Bankruptcy Administration

During the past several years, bankruptcy filings have increased more rapidly than at any other time in history. Filings since 1986 have soared 84 percent, from 478,000 to 880,000, and 1 million bankruptcy filings are predicted for 1992. Two programs exist to ensure that bankruptcy cases are administered in accordance with the bankruptcy laws: the U.S. Trustee program and the Bankruptcy Administrator program. GAO could not find any justification for continuing these two separate programs, which were created when Congress overhauled the bankruptcy system in 1978. GAO's review of the two programs in selected districts found that the U.S. Trustee program costs more, but the expense is shouldered by system users. The Bankruptcy Administrator program, by contrast, has a different fee structure and is not self-financing. GAO's analysis of key performance indicators in these districts found no systematic differences that would recommend one organizational structure over the other. To limit the impact of the U.S. Trustee program on the federal budget, Congress incorporated a self-funding provision that is now generating funds in excess of what is appropriated to run the program.

GAO found that: (1) operating costs for trustee districts were higher than for bankruptcy districts; (2) in Chapter 7 bankruptcy cases, creditors received similar distributions from both programs, although unsecured creditors received higher percentages in trustee districts; (3) neither program demonstrated a pattern of superiority in processing time; (4) the trustee program provided additional trustee oversight and was self-financing; (5) trustee fees exceeding 110 percent of the appropriated budget must be transferred to the Treasury general fund, and these monies might have been better used for additional staffing; (6) a potential for conflict of interest exists in the trustee program when the federal government is a creditor, but studies done for DOJ have not documented any problems; (7) DOJ and AOUSC agreed that dividing bankruptcy case administration between two programs is not sensible, but each believed its program was preferable; and (8) in previous legislation, Congress has determined that DOJ is the more appropriate entity for the case administration function.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

Director: Team: Phone: