Friday, September 19, 2008

BAPCPA's Effect on Trustees, US Trustees & the Bankruptcy Courts

By Andrew Toth-Fejel, Bankruptcy Litigation Support for Attorneys,

This summer the U.S. Government Accountability Office (GAO), on request of a number of members of Congress, released a report entitled Dollar Costs Associated with the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. In it the GAO presents the financial effect of BAPCPA on the U.S. Trustee Program, on trustees, and on the federal judiciary.

(The report also analyzes the post-BAPCPA increases in the cost of filing bankruptcy for consumer debtors, but that was the subject of yesterday's Bulletin.)

Please note that "[t]his report did not seek to assess the benefits of the Bankruptcy Reform Act and is therefore not an evaluation of the merits of the act."

The conclusions of the report include the following:

  • U.S. Trustee Program:
$72.4 million for costs directly relating to fulfilling its mandates under BAPCPA, during fiscal years 2005 through 2007. Most of this was for personnel costs "related to the means test, debtor audits, data collection and reporting, and counseling and education requirements."

At the same time filing fee revenues for the U.S. Trustee Program declined because of a reduction in bankruptcy filings, going down from $74 million to $52 million from fiscal year 2005 to 2007.
  • Private Trustees:
BAPCPA has increased the time and resources that trustees must spend on each case, while caseload of most trustees have declined.

The trustee's rate of attrition has not changed from before BAPCPA.
  • Bankruptcy Court:
Although the federal judiciary could not isolate its costs from BAPCPA from its normal operational costs, it estimated that about $48 million was spent in one-time start up costs that directly related to staff training and changes to its procedures, rules and forms.

Between fiscal years 2005 and 2007 bankruptcy filing and miscellaneous fees decreased from $237 million to $135 million because of the reduction in bankruptcy filings.
  • Query:
BAPCPA's implementation cost taxpayers at least many tens of millions of dollars, and apparently continues to cost significant amounts each year. At the same time, at least for a couple years, the bankruptcy system became less self-funded because of reductions in filing and other fees, although how much that was offset by pre-BAPCPA increased filings and resulting increased fee revenues is very difficult to determine. In any event, by any measure it's cost on taxpayers has been huge. As have the greatly increased costs on debtors, as outlined in yesterday's Bulletin. The question begged is whether BAPCPA's intended benefits are being achieved. An upcoming Bulletin will highlight a recent study from Harvard Law School which specifies the intended benefits and analyses whether they have been achieved so far.

by: Andrew Toth-Fejel
Bankruptcy Litigation Support for Attorneys

© 2008 Bankruptcy Litigation Support for Attorneys