to the counseling service after he has exhausted 
every opportunity to borrow or negotiate payments with his
-25-
creditors. The service is the "financial first-aid station 
that cares for the wounded". ' This band-aid is doing only 
part of the job. Prevention from enormous debt through ed­
ucation would be so much better (Sullivan, 1968).
There are three Consumer Credit Counseling Services 
located in Montana. Each of them has been the subject of a 
study evaluating their effectiveness. The first study was 
done in Butte by Lola Krueger in 1970. Cynthia Bryson fol­
lowed with a study on the Missoula service in 1971, and 
Sereta Taylor completed a study of the Great Falls CCCS in 
1973. Krueger (1970) found that the CCCS was fulfilling a 
serious need in Butte, Montana. The major portion of the 
indebtedness in Butte was the result of strikes and the un­
employment caused by the strikes. She reported that the cli­
ents were satisfied with the service and that many of them 
were interested in taking a course on money management.
In the Missoula study, Bryson (1971) found that the 
major cause of indebtedness was installment buying. Unemploy-
iIment was not rated as a major factor. The client response /.
indicated a.high degree of effectiveness (99 percent). Busi­
ness participants also expressed a feeling of satisfaction 
with the program and its effectiveness.
In .the Great Falls study, Taylor (.197 3) found that the
— 26—
major causes of indebtedness included poor money manage­
ment, installment buying, medical expenses, and unemploy­
ment. Both clients and participating businesses considered 
the program worthwhile. The board of directors evaluated 
the service as highly effective in money management and a 
financial benefit to the entire community„
Financial Counseling Clinic
There is a unique financial-counseling clinic in oper­
ation at California State University at Long Beach. Its 
director is Wm. Buckner, associate professor of home economics 
(family finance, management and consumer science) .' Mr. Buck­
ner came to this position with a background as director of 
the central office of the Long Beach legal aid program.
Counseling is provided during the days and one evening 
a week. Help is free and available to everyone. The program 
is presently helping five hundred families per year.
Families are helped in three states:
Diagnosis of the problem followed by 
. , Remedy; then suggestions for
Prevention of future financial difficulties.
Diagnosis: The client, with the assistance of two stu­
dents, fills out a questionnaire. This is followed by a con­
ference between Dr. Buckner and the students to explore all
-27-
possible alternatives. Then the client is called in and a 
three-way discussion follows. The client then makes a choice 
that he understands and can live with. Seventy-five percent 
of the clients have previously decided that they were going 
to opt for bankruptcy. Dr. Buckner convinces them that bank­
ruptcy is usually the least desirable of many solutions. The 
initial visit is usually made by the husband but the clinic 
usually requests that he bring his spouse on the second visit 
and emphasis is placed on developing proper spending habits 
by all members of the family.
Remedy: The clinic assists the client in making out a
realistic budget. The client with severe financial problems 
is counseled concerning Chapter XIII. This rehabilitative 
program causes the client's salary to be paid directly to the 
court. The court pays the client a portion to cover his bud­
get (already worked out) and it pays the remainder to the cred­
itors. . Under this plan, no one can harass the wage earner 
about his bills and his assets cannot be touched.
Prevention: Originally, prevention consisted of a re­
visit to the clinic at the end of a three-month period to 
take another look at the budget and remodify it if necessary. 
Additional support is now being offered in the prevention 
program through classes in personal and family financial man-
— 28-
agement. These classes are taught by student counselors.
Benefits of the program; Benefits are many. For the 
student: I) the program exposes him to. the real problems in
the community, 2) it broadens the student work experience to 
include teaching and counseling, 3) it shows management and 
supportive-services background, 4) it gives experience in 
budget work and seeking sources of funding, 5) it helps inter­
nalize the principles of good money management, and 6) it 
helps future teachers integrate consumer education into 
classes.
For the faculty: I) the program gives additional ex­
perience in working1 with off-campus people, 2) it makes the 
home economics department a more effective learning center, 
and 3) it encourages an interdisciplinary approach in problem 
solving (law, home economics, psychology, and business ad­
ministration) .
For the client: I) it is a place where he ,can get help,
and 2) it gives him an alternative to bankruptcy.
For the community: I) there is a reduction of the high
rate of bankruptcy and this will bring about a general reduc­
tion in the cost of credit for everyone (Rader, Journal of 
Home Economics, May, 1973).
If, as Americans, we are to seek security and acquire 
a better standard of living, then we need to have education
-29-
in credit and financial management. In some instances, 
credit knowledge may come from the home where values should 
be taught. ■ All too often, the home does' not provide this 
information and training.and the need for credit and fi­
nancial education in the schools arises (Schiffer, 1962).
CHAPTER III
PROCEDURES OF THE STUDY
The purpose of this study was to compare the bankruptcies 
filed in the three Montana cities which have Consumer Credit 
Counseling Services with bankruptcies filed in three Montana 
cities of similar nature which do not have these services 
available. The history and philosophy of bankruptcy as well 
as results of the three previous studies of Consumer Credit 
Counseling Services in Montana were outlined in the second 
chapter.
Selection of the Sample
Because the bankruptcy files are open to the public, 
every file from the six cities chosen for the study was ex­
amined. The study included every non-business bankruptcy 
filing in these cities during the fiscal year beginning July 
I, 1972 and ending June 30, 1973.
The cities of Butte, Great Falls, and Missoula were 
chosen for the study because each has a Consumer Credit Coun­
seling Service. Three other cities were selected to match 
them, as closely as possible. Anaconda was chosen to compare 
with Butte because its economy, like that of Butte, is based 
upon a one-industry minerals company. Billings was selected 
to pair with. Great Falls as a major population center, while
-31-
Bozeman was paired with Missoula as the site of a major unit 
of the state university system. Neither Anaconda, Billings, 
or Bozeman has a Consumer Credit Counseling Service. It was 
felt that this format would enable the researcher to determine 
the impact, if any, of the Consumer Credit Counseling Service 
units in reducing bankruptcies in the communities they serve.
Data Collection
The State of Montana is - divided into two federal court 
districts— eastern and western. Each district has a judge 
appointed as bankruptcy referee to hear and rule on all bank­
ruptcy filings within his jurisdiction. Case records are 
kept on file in the Office of the Clerk of the District Court 
in each district. Those for the western district are located 
at the Federal Building in Butte, Montana, while the eastern 
district files are located, at the Federal Building in Great 
Falls, Montana. The bankruptcy file records, for Anaconda, 
Bozeman, Butte, and Missoula are in the Butte office, and in 
the Great Falls office are the files for Billings and Great 
Falls.
