[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]



 
                    BANKRUPTCY JUDGESHIP ACT OF 2003

=======================================================================

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                   COMMERCIAL AND ADMINISTRATIVE LAW

                                 OF THE

                       COMMITTEE ON THE JUDICIARY
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                                   ON

                               H.R. 1428

                               __________

                              MAY 22, 2003

                               __________

                             Serial No. 27

                               __________

         Printed for the use of the Committee on the Judiciary


    Available via the World Wide Web: http://www.house.gov/judiciary





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                       COMMITTEE ON THE JUDICIARY

            F. JAMES SENSENBRENNER, Jr., Wisconsin, Chairman
HENRY J. HYDE, Illinois              JOHN CONYERS, Jr., Michigan
HOWARD COBLE, North Carolina         HOWARD L. BERMAN, California
LAMAR SMITH, Texas                   RICK BOUCHER, Virginia
ELTON GALLEGLY, California           JERROLD NADLER, New York
BOB GOODLATTE, Virginia              ROBERT C. SCOTT, Virginia
STEVE CHABOT, Ohio                   MELVIN L. WATT, North Carolina
WILLIAM L. JENKINS, Tennessee        ZOE LOFGREN, California
CHRIS CANNON, Utah                   SHEILA JACKSON LEE, Texas
SPENCER BACHUS, Alabama              MAXINE WATERS, California
JOHN N. HOSTETTLER, Indiana          MARTIN T. MEEHAN, Massachusetts
MARK GREEN, Wisconsin                WILLIAM D. DELAHUNT, Massachusetts
RIC KELLER, Florida                  ROBERT WEXLER, Florida
MELISSA A. HART, Pennsylvania        TAMMY BALDWIN, Wisconsin
JEFF FLAKE, Arizona                  ANTHONY D. WEINER, New York
MIKE PENCE, Indiana                  ADAM B. SCHIFF, California
J. RANDY FORBES, Virginia            LINDA T. SANCHEZ, California
STEVE KING, Iowa
JOHN R. CARTER, Texas
TOM FEENEY, Florida
MARSHA BLACKBURN, Tennessee

             Philip G. Kiko, Chief of Staff-General Counsel
               Perry H. Apelbaum, Minority Chief Counsel
                                 ------                                

           Subcommittee on Commercial and Administrative Law

                      CHRIS CANNON, Utah Chairman

HOWARD COBLE, North Carolina         MELVIN L. WATT, North Carolina
JEFF FLAKE, Arizona                  JERROLD NADLER, New York
JOHN R. CARTER, Texas                TAMMY BALDWIN, Wisconsin
MARSHA BLACKBURN, Tennessee          WILLIAM D. DELAHUNT, Massachusetts
STEVE CHABOT, Ohio                   ANTHONY D. WEINER, New York
TOM FEENEY, Florida

                  Raymond V. Smietanka, Chief Counsel

                        Susan A. Jensen, Counsel

                        Diane K. Taylor, Counsel

                  James Daley, Full Committee Counsel

                   Stephanie Moore, Minority Counsel
                            C O N T E N T S

                              ----------                              

                              MAY 22, 2003

                           OPENING STATEMENT

                                                                   Page
The Honorable Chris Cannon, a Representative in Congress From the 
  State of Utah, and Chairman, Subcommittee on Commercial and 
  Administrative Law.............................................     1

                               WITNESSES

The Honorable Michael J. Melloy, United States Circuit Judge, 
  Court of Appeals of the Eighth Circuit, on behalf of the 
  Judicial Conference of the United States
  Oral Testimony.................................................     6
  Prepared Statement.............................................     7
Dr. William O. Jenkins, Jr., Director of Homeland Security and 
  Justice Issues, United States General Accounting Office
  Oral Testimony.................................................    15
  Prepared Statement.............................................    17
Dr. Gordon Bermant, Consultant
  Oral Testimony.................................................    33
  Prepared Statement.............................................    34
The Honorable Paul Mannes, United States Bankruptcy Judge for the 
  District of Maryland, on behalf of the National Conference of 
  Bankruptcy Judges
  Oral Testimony.................................................    36
  Prepared Statement.............................................    37

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

Prepared Statement of the Honorable Jack Kingston, a 
  Representative in Congress From the State of Georgia...........     3
Prepared Statement of the Honorable William M. Thomas, a 
  Representative in Congress From the State of California........     3

                                APPENDIX
               Material Submitted for the Hearing Record

Post-Hearing questions posed to witnesses and their responses
  The Honorable Michael J. Melloy, United States Circuit Judge, 
    Court of Appeals of the Eighth Circuit.......................    41
  Dr. William O. Jenkins, Jr., Director of Homeland Security and 
    Justice Issues, United States General Accounting Office......    50
  Dr. Gordon Bermant, Consultant.................................    54
  The Honorable Paul Mannes, United States Bankruptcy Judge for 
    the District of Maryland.....................................    58


                    BANKRUPTCY JUDGESHIP ACT OF 2003

                              ----------                              


                         THURSDAY, MAY 22, 2003

                  House of Representatives,
                         Subcommittee on Commercial
                            and Administrative Law,
                                Committee on the Judiciary,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 11:03 a.m., in 
Room 2237, Rayburn House Office Building, Hon. Chris Cannon 
(Chairman of the Subcommittee) presiding.
    Mr. Cannon. We welcome the Vice-Chairman of the Commercial 
Subcommittee, Mr. Feeney, from Florida, and with the presence 
of two Members, are ready to begin this hearing. You actually 
get up here--the Vice-Chairman should have his name up here 
next to the----
    Mr. Feeney. I get the front-row seat.
    Mr. Cannon. Ah. Well, actually, why don't you switch and 
just come up here?
    Mr. Feeney. Okay.
    Mr. Cannon. Okay, just to inform you, we have a vote in 
about 30 minutes. Hopefully we can move forward with testimony 
and perhaps not inconvenience the panel by waiting. That will, 
of course, depend on how many people we have with how many 
questions after your testimony.
    As you all know, bankruptcy filings have continued to 
escalate in recent years. Just last week, the Administrative 
Office of the United States Courts released the latest record-
breaking filing statistics. According to the AO, annual 
bankruptcy filings, for the first time in our Nation's history, 
exceeded 1.6 million cases for the 12-month period ending last 
March. These numbers are absolutely astounding.
    In addition to underscoring the need for additional 
judgeships, they also may highlight the need for comprehensive 
bankruptcy reform.
    For those of you who don't know, my State, Utah, according 
to a recent study by Utah State University, ranks first in the 
Nation in the number of consumer bankruptcies per household. I 
also note that Utah would be authorized a bankruptcy judge 
under the bill that is the focus of today's hearing.
    As some of us well know, additional bankruptcy judges, or 
judgeships, have not been authorized since 1992. Although this 
body has on at least two occasions since 1997 passed stand-
alone legislation authorizing additional bankruptcy judges as 
well as included such authorization in omnibus bankruptcy 
reform legislation pending since 1998, the other body has not 
acted on this long-overdue measure.
    In response to the exponential increase in bankruptcy 
filings nationwide, my colleague from Georgia, Mr. Kingston, 
introduced H.R. 1428, the ``Bankruptcy Judgeship Act of 2003,'' 
which memorializes the Judicial Conference's latest request for 
additional bankruptcy judges. It authorizes a total of 36 
bankruptcy judgeships--29 on a permanent basis and seven on a 
temporary basis--in 22 judicial districts.
    The need for this legislation is largely premised on a 
comprehensive study of judicial resource needs conducted by the 
Judicial Conference. With the excellent expertise of our 
witnesses, today's hearing should provide a useful opportunity 
for the Members of this Subcommittee to obtain a greater 
understanding of how the Judicial Conference assesses the 
Nation's bankruptcy judgeship needs and how the Conference 
assures that all currently authorized judicial resources are 
maximized.
    Is Mr. Watt----
    We shall turn to Mr. Watt, who is the distinguished Ranking 
Member of the Subcommittee when he arrives. We have a great 
deal going on today, unfortunately. It looks like we're going 
to be out of session after today, and so people are running 
around helter-skelter. We'll give Mr. Watt time for an opening 
statement when he arrives.
    Without objection, his entire statement will be placed in 
the record. Also without objection, all Members may place their 
statements in the record at this point. Is there any objection?
    [No response.]
    Mr. Cannon. Hearing none, so ordered.
    We would like to welcome Mrs. Blackburn from Tennessee--
thank you for joining us--and Mr. Chabot, is it? I've got to 
get my glasses on. Mr. Chabot from Ohio has joined us.
    Without objection, the chair will be authorized to declare 
a recess of the Committee so that we can meet today at any 
point. Hearing none, so ordered.
    On unanimous consent, I request that Members have five 
legislative days to submit statements for inclusion in today's 
hearing record. Without objection, so ordered.
    We want to welcome Mr. Coble, the gentleman from North 
Carolina. And I understand you may be in and out today. Are 
you--you're going to be here with us. Good. Thank you. I 
thought I'd heard that you had another--something else you 
needed to be doing, but----
    Mr. Coble. Well, I've got to be in two or three different 
places. Thank you, Mr. Chairman. Not unlike everybody else.
    Mr. Cannon. Yes, pretty much. Also, if there's no 
objection, I wish to submit for the record, in addition to the 
testimony we will receive today from the witnesses, written 
statements from my two colleagues. One is a statement by the 
author of H.R. 1428, Mr. Kingston of Georgia. In addition, I 
have a statement from my colleague from the State of 
California, Mr. Thomas, in which he explains the need for a 
permanent bankruptcy court in Bakersfield, CA.
    [The prepared statement of Mr. Kingston follows:]
Prepared Statement of the Honorable Jack Kingston, a Representative in 
                   Congress From the State of Georgia
    Mr. Chairman and members of the committee, I wish to thank you on 
behalf of myself and the 25 other Members of Congress who have joined 
me in support of this legislation. I also wish to thank Chairman 
Sensenbrenner for his attention to this bill and for his continued work 
on the Bankruptcy Reform package. I support the Bankruptcy Reform 
package and hope that it continues to move forward. The members who 
support H. R. 1428 realize that it is one small part of the work the 
108th Congress will undertake for our bankruptcy system, but we feel it 
is an especially important bill.
    Despite an enormous increase in bankruptcy filings in recent years, 
Congress has not authorized any new bankruptcy judgeship positions 
since 1992. Bankruptcy filings now number over 1.5 million per year, a 
59% increase in the caseload of bankruptcy judges. This tremendous case 
load prevents cases from advancing as they should, and new judgeships 
are essential in moving our nation's economy toward recovery. The vast 
majority of Americans who are parties to federal litigation are in the 
bankruptcy system, and it is important that those people remain 
confident in the system. With an overwhelming number of bankruptcy 
cases being filed every day, our judicial system is approaching chaos.
    Judges are crucial to the bankruptcy process. They, and they alone, 
ensure that work is completed, creditors paid and assets properly 
dispersed. Without congressional action this year, in some districts it 
will be impossible to appoint any new judges should any sitting judge 
die or retire.
    This bill will make a difference in the lives of my constituents. 
It allocates for Georgia two additional bankruptcy judgeships in the 
Northern District, one additional permanent bankruptcy judgeship in the 
Southern District and one temporary bankruptcy judgeship in the 
Southern District. Most of my congressional district is in the Southern 
District of Georgia, where the weighted filings per judge is 2,293. 
Given that the national average of weighted filings per judge is 1,772, 
that number is quite high.
    Thank you again for your consideration of H. R. 1428, the 
Bankruptcy Judges Bill of 2003.