During the month of April, 1974, the investigator col­
lected. data from the files for these six municipalities by 
direct examination of the bankruptcy files in the two district
—  3 2 —
court offices. All,of the 449 filings for the period July I, 
1972 to June 30, 1973 were included in the investigation.
The findings are necessarily limited to the range of infor­
mation provided by the bankruptcy case files. Information 
gathered for the six cities included the number of bankrupt­
cies per thousand population, the occupations of the bank- ' 
rupts, the types and dispositions of the cases, income of 
the bankrupts for a two-year period prior to filing, reasons 
for declaring bankruptcy, losses involved through bankruptcy 
(including secured, unsecured, total losses and types of 
losses), and bankruptcy exemptions. Unfortunately, the rec­
ords contain almost no other demographic data such as age, 
number of children, length of marriage, educational attain­
ment, and other personal background factors which would have 
been extremely useful in helping to identify and examine the 
probable causes of bankruptcy and characteristics of persons 
who declare bankruptcy.
To acquire a fuller understanding of the actual proce­
dures involved in declaring bankruptcy, the investigator at­
tended a session on bankruptcy hearings. Approximately fif­
teen cases were heard during the three-hour session. The 
petitioner., accompanied by his attorney, would enter the 
room, be sworn in, arid would state that the petition he had
-33-
submitted was true in all respects. The referee would ask 
why bankruptcy was being sought at this time. If there were 
creditors present (creditors had been informed prior to this 
as to time, place, and date of the hearing), they were al­
lowed to speak to the court concerning the debt owed to them. 
In some cases, compromises were worked out. If there were 
no complications or irregularities, the petitioner was al­
lowed to leave. There were two cases with serious irregu­
larities and the referee directed each petitioner to straight- 
• en out the matter with the' aid of his attorney and to return 
to the court at a later date. It was extremely interesting 
to see the wide variety of cases and to listen to the peti­
tioners.
CHAPTER IV
RESULTS
The purpose of the study was to find both the■similari­
ties and the differences concerning the bankruptcy situation 
in six Montana cities: Anaconda, Butte, Missoula, Bozeman,
Great Falls, and Billings. Another objective was to ascer­
tain whether or not cities with a Consumer Credit Counseling 
Service had a lower bankruptcy rate per thousand population 
than cities without this service. '
Sample
The three cities of Butte, Great Falls, and Missoula, 
Montana were chosen to be represented in this study because 
they are, at present, the only three cities in the state 
which have the services of a Consumer Credit Counseling Ser­
vice available. As a comparison for these cities. Anaconda, 
Billings, and Bozeman, Montana were chosen. These cities do 
not have available the Consumer Credit Counseling Service.
In addition, each city in the latter category was chosen be­
cause it had a marked similarity to a city in the former cat­
egory. Both Butte and Anaconda are primarily one industry 
towns controlled by the same industry, that of minerals, and 
each is subject to the same labor conditions which include 
three-year labor contracts., and the yery real possibility of
— 35—
a major strike every third year. This economic condition 
sets these two cities apart from the rest of the cities in 
the study. Missoula and Bozeman house the two largest units 
of the university system and the influence of the university 
upon the town is of importance. Great Falls and Billings 
were matched because these two cities are by far the two 
largest cities in the state and their more cosmopolitan 
nature and varied industries make them important to the 
study (see Figure I).
Information for this investigation was taken directly 
from the official bankruptcy forms. Because bankruptcy 
files are considered to be a part of the public domain, they 
are open to the public at all times. Therefore, the response 
was gathered from 100 percent of the bankruptcy cases filed 
in the six cities during the fiscal year beginning on July 
I, 1972 and ending on June 30, 1973. For the purpose of this 
study, all dollar figures have been rounded off to the near­
est whole dollar.
Number of Bankruptcies per 1000 Population
During the one-year period of the study, 449 bankrupt­
cies were filed in the six participating cities. Butte con­
tributed 78; Anaconda added 18; Missoula had 60; Bozeman 
listed 11; Great Falls added 123; and Billings rounded out
MONTANA
Great Falls
Missoula
Anaconda
Billings
Bozeman
Figure I. Location of the Montana Cities Included in the Study
— 37—
: the total with 159., Per 1000 population, the city with the 
smallest number of filings was Bozeman with .60 and the city 
with the largest number was Butte with 3.34 (see Table I).
TABLE I
BANKRUPTCY FILINGS PER 1000 POPULATION 
IN SIX MONTANA CITIES
CITY FILINGS POPULATION* FILINGS PER 1000
Butte 78 23,368 3.34
Anaconda 18 9,971 1.84
Missoula 60 29,497 2.03
Bozeman 11 18,670 . 60
Great Falls 123 - 60,091 2.05
Billings 159 61,581 2.58
*Population based on U. S. Dept, of Commerce Bureau of Cen­
sus (Nov. 1970) "Number of Inhabitants of Montana"
The. number of bankruptcies per 1000 population seemed 
quite high for the city of Butte in comparison with the other 
five cities. When this difference became apparent, every 
tenth filing was checked from this point and it was found that 
of the 120 remaining filings in the Western district of 
Montana (including the cities of, Anaconda, Bozeman, Butte,'
— 38—
and Missoula) five of the bankrupts had filed their previous 
year's income tax in the State of Montana while seven had 
not. Greatly contrasting this was the Eastern district of 
Montana (including Great Falls and Billings) where twenty- 
two had been residents of the state during the year prior to 
filing bankruptcy while only four had filed their last state 
income tax in a state other than Montana. This much higher 
rate of transiency indicates that many of the bankrupts had 
developed their financial difficulties in another state. They 
had found jobs in Montana, many being employees of the Anacon­
da Company in Butte and Anaconda. Their creditors had traced 
them and had begun harassing them about former debts. Many 
were threatened with garnishment and many actually had attachr 
ments on their wages. Many filed bankruptcy as soon as the 
Montana residency requirement had been met. This require­
ment states that a person has to have been a resident of 
Montana for the majority portion of six months: this liter­
ally means three months and one day.