    [The prepared statement of Mr. Thomas follows:]
Prepared Statement of the Honorable William M. Thomas, a Representative 
                in Congress From the State of California
    MR. CHAIRMAN AND MEMBERS OF THE SUBCOMMITTEE, thank you for the 
opportunity to provide input on the question of the need for 
legislation authorizing the creation of additional bankruptcy courts 
and, in particular, the need for a bankruptcy court to conduct 
proceedings on a daily basis in Bakersfield, California. As my 
constituents have informed me that neither they, nor justice, is well-
served by the status quo, I recently introduced legislation, H.R. 2158, 
to improve the situation.
    Bakersfield, with a population of 247,057, is the county seat of 
Kern County, California, which I represent. Kern County encompasses 
8,141 square miles, has a population of 676,367, and is one of 34 
counties that lie within the jurisdiction of the United States 
Bankruptcy Court for the Eastern District of California. That Court is 
served by six judges and three recalled judges and has three divisions: 
the Sacramento Division, the Modesto Division, and the Fresno Division, 
which includes Kern County. As you know, no new bankruptcy courts have 
been authorized since 1992, despite the fact that nationwide total 
bankruptcy filings have increased from 971,517 in 1992 to 1,577,651 in 
2002; during that period, total filings in the United States Bankruptcy 
Court for the Eastern District of California have increased from 24,045 
to 31,497.
    In 1999, the Kern County Bar Association commissioned a study by 
Dr. R.B. Cazares, professor of sociology at Bakersfield College, of 
some 690 attorneys representing a broad spectrum of the legal community 
to determine priorities for the Association. The study revealed strong 
support among Kern County attorneys for the establishment of a United 
States Magistrate Court, Bankruptcy Court, and District Court in 
Bakersfield, and a subsequent study by the Administrative Office of the 
Courts led to the recent establishment of a Magistrate Court in 
Bakersfield. The Kern County Bar firmly believes that current 
conditions warrant the establishment of a United States Bankruptcy 
Court in Bakersfield.
    Kern County attorneys familiar with the perspectives of both 
bankruptcy petitioners and creditors indicate several significant 
problems with the status quo, under which Bakersfield is designated as 
a location where court is conducted once a month, with other matters 
disposed of through the use of video/teleconferencing. I have been 
asked to convey that practitioners believe that these problems persist 
despite the fact that the judges are doing their best to work within 
the confines of the current system and attempt to appear live in 
Bakersfield as often as possible.
    One particularly significant problem is the distance that parties 
must travel in order to personally appear in the Fresno Division of the 
United States Bankruptcy Court for the Eastern District of California. 
As I mentioned above, Kern County encompasses a vast area, and those 
persons involved in contested proceedings who wish to be heard in 
Fresno must travel 110 miles from Bakersfield. Moreover, 429,310 of 
Kern County's residents live in outlying communities and areas, and 
must travel much further to be heard in Fresno. For example, those 
persons living in the communities of Boron, Frazier Park, or Rosamond 
with business before the Bankruptcy Court have to travel 172, 143, and 
160 miles respectively to appear in Fresno. If those persons could 
appear in Bakersfield, they would only have to travel less than half as 
far--80, 37, and 57 miles respectively--and would be relieved of some 
of the hardships and costs inherent in traveling such distances. This 
travel is especially difficult for those parties who are sick, elderly, 
or have small children.
    While a video/teleconferencing system is in place, I am told the 
system works well only approximately 70 percent of the time and that on 
occasion the video fails, leaving only teleconferencing. My constituent 
practitioners firmly believe that appearances through the use of the 
video/teleconferencing system not only decrease the decorum of the 
proceedings, but also decrease the parties' ability to effectively 
communicate, resulting in proceedings that are less efficient and fair 
than proceedings conducted in person before a live court and witnesses.
    By way of example, Kern County bankruptcy practitioners point out 
that one cannot hand various pleadings, orders, or other documents to a 
judge appearing through the use of the video/teleconferencing system, 
and that this reportedly leads to delays in getting critical orders 
signed and necessitates travel to Fresno if one must have orders signed 
at a hearing. In addition, because practitioners cannot file documents 
in Bakersfield, Kern County parties incur increased costs in the form 
of overnight or courier charges. As couriers leave once a day, Kern 
County parties are further disadvantaged because, while deadlines are 
rightly the same for everyone, the de facto result is shortened 
deadlines for Kern County parties.
    The status quo also results in the almost automatic conduct of 
short proceedings via video/teleconferencing as well as the conduct of 
proceedings through a mixture of live and video/teleconferencing 
appearances. For example, during the conduct of a hearing in 
Bakersfield, opposing counsel may appear live in Fresno with the 
Bakersfield counsel forced by economics to appear by video. Kern County 
practitioners advise me that this places the parties they represent at 
a distinct disadvantage.
    A strong case exists for the daily conduct of bankruptcy court 
proceedings in Bakersfield when one considers the number of filings 
submitted by Kern County parties and general demographic data. In 2002, 
Kern County parties made 4,168 total bankruptcy filings, and through 
March 31, 2003, have made 1,042 total filings. During those time 
periods, total filings in the entire four-county Modesto Division were 
5,045 and 1,324 respectively. Moreover, Kern County's 4,168 total 
filings in 2002 were greater than the 3,696 total filings in Fresno 
County and constituted over one-third of the 11,912 total filings in 
the entire eight-county Fresno Division. Finally, nationwide there are 
approximately 700,000 people per bankruptcy court, and Kern County, one 
of the fastest growing areas in the nation, has a population in excess 
of 676,000. By comparison, Stanislaus County, where the Modesto 
Division is located, has a population of 468,566.
    In closing, my constituents and I appreciate the opportunity to 
provide input as this Subcommittee and the full Committee on the 
Judiciary consider the need for legislation to authorize the 
establishment of additional bankruptcy courts, and I look forward to 
working with you as you work to ensure that our legal system is 
structured in a manner that allows for the effective and fair 
administration of our bankruptcy laws.

    Mr. Cannon. I should note that earlier this month I 
formally requested the Judicial Conference to review this 
matter and to report to this Subcommittee on the results of its 
review.
    Now I'm pleased to introduce today's witnesses for this 
hearing. Our first witness is Judge Michael J. Melloy of the 
Eighth Circuit Court of Appeals. Preceding his appointment to 
that court last year, Judge Melloy served as a United States 
district court judge as well a bankruptcy judge. Judge Melloy 
currently chairs the Bankruptcy Administration Committee of the 
Judicial Conference.
    Thank you, Mr. Watt. We're just introducing the panel, but 
when we finish that--do you have an opening statement you'd 
like to make?
    Mr. Watt. No.
    Mr. Cannon. Great. Thank you. You're welcome to submit one 
for the record. I appreciate Mr. Watt from North Carolina 
joining us for the hearing.
    Before his appointment to the bench, Judge Melloy was in 
private practice in Dubuque, Iowa, where he specialized in 
general, civil, and commercial litigation. Judge Melloy is a 
graduate of Loras College and obtained his law degree with high 
distinction from the University of Iowa College of Law.
    Our next witness, Dr. William Jenkins, Jr., is the Director 
of Homeland Security and Justice Issues at the General 
Accounting Office. Over the course of his nearly 30-year tenure 
with the GAO, Dr. Jenkins has worked on a variety of matters, 
including budgetary issues, the administration of justice, and 
defense matters. In his current capacity at GAO, Dr. Jenkins is 
principally responsible for issues pertaining to the judiciary, 
emergency preparedness, elections, and corrections. Dr. Jenkins 
obtained his bachelor of arts degree from Rice University. He 
thereafter obtained his master's and doctorate in public law 
from the University of Wisconsin at Madison.
    Joining Dr. Jenkins is Dr. Gordon Bermant. Dr. Bermant is a 
principal author of the seminal bankruptcy judge time study 
conducted by the Federal Judicial Center during the late 1980's 
and which is still used by the Judicial Conference to assess 
its judicial resource needs in the bankruptcy court system. 
Over the course of his 21-year tenure at the FJC, Dr. Bermant 
served as the Director of the Innovations and Systems 
Development Division and later for the Division of Planning and 
Technology. Upon his retirement from the FJC in 1997, Dr. 
Bermant was a consultant for the Executive Office for United 
States Trustees, a component of the Justice Department charged 
with administrative oversight of the bankruptcy system. During 
his years at the FJC and Executive Office, Dr. Bermant 
conducted numerous studies of bankruptcy courts and trustee 
operations. Dr. Bermant received his Ph.D. in psychology from 
Harvard University and a J.D. from George Mason University. He 
is currently a consultant in private practice specializing in 
research planning and systems development, and is a lecturer in 
the Department of General Honors at the University of 
Pennsylvania.
    Our final witness is Judge Paul Manners--or Mannes. Pardon 
me. Paul Mannes, who is a United States bankruptcy judge for 
the District of Maryland. Judge Mannes appears on behalf of the 
National Conference of Bankruptcy Judges, an organization 
founded in 1926, whose membership includes virtually all of the 
active and retired bankruptcy judges in the United States. The 
Conference works to improve the administration of bankruptcy 
laws and court system.
    Judge Mannes is a 1958 graduate of Georgetown University 
Law Center. Before joining the bankruptcy bench in 1981, Judge 
Mannes was in private practice in Maryland and the District of 
Columbia. He has previously served as president of the National 
Conference of Bankruptcy Judges and of the Montgomery County 
Bar Association in Maryland. He was appointed by the Chief 
Justice to the Judicial Conference's Advisory Committee on 
Bankruptcy Rules in 1987, and served as its chairman from 1993 
to 1996.
    I extend to each of the witnesses my warm regards and 
appreciation for their willingness to participate in today's 
hearing. I also ask each of you to limit your remarks to 5 
minutes. Your written statements will be included in the 
hearing record, so feel free to summarize or highlight the 
salient points of your testimony. As a matter of just moving 
things forward, I'll give a tap of the gavel when the 5 minutes 
runs. You don't have to stop immediately, as you do on the 
floor of the House, but if you could more or less wrap up 
fairly quickly, that will allow us to move forward and then 
we'll do the same thing for Members of the panel who have 
questions and try and keep them within the 5-minute time limit 
as well.
    Judge Melloy, please proceed with your testimony.

  STATEMENT OF THE HONORABLE MICHAEL J. MELLOY, UNITED STATES 
   CIRCUIT JUDGE, COURT OF APPEALS OF THE EIGHTH CIRCUIT, ON 
     BEHALF OF THE JUDICIAL CONFERENCE OF THE UNITED STATES