Occupations of Bankrupts
The bankruptcy docket sheet lists seven general types 
of occupations. All the respondents were classified in just 
four of the seven categories. There were no farmers, mer­
chants, ,or .manufacturers, presumably since bankruptcies in
-39-
thpse occupations would normally be considered a business 
bankruptcy and this study was limited to personal bank­
ruptcies. Of the professional people, there was only one 
listing; he was a police officer. There were twenty-four 
who had been businessmen and these businesses all had fail­
ed, thus causing the bankruptcy. The category, other non­
business, comprised primarily of homemakers, included a 
light sprinkling of the chronically unemployed, students, 
and retired persons. The employee classification numbered 
268 and this group included all wage earners working for 
someone else (see Table II).
TABLE II
TYPES OF EMPLOYMENT OF BANKRUPTS IN SIX MONTANA CITIES
EMPLOYMENT BUTTE ANACONDA MISSOULA BOZEMAN
GREAT
FALLS BILLINGS
Farmer 0 0 0 0 0 0
Employee 40 11 35 5 75 102
Professional 0 0 0 . 0 I 0
Other non-
business 34 6 15 2 45 54
Merchant 0 0 0 0 0 0
Manufacturer 0 0 0 0 0 0
Business 4 I 10 4 2 3
— 40—
Interestingly, most of the couples who filed bankruptcy 
did not consider having a second income as a solution to 
their financial difficulties. This corresponds with the 
three Montana studies done of the three Consumer Credit Coun­
seling Services. In the Butte study, Krueger (1970) found 
that 10 percent of the women were employed full-time, 9 per­
cent part-time, and the remaining 81 percent listed them­
selves as housewives. In the.Missoula study, 25 percent were 
full-time workers, 14 percent worked part-time, and the re­
maining 61 percent of the participants were housewives, ac­
cording to Bryson (1971). In the Great Falls study, Taylor 
(1973) found the smallest percentage of women working. Elev­
en percent worked full-time and only two percent worked part- 
time.
The reasons for this phenomenon are not known. Perhaps 
there were small children at home to be cared for; perhaps 
the wife did not feel herself to be employable either through" 
lack of education, training, or job availability; perhaps the 
husband felt that his wife's working would be a threat to his 
masculinity; or perhaps it simply never, occurred to them that 
the wife could work to help ease the financial strain. Rea­
sons were not given in the files, so one may only make con­
jectures about the explanation of this fact.
■-41- •
Each person filing bankruptcy is considered to be a 
separate case, so a household including a husband and wife 
is considered as'two separate filings. Table III shows the 
number"of filings where.there were two members of one house­
hold filing and within this framework, the number of families 
where both husband and wife were employed and also the num­
ber of households with only one person employed. In most 
cases, it was the wife who was not employed. Exceptions in­
cluded the family situation where the husband was unemployed 
because of a disability or retirement and the wife contributed 
the family income. There were three other cases of irregu­
larities, one in Butte and two in Missoula. Three wives 
listed themselves as employed but each was employed in her 
husband's business and that business had failed, thus causing 
the bankruptcy.
The percentages of both husband and wife working to in­
crease family income and decrease indebtedness ranged from a 
high of 50 percent in Bozeman to a low of zero percent in 
Anaconda. The two university cities contributed the highest 
percentage of two employments per household with Missoula 
ranking second with 35 percent. Montana's two largest cities, 
Great Falls and Billings, had 22 and 20 percent respectively. 
The two mineral industry controlled cities ranked very low
— 42—
with Butte only three percentage points above Anaconda's 
zero.
TABLE III
NUMBER OF PERSONS EMPLOYED WITHIN
A HOUSEHOLD DECLARING BANKRUPTCY
City Two Members 
of One 
Household 
Filing
Both Bank­
rupts were 
Employed
% One Bank­
rupt was 
Employed
%
Butte 29 I 3 28 97
Anaconda 6 0 Q 6 100
Missoula 17 6 35 11 65
Bozeman 4 2 50 2 50
Great Falls 48 11 22 37 78
Billings 61 12 • 20 . 49 80
Types of Bankruptcy and Dispositions of Cases 
There are two types of bankruptcies included in the 
Montana filings. Chapter 4 filings, straight bankruptcy, over­
whelmed Chapter 13 filings. One family, including two filings, 
in Great Falls petitioned for a Chapter 13 or wage-earner 
plan. The couple has successfully, to. this point, carried
out its program of repayment to its creditors because the plan
-43-
is still in operation. There were 447 cases of straight 
bankruptcy as opposed to two Chapter.13 filings.
The two main reasons given for this heavily lop-sided 
figure are that there is so much more paperwork involved in 
a Chapter 13 filing and that, in the past, almost all of the 
Chapter 13's were so hopelessly in debt that they refiled as 
a Chapter 4 straight bankruptcy. One might suppose that if 
all of the petitioners went through a Consumer Credit Coun­
seling Service first, then many might avoid bankruptcy court 
altogether. Repayment could be carried out through the coun­
seling service instead of the court, thus avoiding the two 
major problem areas.
Of the 449 cases of bankruptcy filed, the entire total 
were voluntary actions with proceedings begun by the bank­
rupt. There were no cases in which the creditors called for 
a bankruptcy proceeding against anyone. In addition, the 
only reasons for a failure to grant the petition were either 
that the petitioner failed to appear at any of the proceed­
ings or that he had failed to pay the necessary fees involved 
in the action. With these two exceptions, all other peti­
tions were granted. One case was recorded in Montana statis­
tics but was transferred out-of-state. There are twenty- 
seyen cases pending. . The reasons for the delay in completion
>
— 4 4—
of these cases include partial payment of fees (enough money 
paid to show goodwill and good intentions of the petitioner), 
possible assets which were not listed on the petition, and 
legal questions which must be resolved (child support, law­
suits, etc.). The two petitions involving the Chapter. 13 
filings are also pending as the repayment plan is still in 
operation (see Table IV).
TABLE IV
DISPOSITION OF DISCHARGE IN BANKRUPTCY CASES
DISCHARGE BUTTE ANACONDA MISSOULA BOZEMAN
GREAT
FALLS BILLINGS
Granted 56 14 56 10 120 142
Denied (due 
to non- 
appearance) I 2 I 0 0 2
Dismissed 
(due to non­
payment) 2 2 0 0 I 13
Pending 19 0 3 I 2 2
Transferred
out-of-state ' 0 0 I . 0 0 0
Payment of Fees:
Lt is interesting- to note the method by which the fees
— 4 5—
were paid in the filing of the bankruptcy petition. Two 
hundred and thirty of the petitioners paid their fees in full 
at the time of filing. Nearly as many petitioners, 219, had 
to make arrangements to pay their fees in installments. In 
order to do this, the person must petition the court to de- . 
clare that he is a pauper and not only is he without the 
funds to pay his fee, but also he is without friends or rel­
atives who can loan him the money to accomplish this. Upon 
receipt of this petition, the court will set a payment plan 
of perhaps twenty dollars a month. The petition is then 
placed in the status of pending until fees are paid in full. 