    Judge Melloy. Thank you, Mr. Chairman, Members of the 
Committee. I appreciate this opportunity to testify here today 
in support of H.R. 1428. As you've already indicated, Mr. 
Chairman, I chair the Bankruptcy Administration Committee of 
the Judicial Conference and appear here today as a 
representative of the conference. I have a prepared witness 
statement which has been submitted to the Subcommittee. I would 
like to briefly emphasize a few points which I hope the 
Subcommittee will consider when it takes up the bill providing 
for new bankruptcy judgeships.
    No new bankruptcy judgeships have been authorized since 
1992. Since then, we have seen bankruptcy filings increase from 
a low of 833,000 to over 1.6 million. As you indicated, Mr. 
Chairman, just last week statistics were released showing that 
filings for the 12 months ending March 31, 2003, had again 
reached a new record, with over 1 million 611 cases--1,611,000 
cases being filed.
    The bankruptcy courts of our country have used a number of 
strategies to address their overcrowded dockets. Many 
innovative case management techniques have been utilized. 
However, there is a limit to the number of hours in the day 
that can be worked and management techniques employed. 
Eventually, the quality of justice will suffer. I'm fearful we 
are at that point.
    The bankruptcy courts of our Nation are addressing some of 
the largest and most complex commercial issues facing the 
Federal judiciary. Cases involving companies that are household 
names, such as United Airlines, USAir, Kmart, and Enron, impact 
thousands of creditors, tens of thousands of employees and 
their jobs and pensions, and greatly affect the American 
public. We need the resources to ensure that these cases can be 
effectively and efficiently dealt with.
    Delay in dealing with the difficult issues these cases 
present is not an option. If a major airline files a chapter 
11, the questions of vendor payments, employee salaries, rent 
to the airports, the myriad of other issues that these cases 
present, must be resolved with resolved within hours of the 
case being filed if the airline is going to continue to fly, 
the jobs of the airline employees, vendors, and airport 
employees saved, and the flying public guaranteed continued 
service. We need these additional judges to make sure these 
cases are quickly resolved in a manner that is consistent with 
the Bankruptcy Code and fair to all parties concerned.
    Because these issues in chapter 11 cases are so time-
sensitive and have to be dealt with, the lack of resources 
often means that other important issues that do not have the 
same time urgency, such as adversary complaints involving 
preferences and fraudulent transfers, often get put off for far 
too long. Creditors and debtors are impacted by the inability 
to get these important issues resolved in a timely fashion.
    I believe we have taken a very conservative approach to our 
request for additional judges. A benchmark for consideration of 
a request for additional judges has traditionally been a 
district in which the filings show more than 1,500 weighted 
case filings per judge. Based on the recent numbers for the 
year ending March 31, 2003, no district for which we are 
requesting an additional judge has weighted filings under 1,800 
filings, and only two of the 22 districts for which we are 
requesting additional judges have weighted filings under 2,000 
filings. Most are well in excess of 2,000 filings, and three 
are over 3,000 weighted filings per judge.
    Finally, I urge you to enact this legislation as a matter 
of fundamental fairness to the existing judges in the affected 
districts. Judges in districts such as Delaware, the Southern 
District of New York, my friend Judge Mannes's district in 
Maryland, and all the other districts in the legislation are 
putting--the judges in those districts are putting in hours and 
working under pressures that no judge should have to endure. If 
we are not able to provide them some relief soon, I'm afraid 
that either their health will suffer or excellent judges will 
start leaving the bench. We desperately need relief for these 
severely overworked judges.
    Again, thank you for allowing me to testify in support of 
this legislation. It is of great importance to the Federal 
judiciary. I'll be happy to answer any questions you might 
have. Thank you, Mr. Chairman.
    [The prepared statement of Honorable Michael Melloy 
follows:]
                Prepared Statement of Michael J. Melloy
    Chairman Cannon and Members of the Subcommittee,
    My name is Michael J. Melloy. I am a Circuit Judge with the Court 
of Appeals for the Eighth Circuit. I am also Chair of the Judicial 
Conference Committee on the Administration of the Bankruptcy System 
(the Bankruptcy Committee) and in that capacity I appear before you 
today.
    Thank you for the opportunity to testify to the need for additional 
bankruptcy judgeships. Pending bankruptcy judgeship legislation 
sponsored by Congressman Kingston (H.R. 1428) reflects the Judicial 
Conference's recent recommendation to Congress for the authorization of 
36 more judgeships in 22 judicial districts.
    Additional judgeships are critical to ensure that the bankruptcy 
courts have sufficient judicial resources to effectively and 
efficiently adjudicate the rights and responsibilities of parties in 
bankruptcy cases and proceedings. New bankruptcy judgeships have not 
been authorized by Congress since 1992. Since that time, case filings 
have increased nationally by 61 percent. In response to this increase, 
the Judicial Conference--as part of its process of reviewing bankruptcy 
judgeship needs every two years--made recommendations to Congress for 
additional bankruptcy judgeships in 1993, 1995, 1997, 1999, and this 
year.
    Today I ask for your assistance in completing the process of 
securing authorization for the additional bankruptcy judgeships needed 
by the bankruptcy system. For your convenience, I have provided as 
Attachment A to my written testimony a chart listing the 36 bankruptcy 
judgeships recommended by the Judicial Conference.
    Understanding the process and criteria used in evaluating requests 
for additional bankruptcy judgeships is important and should be, I 
believe, included as part of the official record for every judgeship 
request. I have therefore included a detailed description of the 
process as Attachment B to my written testimony. The attachment also 
provides a description of the various programs used by the judiciary to 
fully and efficiently utilize its existing judicial resources.
    The Judicial Conference is required by statute (28 U.S.C. 
Sec. 152(b)(2)) to submit recommendations to Congress for new 
bankruptcy judgeships. To assist the Conference in performing this 
responsibility, the Bankruptcy Committee biennially conducts national 
judgeship surveys pursuant to a policy statement adopted by the 
Conference in 1991.
    The policy statement sets out a number of workload factors that the 
Committee considers in assessing a district's request for additional 
bankruptcy judgeships, the first of which is the weighted caseload of 
that district. Generally, it is expected that, in addition to other 
judicial duties, a bankruptcy court should have a threshold caseload of 
1,500 annual case-weighted filings per judgeship to justify additional 
judgeship resources. Other factors the Committee considers include the 
nature and mix of the court's caseload; historical caseload data and 
filing trends; geographic, economic, and demographic factors in the 
district; the effectiveness of case management efforts by the court; 
and the availability of alternative solutions and resources for 
handling the court's workload.
        2003 recommendation for additional bankruptcy judgeships
    As Chair of the Bankruptcy Committee, I initiated the most recent 
judgeship survey in March 2002 with a letter to all chief circuit 
judges asking that they assess the bankruptcy judgeship needs within 
their circuits and report on whether additional judgeships are 
warranted. At its June 2002 meeting, the Bankruptcy Committee evaluated 
the requests based on the criteria provided in the 1991 Conference 
policy statement. The Committee noted that, in addition to other 
justifying factors, the weighted filings per judgeship (based on the 
twelve month period ending September 30, 2002) in every district 
included in our current judgeship recommendation were above the 1,500 
level, and that each district had a demonstrated need to increase its 
judicial resources.
    It is important to note that an overburdened court may use several 
strategies to alleviate its caseload burden temporarily, such as 
streamlined case management procedures, assistance from other districts 
or circuits, expansion of automation programs, or addition of more 
support personnel. Rising case filings and increasing weighted 
caseloads per judgeship, however, quickly outpace the benefits of these 
programs. A circuit's request for additional judicial resources is made 
only after a pattern demonstrates the judicial caseload of a district 
can no longer be administered by other methods. Thus, each district for 
which a new judgeship is requested has already experienced a sustained 
elevated caseload that exceeds the capabilities of the judicial 
resources of that district.
    The Bankruptcy Committee recommended that the Judicial Conference 
ask Congress to authorize 36 additional judgeships in 22 judicial 
districts. The Committee noted that each of these districts experienced 
a sustained period of heavy per judgeship weighted case filings, 
straining the abilities of its judges to administer its caseload 
effectively. I have provided as Attachment C to my written statement a 
chart indicating the weighted caseload per judgeship for each of the 22 
districts at issue. Additionally, based upon the circuits' requests, 
the Bankruptcy Committee recommended converting two existing temporary 
judgeship positions to permanent judgeship positions, extending two 
existing temporary bankruptcy judgeships, and transferring a permanent 
bankruptcy judgeship shared by two districts into a permanent judgeship 
for only one district. The Judicial Conference approved these 
recommendations in September 2002, and forwarded them to Congress in 
March 2003.
    The Judicial Conference recommends that 29 of the 36 additional 
judgeships be authorized as permanent positions. This is a mathematical 
determination based upon weighted filings. In those districts in which 
weighted filings per judgeship would remain above 1,500 notwithstanding 
the addition of a bankruptcy judgeship, we are requesting that the 
position be authorized as permanent. The underlying rationale is that 
the workload of the court can be expected to remain at a sufficiently 
high level to warrant the new judgeship for an indefinite period.
    The Judicial Conference recommends that the other seven judgeship 
positions be created as temporary judgeships. A temporary bankruptcy 
judgeship provides a district with a minimum of five years of 
additional judgeship resources. We believe that this approach is a 
prudent use of our scarce federal funds. It meets the immediate and 
foreseeable future needs of the bankruptcy system, yet affords an 
opportunity to reassess resources allotted to a district where 
immediate need is clear but long-term need is uncertain.
                   the need for additional judgeships
    The need for the required additional judicial officers is at a 
critical level.
    Nationally, the volume of bankruptcy filings has increased 
substantially in recent years. Bankruptcy filings have risen 61 percent 
nationally since 1992 when new bankruptcy judgeships were last 
authorized. In addition, as of December 31, 2002, the average weighted 
filings per bankruptcy judgeship nationally was 1,744, substantially 
above the threshold level of 1,500 weighted filings that the Judicial 
Conference uses to consider additional judgeships for a district.
    In addition to record case filings over the past ten years, 
bankruptcy courts now face cases that are more complex and time-
consuming than anything previously handled. Cases such as Enron, Global 
Crossing, and K-Mart consume a tremendous amount of a bankruptcy 
court's time. Complex airline industry cases, cases involving debtor's 
mass tort liabilities, and cases with hundreds of subsidiary filings or 
adversary proceedings are overwhelming certain judges and courts.
    The Bankruptcy Judgeship Act of 1992 created 35 new bankruptcy 
judgeships, including ten temporary bankruptcy judgeships, increasing 
the number of authorized bankruptcy judgeships to 326 nationally. Since 
enactment of that law, the temporary bankruptcy judgeships in the 
District of Colorado and the District of South Carolina have expired 
under the terms of the authorizing statute. The bankruptcy system has 
operated since 2000 with only 324 judgeship positions--fewer than 
authorized by Congress 11 years ago.
    For ten years, the judiciary has sought to secure additional 
bankruptcy judgeships. In response to our requests, in the 104th 
Congress the House Judiciary Committee favorably reported a bankruptcy 
judgeship bill (H.R. 2604). And, in the 105th Congress, the House 
passed stand-alone bankruptcy judgeship legislation (H.R. 1596). This 
bill was subsequently incorporated into the conference report on the 
Bankruptcy Reform Act of 1998 (H. Rept. 105-794) that failed enactment. 
Since 1998, Congress has continued to tie bankruptcy judgeship 
legislation to still-pending bankruptcy reform legislation that we 
respectfully suggest is unrelated to our need for additional judicial 
resources.
    Six judicial districts have been forced to wait for additional 
judicial resources since 1993. The Northern District of New York, the 
District of New Jersey, the Eastern District of Pennsylvania, the 
District of Maryland, the Eastern District of Michigan, and the 
Southern District of Florida were included in every Judicial Conference 
recommendation for additional judgeships since 1993. Further, most 
districts included in this current recommendation of the Judicial 
Conference have experienced weighted case filings in excess of 1,500 
since 1997.
    The number of additional bankruptcy judgeships recommended by the 
Judicial Conference has increased with each biennial request since 
1997. The Conference requested 18 judgeships in 1997, 24 judgeships in 
1999, and now 36 judgeships this year. The number of requested 
judgeships increases with each new request because of the backlog of 
requested judgeships that were not authorized, coupled with escalating 
case filings.
    The Judicial Conference is aware of the budget crisis and the 
importance of government frugality with taxpayers' dollars. With that 
key reality in mind, a Judicial Conference recommendation for 
authorization of additional bankruptcy judgeships is not undertaken 
lightly. The judicial districts included in H.R. 1428 have waited many 
years for additional judicial resources, under great stress and 
overburdened by burgeoning caseloads. We respectfully suggest that it 
is now time to pass bankruptcy judgeship legislation to alleviate the 
overcrowded dockets and assure that the bankruptcy system continues to 
operate in a timely, efficient, and effective manner.
                               conclusion
    We share a common interest in ensuring that the bankruptcy court 
system has adequate judicial resources to manage its caseload justly, 
speedily, and economically. An unprecedented number of cases are 
pending in our bankruptcy courts. Many of the 22 districts for which 
additional bankruptcy judgeships are sought have had overwhelming 
filings dating back years, in some cases to 1993, shortly after 
Congress last authorized additional judgeship positions. Although the 
judiciary has developed creative and innovative techniques to fully 
utilize its existing judicial resources and manage increasing 
caseloads--including the use of temporary bankruptcy judges, recalled 
bankruptcy judges, inter- and intracircuit assignments, and advanced 
case management techniques--the bankruptcy courts can no longer operate 
as effectively as the American public deserves because of the heavy 
weighted per judge caseloads. Our judicial resources are strained, and 
the cost to society of an overburdened bankruptcy system is enormous.
    I therefore urge you to provide for 36 additional bankruptcy 
judgeships as requested by the Judicial Conference.
    Thank you, once again, for your consideration of our request and 
your continued support to the system. I look forward to our continuing 
joint efforts to improve the administration of the bankruptcy system 
and believe that the authorization of these long-needed additional 
judgeships will be our most important first step.
    I would be pleased to answer any questions or provide any 
assistance in this matter.

                              ATTACHMENT A


                              ATTACHMENT B

              Assessing the Need for Bankruptcy Judgeships

    In the late 1980's, encouraged by urging from Congress, the 
Bankruptcy Committee requested that the Federal Judicial Center conduct 
a detailed, quantitative study of the bankruptcy judges' workloads and 
recommend a comprehensive case measurement system. A copy of the report 
containing the Federal Judicial Center's work, entitled ``A Day in the 
Life: The Federal Judicial Center's 1988--1989 Bankruptcy Court Time 
Study'' by Gordon Bermant, Patricia Lombard, and Elizabeth Wiggins, is 
enclosed for the record. \1\ Based on time records of the activities of 
97% of all bankruptcy judges recorded over a 10-week time frame, 
staggered throughout a one-year period, the Federal Judicial Center 
designed a work measurement system consisting of a case weight for each 
of the 17 specific case types within the jurisdiction of the bankruptcy 
courts. These case weights categorized bankruptcy cases filed under 
chapters 7, 9, 11, 12, and 13 of the Bankruptcy Code and adversary 
proceedings, i.e., a lawsuit within a case usually initiated by filing 
a complaint. The cases or proceedings are generally grouped by type and 
by the amount of assets or scheduled debts. For example, chapter 13 
cases are categorized into subgroups according to the amount of 
liabilities--one subgroup applies to cases in which the liabilities are 
less than $50,000 and another to those with scheduled liabilities of 
$50,000 or more. While the chapter 13 case weights are based on 
liabilities, case weights for chapter 11 cases and both the business 
and non-business chapter 7 cases are based on assets.
---------------------------------------------------------------------------
    \1\ A Day in the Life: The Federal Judicial Center's 1988-1989 
Bankruptcy Court Time Study, reprinted from 65 American Bankruptcy Law 
Journal (1991), is not reprinted in this hearing but is on file with 
the Committee on the Judiciary, Subcommittee on Commercial and 
Administrative Law.
---------------------------------------------------------------------------
    Through this comprehensive work measurement system, the ``weighted 
judicial caseload'' in the United States bankruptcy courts can be 
determined and analyzed. Based upon the case weight assigned to each of 
the 17 categories of case types before the bankruptcy courts and the 
actual cases pending before the bankruptcy courts, a quantitative 
measurement of the judicial caseload can be made per district. This 
thorough system helps the judiciary ascertain the minimum number of 
bankruptcy judges needed in each district and throughout the country.
    At its January 1991 session, the Judicial Conference carefully 
reviewed the Federal Judicial Center's Time Study and adopted the 
proposed case weighting system. The Judicial Conference acknowledged 
the Center's determination that 1,280 hours was the ``average'' amount 
of time spent by bankruptcy judges on ``case related'' matters, noting 
that this figure excludes the 660 hours per year that the average judge 
spends handling general office-chambers matters, addressing personnel 
issues, traveling to divisional locations, attending meetings and 
seminars, conducting general research, and other matters related to the 
judicial role. The Judicial Conference determined, however, that a 
district should have an even higher weighted judicial case load, a 
minimum of 1,500 annual ``case related'' hours per bankruptcy judge, 
before that district's request for an additional bankruptcy judge 
should be considered.
    The Bankruptcy Committee's Judgeship Subcommittee thoroughly 
screens, reviews, analyzes, and assesses the pending requests for 
additional judgeships from the circuit councils, and applies the 
weighted case filing criteria to all requests for new judgeships. The 
subcommittee separates the requests into categories, identifying needs 
that could be met without adding a judgeship and securing short-term 
relief for those in the greatest distress. In short, the subcommittee 
tries to stabilize those situations deemed most critical while awaiting 
the authorization of new bankruptcy judges.
    The weighted judicial caseload is not the sole determinant of 
whether the Judicial Conference endorses or denies a judgeship request. 
Other factors considered include:

        1)  the nature and mix of the court's caseload;

        2)  historical caseload data and filing trends;

        3)  geographic, economic, and demographic factors;

        4)  the effectiveness of the court's case management efforts;

        5)  the availability of alternative resources for handling the 
        court's caseload; and

        6)  any other relevant factors.

    It is only after all these factors are considered that a decision 
is made regarding whether an additional judgeship should be requested 
from Congress.
    Not all requests of the judicial councils are endorsed by the 
Judicial Conference. Some are denied based upon information obtained 
during on-site surveys. An ``on-site survey'' generally consists of a 
review at the requesting district by a survey team composed of a judge 
from the Bankruptcy Committee and one or more members of the Bankruptcy 
Judges Division from the Administrative Office of the U.S. Courts. The 
survey team reviews the court's policies and practices, focusing 
particularly on the court's calendaring procedures and docket sheets. 
Interviews are held with key court personnel, members of the local bar, 
the U.S. Trustee's office, panel trustees, and judges of the 
bankruptcy, district, and circuit courts. Before completing the on-site 
survey, the judge member of the survey team often meets with the judges 
of the bankruptcy court and furnishes a candid evaluation of that 
court's practices. Suggestions for improvements and ways to achieve 
greater efficiencies and productivity are discussed. This form of 
``peer review'' has proven to be extremely helpful both to the courts 
and the Bankruptcy Committee in determining whether additional judges 
or better case management is the solution to the court's heavy 
workload.
    Continuous improvements and enhanced efficiencies are a constant 
goal and, as satisfied as we have been with the case weight and 
assessment system designed by the Federal Judicial Center, we recognize 
that periodic refinements are necessary. Thus, the Bankruptcy Committee 
asked the Center to re-examine and to attempt to quantify more 
precisely the judicial work required by chapter 11 ``mega cases''--an 
area that the Center had noted at the outset of its report that the 
system may have undervalued. The Federal Judicial Center responded to 
this request by developing a prototype for adjustment to the case 
weight system in districts with a number of the mega cases, which the 
Bankruptcy Committee accepted and authorized at its June 1996 meeting.
    We anticipate that additional adjustments to the case weighting 
system will be made as we gain experience with this system, to ensure 
that it provides as accurate an assessment as possible of the judicial 
workload for the various categories of bankruptcy cases and 
proceedings.
                       judicial management tools
    Resource management tools and processes currently used by the 
judiciary to maximize its resources include:

          Temporary positions: The Judicial Conference 
        recommends temporary judgeship positions in those instances 
        where the need for an additional bankruptcy judgeship is 
        demonstrated through the on-site survey process, but it is not 
        clear that the need will exist permanently in the district. Ten 
        of the 35 new positions created by Congress in 1992 were 
        temporary positions (where the first vacancy resulting from the 
        death, resignation, or removal of a sitting judge occurring 
        after 5 years cannot be filled). In January 2003, the Judicial 
        Conference recommended that of the 36 additional judgeships, 
        seven be created as temporary bankruptcy judgeships.

          Recall: The judiciary also meets its judicial 
        resource needs through the recall by any circuit of retired 
        bankruptcy judges to serve in a district on either a full-time 
        or part-time basis. Currently, approximately 33 recalled 
        bankruptcy judges are serving nationwide. The number of 
        bankruptcy judges available for recall increases almost every 
        year.

          Shared Positions: The judiciary turns to shared 
        bankruptcy judgeship positions when possible to meet the 
        resource needs of more than one district, thus avoiding the 
        cost of an additional judgeship.

          Cross Designation: The judiciary also has the 
        authority to designate a bankruptcy judge to serve in more than 
        one district pursuant to 28 U.S.C. Sec. 152(d) which permits 
        designation of a bankruptcy judge to serve in any district 
        adjacent to or near the district for which the judge was 
        appointed.

          Intercircuit and Intracircuit Assignments: The 
        judiciary uses the systems for intercircuit and intracircuit 
        assignment of bankruptcy judges to furnish short-term solutions 
        to the disparate judicial resource needs of districts within 
        circuits and between circuits.

          Additional Law Clerks: The judiciary has developed 
        several programs through which the bankruptcy judges in the 
        busiest districts may be able to receive additional law clerk 
        help through emergency funds provided by the circuit councils, 
        funds for supplemental law clerks provided by the Judicial 
        Conference, and by allowing a bankruptcy judge to hire an 
        additional law clerk in lieu of a secretary.

          Judicial Education: Recognizing that the number of 
        bankruptcy judgeships authorized has not kept pace with the 
        dramatic increase in case filings, the judiciary relies on 
        continuing judicial education provided by the Federal Judicial 
        Center to help the incumbent judges do more with less. Ongoing 
        improvements in case management--through publications such as 
        Case Manual for United States Bankruptcy Judges and specialized 
        management seminars, including those covering mega-cases and 
        ADR processes--allow the bankruptcy judges to handle more cases 
        than before. To enhance the management process further, the 
        Administrative Office provides each court with an annual ``case 
        processing measures report'' that reflects how that court is 
        managing its caseload. Moreover, the caseloads are constantly 
        analyzed and monitored through the case weight tables developed 
        by the Federal Judicial Center.

          Other Ongoing Initiatives: The Ninth Circuit has a 
        pilot project designed to balance the disparate bankruptcy 
        caseloads more evenly within that circuit by transferring 
        pretrial work in adversary proceedings to districts with 
        lighter caseloads.

          Technology: The judiciary continues to explore other 
        innovative and novel ways to alleviate overly burdensome 
        caseloads through technical advancements, where judges can help 
        other districts through ``virtual courtrooms,'' video-
        conferencing, and the use of educational programs broadcast 
        over the FJTN, a judiciary-wide satellite television network.
                                 ______
                                 

                              ATTACHMENT C


    Mr. Cannon. Thank you, Judge Melloy. Dr. Jenkins?

  STATEMENT OF WILLIAM O. JENKINS, JR., DIRECTOR OF HOMELAND 
 SECURITY AND JUSTICE ISSUES, UNITED STATES GENERAL ACCOUNTING 
                             OFFICE

    Mr. Jenkins. Mr. Chairman and Members of the Subcommittee, 
I'm pleased to be here today to discuss the results of our 
review and assessment of bankruptcy weighted case filings, the 
judicial workload measure the Judicial Conference first 
considers in assessing the need for additional bankruptcy 
judgeships. You asked us to assess whether weighted case 
filings were a reasonably accurate measure of bankruptcy judge 
case-related workload and to assess any proposal to revise the 
current weights.
    To meet this objective, we reviewed the documentation 
provided by the Administrative Office of the United States 
Courts and the Federal Judicial Center and interviewed 
officials in these two agencies. I wish to emphasize that our 
analysis and my testimony are limited to an assessment of the 
weighted filings workload measure itself. The scope of our work 
did not include how the Judicial Conference used weighted 
filings, and other factors, to develop its current request for 
additional bankruptcy judgeships.
    Weighted case filings are a statistical measure of the 
average amount of a judge's time that a specific number and mix 
of cases filed in a bankruptcy court are expected to require. 
Each case filed in a bankruptcy court is assigned to one of 17 
case-weight categories. Each of these categories has a weight 
representing the average number of judge hours this type of 
case is expected to require. For example, a business chapter 7 
bankruptcy case with assets of $50,000 to $499,999 is expected 
to require, on average, about two and a half times as much 
judge time as a non-business chapter 7 case of the same asset 
size.
    Annual weighted filings are the total weighted value of all 
cases filed in a bankruptcy court in a year. Weighted filings 
per judgeship is the total weighted filings divided by the 
number of authorized judgeships in that court. The Judicial 
Conference has established at threshold of 1,500 weighted 
filings per authorized judgeship as its initial indicator that 
a bankruptcy court may need one or more additional judgeships.
    In assessing the needs for new bankruptcy judgeships, the 
Judicial Conference relies on the weighted filings to be a 
reasonably accurate measure of case-related judge workload. 
Whether weighted filings are in fact a reasonably accurate 
workload measure rests in turn on the soundness of the 
methodology used to develop the weights. The original case 
weights were approved for use in 1991, with adjustments made in 
1996 to reflect the workload associated with mega business 
chapter 11 cases, generally complex cases with assets at at 
least $100 million and 1,000 creditors.
    We believe the methodology used to develop the original 
1991 weights is likely to produce a reasonably accurate measure 
of bankruptcy judge case-related workload. The weights are 
based on a time study in which bankruptcy judges recorded the 
time they spend on a sample of cases over a 10-week period. The 
methodology included a valid sampling method, the participation 
of almost 97 percent of eligible bankruptcy judges, and a 
reasonable means of adjusting for such factors as missing data.
    Recognizing that the original case weights may not have 
fully reflected the workload associated with complex mega 
chapter 11 cases, the Committee on the Administration of the 
Bankruptcy System asked the Federal Judiciary to study and 
develop an adjustment to the case weights for such cases, which 
generally affect few districts. Basically, the adjustment gives 
the court extra credit for such mega cases based on the number 
of filings and other docketed events associated with these 
cases. Given the size and unusual characteristics of these 
cases, the overall strategy used to make the adjustment for 
these cases was a reasonable one.
    The current case weights are about 12 years old, based on 
times data that are about 15 years old, and changes in the last 
12 years, such as changes in case characteristics or case 
management practices, may have affected how accurately the 
weights continue to measure case-related judge workload. 
Recognizing this, in June 2002, the Committee on the 
Administration of the Bankruptcy System approved a two-phase 
study to create new bankruptcy case weights. The first phase 
would include a new time study in which judges would record the 
time they spend on a sample of cases. The new weights would 
then be developed using this time data.
    The second phase would be experimental research to 
determine whether it would be feasible to update the case 
weights in the future without a new time study. The data from 
the time study can be used as one means of assessing the 
usefulness and accuracy of case weights developed using this 
proposed event-based methodology.
    In conclusion, Mr. Chairman, we found that the 1991 weight 
case filings and subsequent adjustments to them are likely to 
produce a reasonably accurate measure of case-related 
bankruptcy judge workload. We also believe that the methodology 
for updating the bankruptcy case weights is appropriate and can 
be used to develop case weights whose accuracy can be 
specifically assessed.
    This concludes my statement and I'd be happy to answer any 
questions you or other Members of the Committee may have.
    [The prepared statement of Mr. Jenkins follows:]
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Mr. Cannon. Thank you, Dr. Jenkins. Dr. Bermant?