This large number of petitioners would indicate that by .the 
time a person petitions for bankruptcy, all other avenues 
are blocked to him. The court fee is $50.00 per petition 
which would mean $100.00 for a couple.
In addition to this filing fee, the petitioner usually 
has an attorney's fee to pay. This fee varies from lawyer 
to lawyer, but a generally accepted figure is $350.00. It 
is not necessary to have an attorney to file a bankruptcy 
petition, but most people either do not know this or do not 
feel capable of handling the matter themselves.
Billings has a legal aid attorney. This in part accounts 
fot the hicjh. number of petitions of bankruptcy from Billings.
— 4 6-
The legal service is free and the petitioner has only to pay 
the court fee. In the past, many persons filed a petition, 
did not carry through with the proceedings, had the case dis­
missed for non-payment of fees, and then filed again.
In Bozeman and Missoula, the petitioners seemed to have 
been better prepared financially. Only in these two cities 
were all fees paid in full for all filings at the time of the 
filings (see Table V).
TABLE V
METHOD OF PAYMENT OF BANKRUPTCY FEES
Paid in Full
City at Time of Filing %
Paid in 
Installments %
Butte 20 26 58 74
Anaconda 10 55 8 45
Missoula 60 100 0 0
Bozeman 11 100 0 0
Great Falls 42 . 34 81 66
Billings 87 54 72. 46
Income of :Petitioners prior to Filing Bankruptcy
Income is not the sole determining factor in the decision
to file for bankruptcy. In Billings, Butte, Great Falls, and
Missoula, a majority of petitioners showed an increase in 
income for the year immediately preceding their bankruptcy 
as against the year before. Bozeman had equal numbers of 
increases and decreases. Only in Anaconda was there a drop 
in income. For those persons declaring bankruptcy in 1972, 
the income figures are from the years of 1970 and 1971. The 
income study for those individuals declaring bankruptcy in 
1973 includes the years of 1971 and 1972. The income figures 
are based on a per person filing rather than a per household 
figure. Thus, an income amount of $3,884.00 would reflect an 
average of each person filing a petition. If a married cou­
ple filed, then the figure for each household would double.
The highest income recorded by an individual was 
$17,000, while the lowest rate was a loss of $6,941. The 
latter was said to be a loss based on what an individual could 
have earned working for wages and what he did earn running his 
own business. The business, operating at a loss, did fail 
during the following year. Median incomes ranged from $8,500 
in Anaconda to $5,652 in Missoula.
Average annual income per individual, based on both 
years' income prior to filing were for $3,884 in Butte, $4,505 
in Anaconda, $4,082 in Missoula, $3,994 in Bozeman, $3,745 
in Great Falls, and $3,521 in Billings, In two cases in
-47-
-48-
Butte the information was missing and the income was not 
listed for the two Chapter 13 filings in Great Falls (see 
Table VI).
Reason's for Declaring Bankruptcy
Reasons for declaring bankruptcy were available only 
in the Western Montana District. This question does not ap­
pear on the bankruptcy petition and the information was 
available only because the referee asked for it. The bank­
ruptcy causes, then, relate to persons in Anaconda, Bozeman, 
Butte, and Missoula.
As has been previously indicated, insufficient income 
was given as a cause in only eleven cases, seven of them oc­
curring in Butte, which had the third lowest average annual 
income.
The leading cause of bankruptcy was unemployment; it was 
listed as a cause fifty-six times. Again, a disproportionate 
Iy large number of listings were found in Butte, where there 
were thirty-one mentionings of unemployment. In Butte, it 
was only partly a case of present unemployment. Frequently, 
the family had been unemployed in its former home town.. The 
family moved to Butte where the husband found employment with 
the Anaconda Company and soon creditors from back home began 
harassing the family. Also occurring in Butte was the in-
TABLE VI
TOTAL, AVERAGE, RANGE, MEDIAN, AND CHANGE IN INCOME OF BANKRUPTS
BUTTE ANACONDA MISSOULA BOZEMAN GREAT FALLS BILLINGS
Total income 
(both years) $590,514 $162,192 $485,795 $87,882 $906,506 $1,155,051
Average annual 
income (both 
years) 3,884 4,505 4,082 3,994 3,745 3,521
Range
high
low
16,072 
- 0-
13,000
-0-
14,113
-0-
10,192
-0-
16, 284 
6,941
17,000 
- 0-
Median income
fore filing 
two years be-
6,000 8,500 5,652 6,000 6,280 6,000
fore filing 6,000 6,000 6,000 6,000 6,300 6,400
Change in income
increase 20 I 22 2 35 49
decrease 12 9 8 2 23 26
no change 13 2 12
2 not given 
Chapter 13
3 12
2 not given
29
$
— 50-
ability of the family to recover from a copper strike and 
the prolonged unemployment during that strike. Tying in 
with this, out of the thirteen mentions of wage attachments, 
both real and threatened, nine occurred in Butte.
The most tragic reason given for declaring bankruptcy 
was that of medical expenses too. great for the family to be 
able to cope with successfully. The gravity of this was 
shown frequently when the family's unsecured debts would show- 
many doctor, hospital, and prescription bills followed by 
debts owed to a funeral home,, a cemetery, and a florist. To 
these people, there was no other solution to their plight 
than bankruptcy.
Too much credit was listed as a chief cause in twenty- 
one instances. This occurred most frequently in Missoula, 
where it was listed ten times. It is very interesting to 
note that the blame was always shifted to the merchants.
They gave too much credit, thus forcing too many debts upon 
the consumer. There was never any indication that the per­
son declaring bankruptcy went out and sought credit beyond 
the limits of his income to repay. Also, it was never in­
dicated that the person had handled his credit badly.  ^In no 
case on record was there a statement by a bankrupt where he
own fault through mismanagement of
money.
-51-
Also listed twenty-one times was business failure as 
the prime cause of personal bankruptcy. Again, the heaviest 
occurrence was in Missoula where thirteen bankrupts listed 
this cause. Marital problems, often ending in divorce, were 
a cause in twelve instances. This cause was given a fairly 
even distribution among the four cities.
In lesser amounts, causes included injury or ill health 
of the bankrupt, mentioned five times; government execution 
on property resulting in loss' of income caused a Bozeman 
couple to declare bankruptcy; and in six instances, including 
the transfer to out-of-state, the cause was not listed.
The only other cause mentioned was an adverse legal 
judgment which affected a couple from Missoula. In this in­
stance,the couple was found responsible in an automobile 
accident, and the courts found them liable in excess of 
$180,000. To relieve themselves of this responsibility, 
the couple declared bankruptcy (see Table VII).
’-52-
PRIMARY REASONS FOR DECLARING BANKRUPTCY
TABLE VII
BUTTE ANACONDA MISSOULA BOZEMAN TOTAL
Unemployment 
Medical ex­
31 ,8 17 0 56
penses 13 I 14 3 . 31
Too much credit 5 ■ 4 • 10 2 21
Business failure 
Wage attachments
5 I 13 2 21
real and threat-
ened 9 2 2 0 13
Marital problems 
Insufficient in­
4 I 5 2 12
come 7 I I 2 11
Injury - ill
■ health
Government exe­
cution on prop-
O O 5 0 5
erty resulting
in loss O O 0 2 2
Adverse legal
judgment O O 2 0 2
Not given 3 2 I 0 6
The causes of bankruptcy in Western Montana seem to cor­
respond fairly well with the nation's, major causes which, were 
discussed in Chapter II. Nationally and in Montana, the major
— 53-
cause is connected to unemployment or work layoffs. Second 
in both the country and state is high medical expense with­
out adequate insurance. The third major cause nationally is 
a decline in family income because the wife left the employ­
ment scene due to illness or pregnancy. This does not af­
fect Montana's bankruptcy causes because so very few wives 
were employed outside the home before the bankruptcy. Fourth 
nationally and sixth in Montana is the problem of divorce 
causing bankruptcy. Fraudulent debt consolidation, which 
was mentioned fifth nationally, was not indicated at all in 
Montana.
Losses Involved in Bankruptcy
Secured Losses
A secured debt is a debt involving some form of col­
lateral which the lender holds until the debt is paid. With 
regard to bankruptcy losses, these debts most commonly in­
volved automobiles. Some loan companies required collateral 
with a loan and some bankrupts had secured loans for.such 
items as motorcycles and snowmobiles. In Great Falls many 
large debts involved mobile homes. Some college loans were 
included.'
Although the average number of secured debts per filing 
was small, ranging from .54 in Bozeman to 1.70 in Missoula,
-54-
the dollar amount was high, ranging from $1,146 in Bozeman 
to $4,589 in Missoula (see Table VIII). The highest amount 
of secured debt by far was an amount of $174,795 in Billings. 
This was personally held by an individual after a partner­
ship had been dissolved. Many petitioners had no secured 
debts (see Table IX). Median dollar amounts of secured 
loans ranged from a low in Bozeman of $1,0.00 to a high in 
Great Falls of $2,864.
Unsecured Losses - .
Unsecured debts include those debts which do not carry 
collateral. They include purchases at stores under a charge 
account system,signature loans from banks and finance com­
panies, charged items from catalog houses, charge accounts 
through bank cards and oil company credit cards, and most 
medical expenses.
Unsecured debts made up a much larger part of the total 
debt figure than did secured debts. Individual amounts are 
smaller dollar-wise, but the totals are sizable. Small 
amounts were recorded for Butte with $264,158 and Anaconda 
with $72,965. Missoula had $494,364 and Bozeman had $103,059. 
Great Falls contributed $522,481 and Billings had a dollar 
amount double that for a total of $1,100,119 (see Table X).
The average number of. unsecured debts per filing ranged
Bu
tt
e
-55-
AVERAGE DOLLAR AMOUNT OF SECURED DEBT PER FILING
TABLE VIII
$5,000
4,000
3,000
2,000
1,000
-  0 -
(0rO
GO
U(0
GC
fC
H
9O
in
in
■H
S
G(0
g
CU
N
Om
Ul iH 
r—I
(d
k
-Prti
CUPO
in
t7>C•H
rH
I—I 
-H
m
-56-
TABLE IX
TOTAL DOLLAR AMOUNTS OF SECURED DEBTS
$700,000
$676,705
(U•L
4-1
Pm
id
rUcou
idC
idiH
POCfi
Cfi■H
Cid
I
N
O
PQ
id
k
-P
id
CU
U
U
Cfl
t n
C•H
i - 4
rH•H
m
600,000
500,000
400,000
300,000
200,000
100,000
- 0—
^Figures in parentheses indicate average figures per filing
TABLE X
TOTAL DOLLAR AMOUNT OF UNSECURED DEBTS
$1,100,119
$522,481
$494,364
$264,158
* ($3,386)
$72.965
($4,053) ($8,239)
$103,059
($9,369) ($4,247) ($6,918)
QJ
-P
3
CQ
fO
CO
UIti
C
C
rti
H
3O
COW-H
C
rti
I
N
O
CQ
M 
iH 
i—I
rtih
-P
rti0)P
O
M
tr>c
-H 
i—I 
I—I 
-H 
CQ
*Figures in parentheses indicate average amount per filing
$1,100,000
1,000,000
900.000
800.000
700.000
I
STTATTT EM
I
500.000
400.000
300.000
200.000 
100,000
- 0 -
-58-
from a high at Missoula of 17.20 to a low. of 10.98 at Great 
Falls. The average total debts per filing ranged from a high 
of $9,369 in Bozeman to a low of $3,386 in Butte (see Table 
X). The highest.unsecured indebtedness per filing was in 
Missoula in the amount of $176,626 to a low in Great Falls 
of zero. The highest number of unsecured debts per filing 
was 121 in Billings and the lowest was zero in Great Falls. 
Median figures ranked from $6,722 in Missoula to $3,103 in 
Butte.
Total Losses
Total debts include secured debts, unsecured debts, 
and, where applicable, taxe's owed to the government. Even 
with the granting of bankruptcy, the petitioner is still 
liable for government taxes. If there are assets to be liq­
uidated, then secured debts take precedence over unsecured 
debts with regard to partial payment.
In total, there were 6,684 individual creditors in­
volved in the 449 filings. There were 1,092 in Butte, 245 
in Anaconda, 1,134 in Missoula, 128 in Bozeman, 1,533 in 
Great Falls, and 2,552 in Billings.