            STATEMENT OF GORDON BERMANT, CONSULTANT

    Mr. Bermant. Mr. Chairman, Members of the Subcommittee, I 
am pleased to be here today to testify regarding the 
methodology used to determine the need for judicial resources 
in the bankruptcy courts. I was an author of the Federal 
Judicial Center's 1988-89 bankruptcy court time study. I have 
also conducted many other studies of bankruptcy courts and 
trustee operations, first as a staff member of the Federal 
Judicial Center and then as a consultant to the Executive 
Office for U.S. Trustees. I am here today, however, simply in 
my own capacity.
    Mr. Coble. Mr. Chairman, I would ask Mr. Bermant to pull 
the mike a little closer. The folks in the back may----
    Mr. Bermant. Better?
    Mr. Coble. That's much better, yes.
    Mr. Bermant. Thank you.
    I will make four points briefly and then be happy to answer 
any questions that you may have.
    First, the bankruptcy court time study was designed and 
conducted with high standards of scientific rigor and 
professional responsibility. The bankruptcy judges were 
completely responsive to the burden we placed on them, 
recording every official act in a diary for a 10-week period. 
Ninety-seven percent of the judges then serving participated in 
the study.
    Second, there were nevertheless two limitations inherent in 
the categories of cases and proceedings to which we assigned 
case weights. The first limitation was at the high end of the 
case-weight spectrum, namely, the large chapter 11 cases. In 
those days, all chapter 11 filings with $1 million or more in 
scheduled assets were placed in the same asset category on the 
filing form. The form has since been amended to provide for 
more high-end categories, and the FJC has provided a separate 
formula for the so-called mega cases. The second limitation was 
that the available records required us to aggregate the various 
kinds of adversary proceedings into only two categories. It 
would have been better for us to have separate case weights for 
each kind of adversary proceeding.
    My third point is this: It has been 15 years since we 
conducted the time study, and that fact alone probably 
justifies revising the case weights. But in addition, much has 
changed in the bankruptcy world in that time. The numbers of 
filings have increased from 680,000 for calendar year 1989 to 
1.6 million for the 12 months ending March 31, 2003.
    There are some notable features of the growing caseload. 
The percentage of business cases has fallen from about 9 
percent of all filings in 1989 to about 2.3 percent for the 
most recent report. Most of the growth in raw filing numbers 
comes from chapter 7 filings that turn out to be so-called no-
asset cases, in which the trustee determines that there no non-
exempt property worth liquidating for the benefit of the 
creditors. The amount of judge time expended on these cases is 
in many if not most courts essentially zero--or at least less 
than the average of about 5 minutes per case now used for the 
smallest chapter 7 category. It would be helpful in any new 
time study to have a case weight specifically for such no-asset 
cases.
    Although chapter 11 filings are fewer than before, many 
seem to be larger and much more complex than before. It is in 
this area especially that we may expect to find additional 
demands on judge time.
    During this period of increased filings chapter 13 cases 
have remained fairly constant as a proportion of the total, but 
many chapter 13 filings are concentrated in a relatively few 
districts. These concentrations produce economies of scale in 
operating efficiency that may lead to some lessening of 
judicial burden.
    There is no way to figure out theoretically how these 
changes, or others that we might discuss, affect the courts' 
weighted caseloads. But it is clear that the changes are large 
enough to justify investing in a new bankruptcy court time 
study, which the conference and the agencies are doing.
    Fourth and finally, the Judicial Conference has always 
insisted that the weighted caseload is the first but not the 
only factor to be considered in evaluating a court's request 
for new judgeships. Each request is scrutinized at a number of 
levels, including the district court, the Circuit Judicial 
Council, and the Bankruptcy Committee of the Judicial 
Conference. The administrative office provides technical 
support throughout this process. So when a request finally 
reaches this Committee, it has been vetted thoroughly. This 
scrutiny protects against misinterpretations of a court's needs 
based solely on a court's weighted caseload.
    In conclusion, then, I would like to emphasize my judgment 
that positive action on new bankruptcy judgeships need not and 
should not await the results of a new time study.
    Thank you, Mr. Chairman, for inviting me to testify today. 
I'll be happy to answer any questions you may have for me.
    [The prepared statement of Mr. Bermant follows:]
                  Prepared Statement of Gordon Bermant
    Mr. Chairman and Members of the Subcommittee:
    I am pleased to be here today to testify regarding the methodology 
used to determine the need for judicial resources in the bankruptcy 
courts. My specific qualifications include my role as an author of the 
Federal Judicial Center's 1988-1989 Bankruptcy Court Time Study, which 
is the quantitative foundation upon which the Judicial Conference 
begins its review of requests for new judgeships. I have also conducted 
many other studies of bankruptcy court and trustee operations, first as 
a member of the staff of the Federal Judicial Center and subsequently 
as a consultant to the Executive Office for U.S. Trustees in the 
Justice Department. I am here today, however, simply in my own 
capacity.
    I have four points to make.
    First, the Federal Judicial Center's 1988-1989 Bankruptcy Court 
Time Study was designed, conducted, and published with high standards 
of scientific rigor and professional responsibility. The FJC committed 
significant resources to enable thorough data collection and detailed 
analysis. The bankruptcy judges were completely responsive to the 
burden we placed on them: recording every official act in a diary for a 
10-week period. Ninety-seven percent of the judges then sitting 
participated in the study. Also, the Administrative Office of the 
Courts cooperated fully with us as we used the AO's centralized 
administrative database to check the judge's diary reports against the 
docket numbers of filed cases. Our published report (copies of which 
have been supplied for the record) fully explains the methods that we 
used, including the assumptions and extrapolations that we made when 
there were gaps in the administrative database or judicial diaries. The 
resulting case weights, and court weighted case loads, were as valid 
and reliable as possible.
    Second, there were nevertheless two limitations inherent in the 
seventeen categories of cases to which we assigned case weights. The 
first limitation was at the high end of the case weight spectrum, 
namely the large chapter 11 cases. In those days, all chapter 11 
filings reporting $1 million or more in scheduled assets were placed in 
the same category on the filing form. But even then there were multi-
billion dollar filings, including Texaco ($36 billion) in 1987, 
Financial Corporation of America ($34 billion) in 1988, and MCorp. ($20 
billion) in 1989. These ``mega-cases'' create unique challenges for 
judges' workloads that we did not measure fully in the original study.
    In 1996, the FJC, recognizing the special character of mega-cases, 
developed a mega-case formula to supplement the chapter 11 case 
weights. The supplemental formula factors into the case weight two 
important features of mega-cases. First, it accounts for the number of 
filings that are consolidated when a mega-case comprises a parent 
company and many affiliates, each of which has filed a separate chapter 
11 petition. In the ordinary course of calculating a weighted case 
load, each of the separate filings is credited with its case weight, 
even if the parent and the subsidiaries are treated as one case in the 
bankruptcy court.
    For example, if a corporate parent and 20 affiliates or 
subsidiaries file on the same day, and each claims at least $1 million 
in assets, then the weighted case load for that entity will be 236 
judge-hours (each of the 21 filings will receive the 11.234 hour case 
weight, which comes to 235.9 hours). If this effect of related cases on 
the work load measurement is not accounted for, the case weight of a 
mega-case might overestimate the amount of judicial work required.
    The supplemental formula also estimates additional judicial effort 
based on the increased number of docketed matters in mega-cases. Mega-
cases, with more lawyers and more parties in interest than other 
chapter 11 cases, generate more contested matters, adversary 
proceedings, fee requests, and so on. The second factor estimates how 
much of this additional work there is. In sum, these two factors 
applied to mega-cases guard against either over-estimating or under-
estimating the amount of judicial work that will likely be required. 
The Center's formula used a three-year window of mega-cases to arrive 
at a final calculation. In my opinion, the formula represents a sound 
approach to weighting the unusual features of mega-cases.
    A second limitation of the original study was that the available 
records required us to aggregate the numerous types of adversary 
proceedings into only two categories: dischargeability actions under 
section 523 of the Bankruptcy Code, and all the other adversary 
proceeding types lumped together. It would have been better to have 
separate case weights for each type of adversary proceeding. But how 
much difference this makes, as a practical matter, I don't know.
    My third main point is this: Much has changed in bankruptcy since 
the FJC time study was completed. The numbers of filings have, of 
course, increased dramatically, from 680,000 for calendar year1989 to 
1.6 million for the 12 months ending March 31, 2003. There are some 
notable features of the growing case load. The numbers of consumer 
cases have grown out of proportion to the increases in business cases. 
In 1989, about 9% of all filings were business cases; in the last 12 
months, by contrast, only 2.3% of filings were business cases.
    Most of the growth comes from chapter 7 filings that turn out to be 
``no-asset'' cases, in which the trustee determines that there is no 
non-exempt property worth liquidating for the benefit of the creditors. 
The amount of judge time expended on these cases is, in many if not 
most courts, essentially zero, or in any event less than the average of 
about five minutes per case that we originally calculated for all cases 
in the $0-$50,000 category. It would be helpful to have a case weight 
specifically for such no-asset cases. There are certain technical 
problems that would have to be overcome to calculate a no-asset case 
weight, but I believe that the FJC could accomplish the task.
    During this period of increased filings, chapter 13 cases have 
remained fairly constant as a proportion of the total, at about 28%. 
However, a large proportion of chapter 13 filings are concentrated in a 
relatively few districts. These concentrations lead to economies of 
scale and operating efficiencies for the chapter 13 standing trustees 
and bankruptcy court clerks' offices, which in turn lead to some 
lessening of judicial burden.
    There is no way to figure out, theoretically, how these changes 
have affected judicial case weights. But it is plausible that the 
changes are large enough to justify investing in a thorough new 
bankruptcy court time study.
    Fourth and finally, the Judicial Conference has always insisted 
that the weighted case load is the first but not the only factor to be 
considered in evaluating the courts' requests for new judgeships. Each 
request is scrutinized at a number of levels, including the district 
court where the bankruptcy court is situated, the Circuit Judicial 
Council, and of course the Judicial Conference Committee on the 
Administration of the Bankruptcy System. Staff members of the 
Administrative Office support the process of reviewing each 
application. So when a request finally reaches this committee, it has 
been vetted at a number of levels and for a number of characteristics. 
In my opinion, this scrutiny protects against any over-interpretation 
or misinterpretation of a court's needs based solely on the court's 
weighted case load.
    In conclusion, I offer my opinion that for the reasons I have 
provided, positive action on new judgeships should not await the 
results of a new time study.
    Thank you, Mr. Chairman, for inviting me to testify today. I will 
be happy to answer questions in my area of competence that you may have 
for me.

    Mr. Cannon. Thank you, Dr. Bermant. And Judge Mannes, would 
you please give us your testimony now?