Total dollar amount losses had a wide spectrum. Butte 
had $480,672 and Anaconda had $123,000 (see Table XI). 
Billings and.Great Falls led the group with amounts totalling
TABLE XI
TOTAL DOLLAR AMOUNTS OF DEBT
$1,840,478
$1,075,393
$719,394
$480,672
* ($6,162)
$123,001
($6,833)
$125,008
($11,989) ($11,364) ($8,743) ($11,575)
CO
(d f0 I—I W
rO I—I C i—l CnC 3 3 3 C
<u O O E NO •H
4-1 U m <D I—I
4-1 (ti W N i—I
3 C -H O -P -H
CQ C S CQ U CQ
*Figures in parentheses indicate average amount per filing
$2,000,000
1.750.000
1.500.000
1.250.000
U i
I,000,000
750.000
500.000
250.000 
— 0—
— 60-
over a million dollars each. Billings had $1,840,478 while 
Great Falls showed $1,075,393. Missoula followed with 
$709,394 while a much lower figure was reported for Bozeman 
with $125,008.
Average losses per filing ranged from $11,989 in 
Missoula down to $6,162 in Butte. It is interesting to note 
that Butte had the highest number of bankruptcies per 1000 
population but that it had the smallest amount of dollar loss 
per filing (see Table XI). Median dollar losses ranged from 
$9,902 in Missoula to $6,158 in Butte.
The highest loss per filing occurred in Billings with 
an amount of $252,300. The smallest amount that a bankrupt 
owed was $1,100 and this was a Missoulian.
Types of Losses
Every tenth file was examined as to the types of debts 
that were claimed. The variety was endless. The smallest 
amount recorded was in the amount of $1.50 for a florist 
bill. Many persons owed debts to cable television companies. 
There were subscriptions to men's magazines and memberships 
in cookbook-of-the-month clubs. Several persons had con­
tracted for lifetime memberships in figure salons. Larger 
debts listed included a $10,000 loan from the parents of one 
bankrupt.. One individual had incurred several gambling debts
— 61-
up to $10,000 each in both Nevada and Montana. Debts for 
mobile homes and automobiles were prevalent. The largest 
debt was in excess of $180,000 and was the result of a court
A breakdown of various types of debts through spot 
checking every tenth filing in the Western District (four­
teen files were investigated) and in the Eastern District 
(twenty-five files were included) shows the distribution of 
debts contracted through finance companies, catalog houses, 
bank cards, national travel cards, and medical expenses. As 
Table XII shows, medical expenses were by far the most numer­
ous.
TYPES OF DEBTS OWED WESTERN DISTRICT EASTERN DISTRICT
judgment concerning an automobile accident
TABLE XII
TYPES OF DEBTS OWED IN BANKRUPTCY CASES
Finance Companies 32 41
Catalog Houses 7 27
Bank Cards I 9
National Travel Cards 2 24
Medical 116 189
— 62—
Bankruptcy Exemptions
Montana's bankruptcy laws are lenient with regard to 
exemptions. The purpose of the laws is not to crush the 
individual or to make him rely on the state for his exis­
tence. It is hoped that by allowing the person many material 
holdings, he will be able to make a fresh start. Exemptions 
generally include personal clothing, household furnishings 
(such as a stove, refrigerator, tables, chairs, beds, chests, 
lamps, etc.), a car, a three-month fuel supply, certain do­
mestic animals (such as chickens, a cow, a horse, etc.), and 
any tools necessary for the work of the bankrupt. In the 
case of a teacher, exemptions would include all books, writ­
ing supplies, a typewriter, and any specialized equipment he 
might own.
Because very few bankrupts were entitled to the Home­
stead exemption and because the trustees are very lenient 
about allowing exemptions, dollar values of exemptions are 
low. For example, one person owned a car upon which he him­
self placed a value of $1,895. The laws state that a car 
may be kept if the value does not exceed $300  ^ Under the ex­
emptions, the car was assigned a value of $300. There does 
not seem to be any pattern in placing a value on wearing ap­
parel. . Valuations varied from several hundred dollars in 
some instances to a zero value in others. The latter would
-63-
seem to indicate that the bankrupt appeared in court either 
without any clothing or in borrowed clothing.
The average exemptions per. filing ranked from $1,029 
in Missoula to .$212 in Bozeman. Median exemptions varied 
from $500 to $250. The highest values came from Great Falls 
and the lowest from Bozeman. The highest allowed exemption 
was in the amount of $15,315 claimed by a Missoula resident 
while figures of zero appeared in Anaconda, Billings, and 
Great Falls (see Table XV).
TABLE XIIl
EXEMPTIONS GIVEN THROUGH THE BANKRUPTCY COURT
GREAT
BUTTE ANACONDA MISSOULA BOZEMAN FALLS BILLINGS
Average 
. per 
filing $ 557 $267 $ 1,029 $212 $ 573 $ 870
per
house­
hold 887 400 1,470 233 950 1,424
Median 400 400 450 250 500 . 500
■Range
high 8,300 800 15,315 600 9,513 13,000
low 50 — 0— 80 100 — 0— -0-
CHAPTER V
SUMMARY,' CONCLUSIONS, AND RECOMMENDATIONS
SUMMARY
The inability to handle finances successfully caused 
704 persons in Montana to declare personal bankruptcy during 
the 1973 fiscal year, which began on July I, 1972 and ended 
on June 30, 1973. This corresponds with a national total 
of 155,643 for the same period. Both of these figures have 
shown decreases in the fiscal years of 1972 and 1973 from an 
all-time high in 1971. These decreases are due, at least in 
part, to debt counseling services and to a slowly growing 
awareness of the importance of money management education.
The purpose of this study was to compile a picture of 
the bankruptcy situation in Montana and to compare the bank­
ruptcies in three cities which have Consumer Credit Counseling 
Services with three similar cities which do not have these 
services available. 'Butte and Anaconda are similar in that 
they both have economies based on a one-industry minerals 
company. Missoula and Bozeman house.the largest units of the 
State University System and these units have a great deal of 
impact upon the cities. Great Falls and Billings are the 
two largest population centers in Montana. These two cities •
also have more diverse industrial bases than other cities
/
in/the state. Butte, Missoula, and Great Falls have Con-
/
/
.sumer Credit Counseling Services available while Anaconda, 
Bozeman, and Billings do not.
One hundred percent of the bankruptcies filed, in these 
six cities during the 1973 fiscal year were examined. A 
total of 449 filings were included in the study. The records 
are on file and were examined in the offices of the Clerk 
of the District Court located in the Federal Buildings in 
both Butte and Great Falls.
Data gathered were limited necessarily to the infor­
mation found on the bankruptcy petition. Comparisons between 
the six cities revealed the total number of bankruptcies per 
1000 population and the types and dispositions of the cases. 
The occupation of the bankrupt was important in that it re­
vealed that in bankrupt households, very few wives had worked 
to increase the family income. This deviated from the na­
tional trend which attributes a wife's losing her job as a 
major cause of bankruptcy. The incomes of the bankrupt.for 
a two-year period prior to his filing indicated in many cases 
that his income had either increased or remained constant. 
Many persons were unable to manage on more money than they 
had earned the previous year. Some incomes were reported as 
high as $16,000 and $17,000 per year. However, on the other 
side of the coin, persons who had been unemployed in their
— 66-
home states came to Montana, especially to Butte, to work 
for the Anaconda Company and soon found themselves harassed 
by creditors from the former locations and pressured into 
filing for bankruptcy..
Comparisons of losses through bankruptcy included 
secured losses, unsecured losses, total losses, and general 
types of losses. This latter classification leaned very 
heavily toward medical losses. This ties in with the major , 
reasons for declaring bankruptcy. (This information was • • - 
available only in the Western District, including Anaconda, 
Butte, Bozeman, and Missoula, because the referee specifi­
cally asked for causes.) Medical expenses were listed as V-" 
the second most frequent cause of bankruptcy. Unemployment, 
either at the time of filing or before the person acquired 
his present job, was the leading cause. Following in im­
portance were too much credit, business failure, wage at­
tachments, and marital problems.
Holdings exempt from bankruptcy rounded out the'infor­
mation. Montana’s bankruptcy policy is considered .to be quite 
lenient and the philosophy behind this is to enable the bank-, 
rupt to make a new start and not to punish him by taking'away 
everything that he has and needs to begin again.
-67-
■ CONCLUSIONS
The findings of this study show that bankruptcy, while 
it enables the petitioner to make a new start, is a source 
of great financial loss in the six communities studied as well 
as in the State of Montana as a whole. In fiscal 1973, the 
total loss in these six communities was $4,363,950. Unless 
community business leaders take more positive action, it is 
reasonable to believe that the severity of the bankruptcy 
situation will not lessen.
Creditors in the city of Billings absorbed a total bank­
ruptcy loss of $1,840,479. This was forty-four percent of 
the total dollar loss for the six communities studied. This 
indicated that the business groups in Billings might want to 
investigate the reasons why their city should be losing so 
much money through bankruptcy.
In comparing the bankruptcy rate between cities having 
a Consumer Credit Counseling Service and the cities without 
such an organization, it was found that in two out of three 
cases, the cities with a Consumer Credit Counseling Service ^  
have a higher bankruptcy rate per 1000 population than those 
without the service. Butte has more bankruptcies than Ana­
conda and Missoula tops Bozeman. Only in Great Falls (with) 
and Billings (without) did the theory bear out.
— 6 8-'
There are possible explanations for the Butte-Anaconda 
situation. Even though they are both basically one-industry 
towns. Anaconda seems to have a more stable population and 
more of the company employees, are members of skilled and 
semi-skilled crafts. In Butte, many company employees are 
unskilled laborers and many have been brought into the area 
from other parts of the country. Many of these people came 
here for employment, left debts in their home states, and 
soon found themselves faced with either threatened or real 
wage attachments. Bankruptcy was their solution in many 
cases.
The economic base might be responsible for some of the 
bankruptcy discrepancy between Bozeman and Missoula. Bozeman 
is more agriculturally oriented and, with.the exception of 
migrant farm workers, labor is more stable. Bozeman is also 
a very conservative town from a political viewpoint. This 
factor would lend disapproval to the very idea of bankrupt­
cy. Missoula^ with its lumber oriented industrial base tends 
to draw from an unskilled labor pool. Perhaps this increases 
the possibility of bankruptcy. More study is indicated in 
this area.
Although the presence of Consumer Credit Counseling 
Services has not greatly decreased the bankruptcies in Butte
— 69—
and Missoula, if these, services were eliminated, then the 
bankruptcy rates would probably climb. These services were 
developed because the people in the areas felt they had 
special need of them.
Great Falls has a lower bankruptcy rate than Billings 
and it is hoped that this might be due to the presence of a 
Consumer'Credit Counseling Service in Great Falls.
RECOMMENDATIONS 
Improvement of the Study
Factors which would improve this study or future studies 
of a similar nature might include the following:
I. To enable communities to lower their bankruptcy 
rates, a study showing who the bankruptcy prone 
citizens in the community are would be helpful.
In order for this to be accomplished, an ad­
ditional information sheet (containing such questions 
as age, educational level, marital status, length 
of marriage, and number of children) would have 
to be inserted into every bankruptcy petition.
This could be accomplished either nationally through 
legislation or with the cooperation of the two 
Montana bankruptcy referees.
— 7 Q—
2. A study showing how many bankrupts were repeaters 
would prove valuable. The bankruptcy petition 
would have to be amended to go beyond the six-year 
period that it now includes.
3. A follow-up study showing how former bankrupts are 
currently managing their finances would be help­
ful in determining whether or not bankruptcy is
an effective solution:
4. It would be interesting to find out how many bank­
rupts had tried other means of solving their finan­
cial problems before opting for bankruptcy.
Suggested Further Studies
1. A future re-study of bankruptcy in Butte would place 
a definite value upon the impact of copper strikes 
on the economy of Butte. Results of fiscal 1974 
would reveal a bankruptcy situation one year farther 
removed from a major strike than this study indicates 
The recent signing of a three-year contract should 
bring about a reduced bankruptcy rate in Butte for 
the next three years.
2. A study of the depth of a Credit Bureau's financial 
. checking upon workers brought into the state by a
large corporation would prove very interesting,.
-71-
This would especially benefit small businesses.
This type of study could also ascertain if there 
is any financial screening given to job applicants 
' by the company before it hires people and brings 
them into the state.
3. A study comparing the vast differences between the 
bankruptcy laws in the fifty states would be re­
vealing. It would also be interesting to find out 
about the movement to make the bankruptcy laws uni­
form throughout the United States.
4. A very interesting study would view bankruptcy from 
the position of the creditor. What are the rami­
fications?