     STATEMENT OF THE HONORABLE PAUL MANNES, UNITED STATES 
BANKRUPTCY JUDGE FOR THE DISTRICT OF MARYLAND, ON BEHALF OF THE 
            NATIONAL CONFERENCE OF BANKRUPTCY JUDGES

    Judge Mannes. Yes, I appear this morning on behalf of the 
National Conference of Bankruptcy Judges, a voluntary 
organization of practically all the bankruptcy judges in the 
country. I hold court in Greenbelt, Maryland, at the end of the 
Green Line of the Metro system.
    The Conference strongly endorses the recommendations of the 
Judicial Conference on the need for additional judgeships. 
Since the last legislation for additional bankruptcy judges in 
August 1992, there has been a 59 percent increase in the number 
of bankruptcy cases filed. Additional bankruptcy judgeships are 
critical to ensure that our bankruptcy court system continues 
to function for the benefit of creditors and debtors. The 36 
judgeships in H.R. 1428 reflect the current recommendation of 
the Judicial Conference based upon the most recent data. These 
judgeships are requested for those districts with a justified 
need for help. The judgeships that were provided in H.R. 975 
track provisions in last year's bankruptcy reform bill and 
reflect older data.
    As far as Maryland is concerned, in the year 1991, before 
the passage of the act of August 26, 1992, that allotted a 
fourth bankruptcy judge, we had 14,652 cases filed in our 
district. Last year, we had 35,534 cases filed. Our weighted 
caseload is 3,656 filings per judge and, like many of our 
colleagues, we are swamped. Cases are more complicated. Because 
of the cost of the delivery of legal services, more and more 
people are--debtors are representing themselves, and any 
bankruptcy judge will tell you that this representation by 
individuals representing themselves causes the consumption of a 
lot of time for the judge both in preparation and in trial. And 
the plain truth is that we do not have the time to devote to 
our caseload that it requires, and the public suffers.
    The suffering takes many forms. For example, in a chapter 
11 reorganization, as Judge Melloy pointed out, it is 
imperative that hearings be held as quickly as possible. For 
example, businesses cannot operate in bankruptcy without cash, 
and the debtor very often must get court approval to borrow 
money or to use cash collateral. These are time-consuming and 
often bitterly contested matters that should be scheduled on an 
expedited basis.
    Chapter 11 is a very expensive and difficult neighborhood 
for any business to operate in. A company cannot emerge from 
chapter 11 as a going concern without first having a hearing on 
confirmation of its plan. And often, because of the crowded 
dockets and problems in our districts, these lengthy hearings 
cannot be scheduled for months. Often hearings must be 
scheduled or have to be set at inconvenient times or over 
several non-consecutive days--a very unsatisfactory way of 
trying a case. Likewise, creditors such as landlords should not 
have to wait long periods of time to have hearings to retake 
their property. In order to manage our docket, debtors in 
chapter 13 are handled in large numbers, often 250, in an 
afternoon sitting.
    As hard as we may try, the appearance of justice suffers 
because often litigants simply do not understand what is taking 
place, and do not feel that they have been fully heard, and we 
do not have the time to fully explain what we have decided. 
This is especially true with respect to those pro se debtors, 
those representing themselves, some of whom come in armed with 
some wrong-headed Internet information.
    We thank you for your help. The National Conference of 
Bankruptcy Judges strongly supports the legislation for the 
authorization of the 36 judges. The system cannot afford to 
wait any longer.
    [The prepared statement of the Honorable Paul Mannes 
follows:]
                   Prepared Statement of Paul Mannes
    The National Conference of Bankruptcy Judges (NCBJ) appreciates the 
opportunity to express its views on HR 1428, which creates 36 
additional judgeships based on the January 21, 2003 Judicial Conference 
recommendation to Congress. The NCBJ, founded in 1926, represents 
virtually all of the Bankruptcy Judges across the country. Over the 
years, the NCBJ has been a resource for the Congress on Bankruptcy 
Court operations.
    NCBJ strongly endorses the recommendation of the Judicial 
Conference on the need for additional judgeships. There has not been an 
additional bankruptcy judgeship slot authorized since August 1992. Yet 
in those 10 years, there has been a tremendous increase in the 
caseload. As the Judicial Conference has reported, the volume of 
bankruptcy filings reached an historic high of over 1.5 million filings 
for fiscal year 2002. This is a 59% increase in the caseload since 
Congress last authorized judgeships in 1992. These additional 
judgeships are critical to ensure that our bankruptcy court system 
continues to function effectively.
    The 36 judgeships in HR 1428 reflect the most current 
recommendation of the Judicial Conference, based on the most recent 
data. These judgeships are requested for those districts with a 
justified need now for additional assistance. The judgeships provided 
for in HR 975 (The Bankruptcy Abuse Prevention and Consumer Protection 
Act of 2003) track provisions contained in last year's Bankruptcy 
Reform Bill and are based on older data.
    One of the key factors used by the Judicial Conference to determine 
the need for additional judgeships is the weighted caseload of the 
bankruptcy court. It is expected that in addition to other judicial 
duties, that a bankruptcy court should have a caseload of 1500 annual 
case weighted filings per judgeship to merit additional judgeships. A 
review of the latest weighted filings per judge data for the 12 months 
ending March 31, 2003, shows that in 20 of the 22 districts that 
qualify for judgeships, the weighted filings are over 2000 per 
judgeship. For example, in the District of Utah, the weighted caseload 
per judge is 2,115. In the District of Delaware, the weighted caseload 
per judge is 12,566.
    The shortfall in judges means delay to all the constituent parties 
in a bankruptcy case. Creditors cannot gain timely adjudication of 
motions and adversary proceedings. Debtors' plans are delayed in 
confirmation and hence distributions of many millions of dollars to 
creditors and back into the economy cannot happen until the hearings 
can be concluded. Right now there are often 250 Chapter 13 
confirmations scheduled to be heard in one overcrowded courtroom on 
each confirmation hearing date. We are often hours behind the time set 
for a particular case to be heard, causing debtors to lose wages and 
employers to lose their services.
    In Chapter 11 cases, companies cannot emerge from reorganization, 
make distributions to creditors and return to full participation in the 
market place until after confirmation hearings are held and plans 
confirmed.
    Judges of courts with extra-heavy caseloads do not have the time to 
sift through files and find those inconsistencies that are the tip of 
the iceberg of a fraudulent filing. Such courts also do not have the 
time to prepare and try motions pursuant to Sec. 707(b) of the 
Bankruptcy Code to dismiss abusive filings, or the time to draw out the 
position of the unrepresented debtor or to explain to litigants why we 
have ruled as we have. Often people will leave court without the 
feeling that they have had the chance to be heard, and that is a 
deplorable situation. With time constraints as they are, it is 
difficult to prepare for the next day's dockets and yet take up those 
emergency hearings that occur in many bankruptcy cases.
    The situation in my own District of Maryland illustrates the 
critical present need for these judgeships. In 1991, the year before 
the last judgeship bill was enacted, the number of cases filed totaled 
14,642 and 926 related lawsuits that are called adversary proceedings. 
In the year 2002, the totals were 35,334 cases filed and 1,573 
adversary proceedings to be handled by the four Maryland bankruptcy 
judges. Within these cases were countless motions or contested matters 
for decision.
    The resources of the bankruptcy system have been strained for years 
and the historic number of bankruptcy filings has pushed the system to 
the limit. It is imperative that the Congress take action in response 
to the clear case for additional judgeships, which has been made over 
the last 8 years and only continues to grow as the years go by.
    The existing critical need for these judgeships is without regard 
to the additional need for judicial resources that HR 975 will create. 
Hence, the need discussed is not conditioned on the passage of that 
legislation. In addition, given the time that it takes to select, 
investigate and appoint additional bankruptcy judges, if the increase 
in judgeships is delayed until passage of HR 975, the critically needed 
new judges will not be on board when the effect of the legislation is 
felt in the courts.
    On behalf of the 308 active bankruptcy judges in the United States, 
we request that the Congress enact 36 additional judgeships contained 
in HR 1428 during the 108th Congress. Enactment of these new judgeships 
will contribute to more efficient adjudication of bankruptcy cases 
across the country.

    Mr. Cannon. Thank you, Judge. I want to thank all of our 
panel members for their testimony. I think you'll see that 
people on the dias are actually pretty much predisposed in 
favor of what we're doing. And I'd like to remind all Members 
that we can submit questions in writing. And I know that Mr. 
Watt has some questions. I'm going to turn the time over to him 
in just a moment. But I'm hoping that for--just for the 
information of the panel, I'm hoping that we can move from this 
hearing into our markup fairly expeditiously.
    And so, Mr. Watt, you'd like to----
    Mr. Watt. Thank you, Mr. Chairman. I'll try to move 
quickly, although I do have a number of questions. And maybe I 
will just submit them to the panel. Most of my questions are to 
Mr. Melloy and Mr. Mannes, I guess, more than--oh, actually, 
for the whole panel.
    I'm wondering whether the bankruptcy system is paying for 
itself. Should it pay for itself? And to what extent is it now 
being underwritten by taxpayers as opposed to being financed 
through user fees and the people who use the system? Do we 
know--does anybody know that? If you don't, I mean, it'd be 
quicker just to say no, and we'll submit the question to you 
and maybe you can----
    Judge Melloy. The short answer is I don't know, 
Congressman.
    Mr. Watt. Anybody on this panel know that? Does anybody 
have a particular philosophy about whether it ought to be a 
user fee-supported system or supported by the taxpayers? I 
notice Mr. Mannes was careful to say that it's for the benefit 
of creditors and debtors, both of whom are users of the system. 
So is there any particular perspective on whether it ought to 
be self-supporting? And I don't especially have a perspective 
on that, either. I'm just--I'm asking whether anybody here has 
a particular perspective on that.
    Judge Mannes. I have to say that's an issue that I have 
never thought about.
    Mr. Watt. Well, that's part of our responsibility, to try 
to figure out how we pay for it, whether the society at large 
pays for it or whether the users of a particular part of our 
Government pay for it. So, I'll--if anybody has perspectives on 
that----
    The other thing that I--and none of this should be taken as 
an indication of--I mean, I think the statistics are 
overwhelming, the growth in the numbers is overwhelming, and 
it's hard for anybody not to be sympathetic to the need for 
additional judges in light of the growth.
    One of the concerns, though, I have is that the proponents 
of this new bankruptcy reform bill, which probably will pass, 
have suggested to us that it's going to either decrease the 
number of bankruptcy filings to get rid of all the people who 
ought not be in the bankruptcy system, or--and/or that it is 
going to increase the efficiency of processing cases regardless 
of whether there is an increase or a decrease in filings in the 
bankruptcy system.
    The question is can we responsibly act on this bill without 
knowing the impact or having some assessment of the impact of 
the new bankruptcy reform bill. That's a separate question than 
the one Mr. Bermant raised about whether we need a new 
efficiency study or whatever the time-management study is, 
which is an issue also. But our responsibility is to do this in 
a responsible way. And if this new reform legislation is going 
to have an impact either on increasing or decreasing filings or 
on increasing or decreasing efficiency, shouldn't that be taken 
into account in our evaluation of what bankruptcy judges are 
needed?
    Judge Melloy. Well, Congressman, if I can take a shot at 
that answer, let me say this. I think the response to that 
question is severalfold. First of all, as I indicated in my 
comments, we believe we took a very conservative approach in 
the first instance when we used--when we have no districts 
under 1,800 weighted filings. Secondly, and I'm certainly not 
an expert on all the intricacies of the reform legislation, but 
based upon what I do know about it, I think it will have, in 
the short run, at least, the effect of imposing additional 
burdens upon the bankruptcy system and the bankruptcy judges. 
And I say that for several reasons.
    First, we're going to--if it has its desired effect, as I 
understand it, we're going to see a lot more cases in chapter 
13 as opposed to chapter 7. Chapter 13 cases are in the system 
for 5 years, they involve considerably more time in 
administration than a chapter 7 case, from the judge's 
perspective. There's confirmation issues, there's 
administration issues, there's plan default issues, and as I 
say, they're around for 5 years, whereas a chapter 7's in and 
out in 60 to 90 days. So I think at a minimum we're going to 
see a lot more work if there's more chapter 13s.
    Secondly, the reform legislation is going to impose 
additional burdens on the bankruptcy court through this whole 
system of means testing. And we really don't have a good handle 
yet on what that's going to involve, but we have every reason 
to believe that it will at least be some additional burden.
    And then finally, the 1978 Bankruptcy Code is, I guess for 
want of a better word, a very mature piece of legislation. A 
lot, or most of the really tough issues have been litigated, 
have been up to the courts of appeal, and as a result, 
creditors and debtors alike, when they come into court, have a 
pretty good idea of what's going to happen. When we pass a 
piece of legislation as comprehensive and as far-reaching as 
the reform legislation, for at least the next several years 
we're going to be inundated with cases and motions and hearings 
dealing with what do each of these provisions really mean, how 
do they affect an individual case, and so on. So I think, if 
anything, the reform legislation's going to require more work 
of bankruptcy judges.
    Mr. Watt. Mr. Chairman, I've got a whole bunch of 
questions, but I guess in light of our time constraints I--the 
best thing for me to do is just submit them in writing.
    Judge Mannes. Mr. Watt, may I add two things.
    Mr. Cannon. Certainly, Judge Mannes.
    Judge Mannes. We need judges now. We're severely----
    Mr. Watt. Well, nothing that I'm saying should be taken as 
an indication that I have a bias against that. But I think our 
responsibilities are a little bit different than just--I think 
we can intuitively say yes, we need additional judges. But 
there are some factors that we have to consider that I think go 
beyond.
    Judge Mannes. There's one other fact that I would point 
out. Simply because Congress authorizes the creation of the 
judgeships doesn't mean that judges serve. There are, for 
example, four judgeships authorized that have never been 
filled. There are at the present time six judgeships that are 
vacant that have not been filled for a year because the 
circuits have decided that there is not a need for an 
additional judge in South Dakota.
    Mr. Cannon. The circuits have decided?
    Judge Mannes. The decisions are made by the circuit 
councils.
    Mr. Cannon. I suspect that we're actually going to revisit 
this issue after we find out the implications of the Bankruptcy 
Reform Act if it passes, and I suspect it--that, as Judge 
Melloy has suggested, we may have in fact a need for more 
judges.
    Are there any Members to my right that would like to ask 
questions at this point?
    [No response.]
    Mr. Cannon. Thank you. Are there any Members to the left 
that would like to ask questions?
    [No response.]
    Mr. Cannon. Thank you. I might point out that we have Ms. 
Baldwin from Wisconsin, Mr. Delahunt from Massachusetts, Mr. 
Flake from Arizona, Mr. Crater from Texas. And I think we've 
introduced everyone else on the panel.
    We want to thank you for being here with us today. We 
appreciate your input. This is an issue that we want to move on 
expeditiously, and you've been very helpful. We--I suspect we 
will have some questions in writing that we'll submit to you, 
and if you could get those back to us within a reasonable 
period of time, we'd appreciate that.
    Again, thank you for your service in being here today with 
us.
    [Whereupon, at 11:41 a.m., the Subcommittee proceeded to 
other business.]
                            A P P E N D I X