5. A re-study of bankruptcy in the Butte/Anaconda area 
could find out how many petitioners had moved into 
the area within a year of filing, how many had been 
there for five and ten year periods and how many 
were life-long residents. This would indicate the 
relationship between mobility and bankruptcy. Also, 
such a study might give insights into the reasons 
for the mobility.
Further Recommehdations
The investigator attended a, session of bankruptcy bear-
— 7 2-
ings and two points ,became very evident. The first one is 
that Consumer Credit Counseling Services are not making 
enough impact upon the communities they serve. An attorney 
from Missoula had never heard of the Service that is located 
in that city, but his client had found out about it and had 
decided to try it before continuing with the bankruptcy pro­
ceedings. If there were some provisions made whereby, pros­
pective bankrupts were to try credit counseling before be­
ginning bankruptcy, perhaps many of these people would not 
reach the bankruptcy courts. If these Services were to en­
list the cooperation of the lawyers, then it would be reason­
able to assume that they could channel people into attempting 
to solve their financial problems in this manner before the 
last resort of completing bankruptcy.
The second point that came out, of this session was that 
some people who file for bankruptcy have great feelings of 
regret at having to do so. In one specific case, a man was 
filing because his wife's illness and subsequent death from 
cancer had left him with medical bills of over $12,000. He 
had three children living at home and his income would not 
permit him to pay these debts and still maintain a standard 
of living that he felt was necessary for his family. The 
hospital and doctors had been pressing him for payment, and
-73-
the petitioner felt that bankruptcy was his only solution.
If there were some aid for persons in situations such as 
this, perhaps many of these people would not opt for bank­
ruptcy. Perhaps government loans over a.long-term period 
with little or no interest could be made available or per­
haps the petitioner could make some legal agreement with his 
creditors whereby partial payment could be made. Solutions 
of this nature might be attractive to both the petitioner 
and the creditor.
Education
It is obvious that bankruptcy is not the most enviable 
solution to financial difficulties. Consumer Credit Coun­
seling Services are more acceptable, but they are a last 
ditch effort. A much more workable solution is education. 
Concerned citizens, educators, and business leaders could 
work together to bring pressure upon the State Legislature 
and/or the Department of Education to develop a consumer ed­
ucation curriculum to be used throughout the public school 
system in Missoula. Ideally, this would begin at the ele­
mentary level and continue through the secondary and post­
secondary levels. This would necessitate related course work 
on the university level so that qualified personnel would be 
.teaching in this program.
With the cooperation of concerned school board members 
school administrators, and teachers, consumer education 
courses could be developed in individual communities.
APPENDIX
— 7 6—
INFORMATION OBTAINED FROM BANKRUPTCY FILES
1. Type of bankruptcy filed
Chapter 4 
Chapter 13
2. Method.through which filing occurred
.... voluntary
involuntary
3. Discharge
' ' granted
'_____denied
'' waived or not applied for
4. Filing fees: if paid in full at time of filing
_______yes
no
5. Occupation
_______farmer
_______employee
_____professional
_______other (non-business)
_____ _merchant
_______manufacturing
_______other (business)
6. Income for each of two years prior to filing 
 first year (1970 or 1971)
second year (1971 or 1972)
7. Unsecured claims
. ..... dollars against
. ..... number of claimants
8. Secured claims
. ..... dollars against
number of claimants
9. Total claims
■ dollars against
10, Ex empt.. property
dollar' value
-77-
11. Residence of bankrupt during the year prior to filing
_____ in state
out of state
12. Type of debts
bank cards 
catalog houses 
finance companies 
medical expenses 
national travel cards
13. Causes of bankruptcy (Western District only)
adverse legal judgment 
business failure 
. too much credit
government execution on property resulting 
in loss of income 
injury - ill health 
' ' ' insufficient income
_______marital problems
'_______ medical expenses (excessive)
' ' unemployment
_______wage, attachments (real and threatened)
_______not given
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Lesson Sheet. Distributed by the Montana Credit 
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Beckman, Theodore N., Ph.D. and Foster, Ronald S., Ph.D., 
Credits and Collections: Management and Theory. New
York: McGraw-Hill Book Company, 1969.
Black, Hillel. Buy Now, Pay Later. New York: William
Morrow and Company, 1961.
Bryson, Cynthia Elizabeth. "An Evaluation of the Consumer 
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published Master's Thesis, Montana State University, 
August, 1971.
Campbell, Sally R. "Teaching in the Classroom," Journal of 
Home Economics, Vol. 60, No. I (January, 1968). pp. 41
2 .
Daly, Margaret. "What Happens If You Go Bankrupt?" Better 
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Goldberg, Faith. "Problem Users as Syen by a Caseworker," 
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"How Bankruptcy Laws Can Help the Little Man." Ebony, Vol. 
XXVI, No. 2 (December, 1970). pp. 62-68.
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Counseling Service in Butte, Montana," Unpublished 
Master's Thesis, Montana State University, June, 1970.
Lane, Sylvia. "Petitioners Under Chapter XIII of the Bank­
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(Summer, 1969). pp. 26-40.
Leavitt, John A., and Hanson, Carl 0. Personal Finance.
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Matsen, Suzanne. "Profile of the Bankrupt." Journal of
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Neal, Charles. ' Sense with Dollars. Garden City, New York: 
.Doubleday and Company, Inc., 1967.
Nuccio, Sal. ' The New York Times Guide to Personal Finance.
New. York: Harper and Row, 1967.
Peterson, John L. District Bankruptcy Judge. Interview,
February, 1974.
Phalon, Richard A.- • "The Scandal in Personal Bankruptcy."
Dun's Review and Modern Industry. March, 1963. 
pp. 35—6+.
Pollack, Jack Harrison. "Debt Clinics Rx for the Poor."
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(May, 1973). pp. 10-13. ,^
"Report on 1973 Nonbusiness Bankruptcies by States." National 
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ember 11, 1973).
Revised Codes of Montana 1947. Vol. 3, Part I, Replacement 
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Macmillan Company, 1968.
Taylor, Sereta Ann Gerhart, "An Evaluation of the Consumer 
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Unpublished Master's Thesis, Montana.State University,
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"They Help Families Who Owe Too Much." ' Changing Times, Vol.
20,. No. 7 (July, 1966). pp. 41-4. —  ^ —
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Hughes, Carol Ann (Kallio!
A  comparison of bank­
ruptcy in six Montana 
cities fiscal 1973
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