                              ----------                              


               Material Submitted for the Hearing Record

                                                       June 6, 2003
The Honorable Michael J. Melloy
United States Circuit Judge
United States Court of Appeals for the Eighth Circuit
625 First Street, S.E.
Suite 200
Cedar Rapids, Iowa 52401

Dear Judge Melloy:
    Thank you for appearing before the Subcommittee on Commercial and 
Administrative Law at the hearing on H.R. 1428, the ``Bankruptcy 
Judgeship Act of 2003,'' on May 22, 2003. Your testimony, and the 
efforts you made to present it, are deeply appreciated and will help 
guide us in whatever action we take on this matter.
    Pursuant to the unanimous consent request agreed upon at the 
hearing, Subcommittee Members were given the opportunity to submit 
written questions to the witnesses. These questions are annexed. Your 
response will help inform subsequent legislative action on this 
important topic.
    Please submit your written response to these questions by 5:00 p.m. 
on Friday, June 13, 2003, to: Susan Jensen, Subcommittee on Commercial 
and Administrative Law, B353 Rayburn House Office Building, Washington, 
DC 20515. Your responses may also be submitted by e-mail to: 
[email protected]
    In addition, we have enclosed for your review a copy of the 
official transcript of this hearing. The transcript is substantially a 
verbatim account of remarks actually made during the hearing. 
Accordingly, please only make corrections addressing technical, 
grammatical, or typographical errors. No substantive changes are 
permitted. Please return any corrections you have to: Susan Jensen, 
Subcommittee on Commercial and Administrative Law, B353 Rayburn House 
Office Building, Washington, DC 20515 by June 20, 2003.
    If you have any questions regarding the enclosed questions or 
transcript, please feel free to contact Ms. Jensen at (202) 225-2825.
    Thank you for your continued assistance.
            Sincerely,
                                              Chris Cannon,
                                                   Chairman
                             Subcommittee on Commercial and
                                         Administrative Law

Enclosures

CC/sj

c:
        The Honorable Mel Watt
        The Honorable Tom Feeney

             QUESTIONS FOR THE HONORABLE MICHAEL J. MELLOY

From Chairman Chris Cannon:

 1.  What steps does the Judicial Conference undertake to ensure that 
judicial resources are maximized before it seeks additional judicial 
resources?

 2.  Does the Judicial Conference have a system in place to require a 
judge serving in a low-volume district to serve on a temporary basis in 
a high-volume district? Can a judge refuse to be transferred on either 
an intra- or inter-district basis?

 3.  For those districts for which judgeships have been requested, does 
each judge's caseload equal at least 1,500 weighted filings? If not, 
why not?

 4.  With respect to each district for which additional bankruptcy 
judgeships have been requested, what factors were considered in 
assessing whether there were alternatives to requesting additional 
judicial resources? Why were those alternatives considered to be 
insufficient?

 5.  In addition to assessing the need for additional bankruptcy 
judgeships, has the Judicial Conference established any criteria for 
determining when a bankruptcy judgeship should be eliminated? When was 
the last time the Judicial Conference recommended that a bankruptcy 
judgeship be eliminated?

 6.  Are there districts in which the weighted filings per authorized 
judgeship would qualify for an additional judgeship, but no judgeships 
were requested? If so, why were additional judgeships for these 
districts not requested?

 7.  Is a bankruptcy clerk authorized to correct case information 
supplied by a debtor? For example, if a debtor erroneously checks the 
``More than $100 million'' estimated asset box on the Voluntary 
Petition official form, may a clerk correct that information before it 
is entered into the court's data system? Please explain in detail what 
quality control or quality assurance procedures are in place to ensure 
the accuracy of case information.

 8.  Dr. Bermant observes that the FJC study only characterized 
adversary proceedings into two categories. Please explain whether or 
not the judicial time requirement data would be more accurate if there 
was a greater range of categories for these proceedings.

 9.  During 2002, only 66 Chapter 11 cases were filed in the Middle 
District of Pennsylvania, which is served by two bankruptcy judges. The 
latest request seeks an additional bankruptcy judgeship, which if 
authorized, would calculate to be 22 Chapter 11 cases per judge. Why is 
this additional judgeship necessary?

10.  For at least 5 districts for which additional judgeships are 
requested, the projected weighted filings for authorized and requested 
judgeships would be less than 1,500 weighted filings. Would you 
recommend that any additional judgeships for those districts be 
authorized, if at all, on anything other than a temporary basis?

From Congressman Tom Feeney:

 1.  What effects would HR 1428 have on bankruptcy reform?

 2.  Are there any studies or proposals that show that increasing the 
number of judges under HR 1428 would reduce the burden on bankruptcy 
courts or substantially modify them?

From Ranking Member Mel Watt:

 1.  What is the bankruptcy court system costing the U.S. taxpayer?

 2.  Shouldn't the bankruptcy system be funded based on a user fee 
theory, i.e., based on contributions from debtors and/or creditors?

 3.  Who benefits from the bankruptcy system as a whole? Who benefits 
from the mega bankruptcy cases?

 4.  Has there been a study on the projected impact on the bankruptcy 
system of the Bankruptcy reform bill if it passes?

 5.  Will there be an increase or decrease in bankruptcy filings as a 
result of the new law if it passes?

 6.  Will there be an increase in the efficiency of processing cases, 
whether or not there is an increase or decrease in filings, if the 
Bankruptcy reform bill passes?

 7.  Shouldn't we have the results of the new bankruptcy time study and 
the results of the impact of the new bankruptcy law if it passes before 
we proceed with H.R. 1428?
                                 ______
                                 
                                 
                                 
 Responses From Judge Michael J. Melloy to Written Questions Received 
from the House Judiciary Subcommittee on Commercial and Administrative 
                    Law in Letter Dated June 6, 2003
From Chairman Chris Cannon:

1.  What steps does the Judicial Conference undertake to ensure that 
judicial resources are maximized before it seeks additional judicial 
resources?

    The Judicial Conference thoroughly reviews each district for which 
additional judicial resources are requested to determine whether other 
means of handling that court's docket are available before approving a 
request for additional judgeships and making such a recommendation to 
Congress.
    At the start of each 2-year bankruptcy judgeship survey, every 
judicial district's current weighted caseload is calculated to 
determine which districts meet or exceed the baseline per judgeship 
weighted filings of 1,500. This information is provided to the circuits 
to assist in their decision whether to request additional bankruptcy 
judgeships. After all requests for additional bankruptcy judgeships are 
received from the circuits, the Judicial Conference's Bankruptcy 
Committee's Subcommittee on Judgeships reviews each requesting 
district's current per judgeship caseweight, historical caseweights, 
annual case filings, and prior requests for additional judicial 
resources. The subcommittee also reviews any additional information 
submitted by the circuit or the district, including the nature and mix 
of the district's caseload, filing trends, and geographic, economic, 
and demographic factors.
    Information gathered during an on-site survey conducted at the 
requesting district is also reviewed to determine the effectiveness of 
the court's case management efforts and the use or availability of 
alternative resources for handling the court's caseload.
    The subcommittee separates the requests into categories, 
identifying districts with needs that could be met without adding a 
judgeship and securing short-term relief for those districts in the 
greatest distress. In short, the subcommittee tries to stabilize those 
situations deemed most critical while awaiting the authorization of new 
bankruptcy judges.
    It is only after all of these factors are considered that the 
Judicial Conference determines whether a district has maximized all 
available resources and an additional judgeship should be requested 
from Congress.

2.  Does the Judicial Conference have a system in place to require a 
judge serving in a low-volume district to serve on a temporary basis in 
a high-volume district? Can a judge refuse to be transferred on either 
an intra- or inter-district basis?

    The judiciary does not assign bankruptcy judges to intra- and 
intercircuit assignments. Participation in the intra- and intercircuit 
system is voluntary, both for the judge who provides assistance and the 
district requesting assistance. An intercircuit assignment of a 
bankruptcy judge is agreed upon between the two circuits involved, 
while intracircuit assignments are coordinated within the circuit. 
Intra- and intercircuit assignments can be of varying length, but 
usually involve several weeks of service per year in another district 
in addition to that judge's duties and obligations in his or her home 
district.
    During the twelve-month period ending March 31, 2003, 51 bankruptcy 
judges nationwide (including some recalled bankruptcy judges) reported 
7,271.5 hours of intracircuit and 3,350 hours of intercircuit 
assistance to other districts.
    There is a range of factors determining a bankruptcy judge's 
ability to voluntarily travel to assist in an overburdened bankruptcy 
court. The first factor would be the judge's home district's ability to 
lend a judge. Of the courts with relatively low judicial workload, 
virtually all are either one- or two-judgeship courts. It is 
impractical in most cases for a judge sitting in one of these courts to 
provide significant services as a visiting judge in another district 
because it would leave the judge's home district without a bankruptcy 
judge or could overburden the remaining home district judge.
    Some courts with low to mid-range caseweighted filings are unable 
to participate in the intra- and intercircuit assignment system. In 
some states, bankruptcy judges travel extensively to hold court around 
a geographically vast area (e.g. the Eastern and Western Districts of 
Arkansas) and therefore do not have extra time to assist outside their 
district. Some bankruptcy judges use their spare time to provide 
service to the bankruptcy community by teaching at Federal Judicial 
Center seminars, writing scholarly articles, serving as a member of a 
bankruptcy appellate panel, or participating in Circuit and Judicial 
Conference activities. Other judges with lighter caseloads are unable 
to travel based upon individual family circumstances, such as aged 
parents or special needs children. Lastly, some bankruptcy judges are 
precluded from providing intercircuit assistance because of the 
judiciary's ``lender-borrower'' rule, whereby a circuit that receives 
intercircuit assistance cannot simultaneously provide intercircuit 
assistance.
    Therefore, although the judiciary encourages bankruptcy judges to 
volunteer for intra- and intercircuit assignments, not all judges from 
``low-volume'' districts are able to participate and no bankruptcy 
judge is involuntarily transferred to or required to serve in another 
district.

3.  For those districts for which judgeships have been requested, does 
each judge's caseload equal at least 1,500 weighted filings? If not, 
why not?

    The statistical system maintained by the Administrative Office of 
the United States Courts is capable of tracking the weighted caseload 
of judges based only on the cases initially assigned to the judge. In 
most cases this is adequate. It can result, however, in misleading 
workload figures. Of the 87 judges in the requesting districts, only 
four had weighted caseloads of less than 1,500 (excluding a number of 
judges who were not on the bench for the full year) based on filed case 
assignments. One of these four judges has had to recuse himself from a 
number of large and complex cases, and has been assigned other cases 
which the AO is not able to quantify. Another judge has responsibility 
for all cases in her division, the workload of which is somewhat less 
than 1,500. As a result, this judge has provided extensive services to 
the main divisional office in mediating and adjudicating adversary 
proceedings. The remaining two judges have caseloads slightly under 
1,500 because they sit in divisional offices for which it would be 
impractical to assign significant numbers of cases from other offices.

4.  With respect to each district for which additional bankruptcy 
judgeships have been requested, what factors were considered in 
assessing whether there were alternatives to requesting additional 
judicial resources? Why were those alternatives considered to be 
insufficient?

    One of the factors examined by the Judicial Conference before 
recommending additional bankruptcy judgeships is whether alternative 
resources or caseload management tools could be used to manage a 
court's caseload in lieu of requesting additional judicial resources. 
The judiciary uses many different programs and resources to efficiently 
and effectively utilize its judicial resources and time: temporary 
bankruptcy judgeships; recalled bankruptcy judges; shared judgeship 
positions; cross designation of districts; intercircuit and 
intracircuit assignments; additional law clerks; judicial education; 
and advanced technology. If a circuit requests additional judicial 
resources, the judiciary reviews data concerning the requesting 
district's use of additional resources and caseload management tools, 
reviews the district's historical and current weighted caseload and 
filing statistics, and conducts an on-site survey of the district.
    An on-site survey generally consists of a review at the requesting 
district by a survey team composed of a judge from the Bankruptcy 
Committee and one or more members of the Bankruptcy Judges Division 
from the Administrative Office of the United States Courts. The survey 
team reviews the court's policies and practices, focusing particularly 
on the court's calendaring procedures and docket sheets. Interviews are 
held with key court personnel, members of the local bar, the U.S. 
trustee's office, panel trustees, and judges of the bankruptcy, 
district, and circuit courts. An on-site survey often produces 
information about the district's geographic, historic, economic, and 
demographic situation.
    During the on-site survey, the judge member of the survey team 
often meets with the judges of the bankruptcy court and furnishes a 
candid evaluation of that court's practices. Suggestions for 
improvements and ways to achieve greater efficiencies and productivity 
are discussed. This form of ``peer review'' has proven to be extremely 
helpful both to the courts and the Bankruptcy Committee in determining 
whether better case management and alternative resources or additional 
judgeships are the solution to the court's heavy workload.
    Before approving a circuit's request for additional judicial 
resources and recommending to Congress the authorization of additional 
bankruptcy judgeships, the Judicial Conference reviews the Bankruptcy 
Committee's recommendation that is based upon all information provided 
by the circuit, the district, the survey team, and the judiciary 
concerning the district's use of alternative resources. Each of the 22 
requesting districts has exhausted alternative caseload management 
tools before requesting additional judicial resources.

5.  In addition to assessing the need for additional bankruptcy 
judgeships, has the Judicial Conference established any criteria for 
determining when a bankruptcy judgeship should be eliminated? When was 
the last time the Judicial Conference recommended that a bankruptcy 
judgeship be eliminated?

    The Judicial Conference is under a statutory duty to periodically 
review existing bankruptcy judgeships. Section 152(b)(3) of title 28, 
United States Code, requires that ``Not later than December 31, 1994, 
and not later than the end of each 2-year period thereafter, the 
Judicial Conference of the United States shall conduct a comprehensive 
review of all judicial districts to assess the continuing need for the 
bankruptcy judges authorized by this section, and shall report to the 
Congress its findings and any recommendations for the elimination of 
any authorized position which can be eliminated when a vacancy exists 
by reason of resignation, retirement, removal, or death.'' The Judicial 
Conference examines any district in which elimination of a judgeship 
would result in a case weighted filings of less than 1000 for each 
remaining authorized judgeship to see if retention of such judgeships 
is justified.
    Since 1994 the Judicial Conference has not recommended the 
statutory elimination of any existing bankruptcy judgeships. The 
Judicial Conference has recommended, however, that certain judgeships 
not be filled in the event a vacancy occurs until an increase in 
workload justifies filling the vacancy. The Judicial Conference 
submitted its most recent biennial report to Congress in December 2002.
    The continuing need for authorized bankruptcy judgeship positions 
is directly related to each judicial district's weighted caseload and 
bankruptcy case filings. These statistics complement each other by 
approaching judicial workload from different perspectives. Weighted 
caseloads measure a district's judicial workload by focusing on 
complexity of cases filed in the district. Bankruptcy case filings 
measure the district's workload by focusing on the volume of cases 
filed. These statistics can be calculated on a per district and a per 
judgeship basis. In addition to statistical data, the Judicial 
Conference also considers other factors, such as local economic and 
demographic trends, when assessing the continuing need for authorized 
bankruptcy judgeships.
    During the 2002 continuing need survey, the Judicial Conference 
decided to preserve all current authorized bankruptcy judgeships for 
two reasons. First, bankruptcy filings and the corresponding weighted 
caseloads are not static, and are generally increasing. Second, the 
process by which additional bankruptcy judgeships are authorized by 
statute and funded proceeds slowly and often lags behind the need for 
the additional positions. By retaining all currently authorized 
bankruptcy judgeships, the circuit councils can manage their judicial 
resources, both now and in the future, without having to seeking 
congressional action to re-authorize a judgeship provision that was 
eliminated and then later needed due to increasing filings and 
caseload. In conjunction with its policy to not eliminate authorized 
judgeships, the Judicial Conference determined that the judicial 
councils should continue the practice of only filling bankruptcy 
judgeship vacancies when doing so is essential to ensure the effective 
operation of the bankruptcy system. This practice continues to yield 
significant cost savings, while retaining the flexibility essential to 
permit prompt response to the bankruptcy system's urgent need for 
additional judicial resources.
    For example, in accordance with the Judicial Conference policy, the 
Third Circuit and the Fourth Circuit previously held vacancies open in 
the Western District of Pennsylvania and the Middle District of North 
Carolina bankruptcy courts, respectively, until a need arose to fill 
those vacancies. Based upon current workload in the subject judicial 
districts, those circuits now seek to fill those vacancies.

6.  Are there districts in which the weighted filings per authorized 
judgeship would qualify for an additional judgeship, but no judgeships 
were requested? If so, why were additional judgeships for these 
districts not requested?

    As of March 31, 2003, twenty districts that did not request 
additional judgeships during the 2002 additional judgeship survey were 
above the threshold of 1,500 weighted case filings. This may be for 
several reasons. Informal discussions with those courts indicate that 
the principal reason these districts have not requested additional 
judgeships is the desire to insure that the increases are not of a 
purely transitory nature. In the interest of fiscal economy, districts 
first try to use judicial resource management techniques, recalled 
bankruptcy judges, cross designation of districts, intercircuit and 
intracircuit assignments, additional law clerks, judicial education, 
advanced technology, and other tools to alleviate a burdensome caseload 
before requesting additional judgeships. Only after sustained high 
levels of case filings and weighted caseloads do districts request 
additional judgeships.

7.  Is a bankruptcy clerk authorized to correct case information 
supplied by a debtor? For example, if a debtor erroneously checks the 
``More than $100 million'' estimated asset box on the Voluntary 
Petition official form, may a clerk correct that information before it 
is entered into the court's data system? Please explain in detail what 
quality control or quality assurance procedures are in place to ensure 
the accuracy of case information.

    No, the bankruptcy clerk has no authority to correct information 
supplied by a debtor in a case file. The clerk's office will perform an 
initial screening of all filings for completeness and correctness and 
to ensure that all forms and information required by the Bankruptcy 
Code and Federal Rules of Bankruptcy Procedure are included. If any 
necessary documents or information is not included, the clerk will call 
the deficiency to the attention of the bankruptcy judge and will 
prepare a deficiency notice that gives the petitioner a grace period in 
which to correct the deficiency. If the clerk's office staff notices 
other deficiencies in the petition of a more substantive nature (e.g., 
the debtor does not appear to be eligible for relief under the chapter 
under which the petition was filed), the matter will be referred to the 
bankruptcy judge for appropriate action. The case trustee in each 
bankruptcy case has a fiduciary duty to ensure that the case is fairly 
and efficiently administered. Case trustees review the information 
provided by the debtor to ensure that it does not include any 
inaccurate or incorrect information.

8.  Dr. Bermant observes that the FJC study only characterized 
adversary proceedings into two categories. Please explain whether or 
not the judicial time requirement data would be more accurate if there 
was a greater range of categories for these proceedings.

    All adversary proceedings are associated with a bankruptcy case 
filed under one of the chapters of the Bankruptcy Code. In planning for 
the 1988-89 study, the Judicial Conference's Bankruptcy Committee and 
the Federal Judicial Center's researchers considered whether the time 
associated with adversary proceedings should be reflected in the 
chapter case weights or whether a separate weight or weights should be 
created for them. They chose the latter option reasoning that this 
would enhance the precision of the case weighting system. Moreover, 
instead of a single weight for adversary proceedings, they chose to 
develop two weights: one weight for dischargeability proceedings, which 
tend to be the most frequent or second most frequent type of proceeding 
in every district, and another weight for all other types of 
proceedings. The Bankruptcy Committee and FJC researchers believed at 
the time that this categorization was reasonable based on filing 
trends, and that calculating a unique weight for every type of 
adversary proceeding would lead to an unmanageable number of weights. 
The decision was not due to shortcomings of the available records. We 
continue to believe the current categorization of adversary proceedings 
to be reasonable, but are considering whether additional categories 
should be added in the upcoming study. It is impossible to determine at 
this point whether that would lead to ``more accurate'' weights.

9.  During 2002, only 66 Chapter 11 cases were filed in the Middle 
District of Pennsylvania, which is served by two bankruptcy judges. The 
latest request seeks an additional bankruptcy judgeship, which if 
authorized, would calculate to be 22 Chapter 11 cases per judge. Why is 
this additional judgeship necessary?

    The need for additional bankruptcy judgeships is not based upon the 
number of chapter 11 cases filed in a district. The need is 
demonstrated by a district's per judgeship weighted caseload in excess 
of 1,500 hours. The weighted caseload is calculated from all bankruptcy 
cases filed in the district (chapters 7, 9, 11, 12, and 13, and 
adversary proceedings). Additionally, a district's per judgeship 
weighted caseload is not the sole determinant of whether the Judicial 
Conference endorses or denies a request for additional judgeships. 
Other factors considered include: the nature and mix of the court's 
caseload; historical caseload data and filing trends; geographic, 
economic, and demographic factors; the effectiveness of the court's 
case management efforts; the availability of alternative resources for 
handling the court's caseload; and any other relevant factors.
    In 2002, the Third Circuit and the Middle District of Pennsylvania 
demonstrated to the Judicial Conference that district's need for an 
additional bankruptcy judgeship. For the 12 months ended March 31, 
2003, there were 76 chapter 11 cases filed in the Middle District of 
Pennsylvania. During the same period, there were 9,894 chapter 7 cases 
filed, 3,105 chapter 13 cases filed, and 695 adversary proceedings 
filed. The total estimated judicial time required by this level of 
filings is 4,394 direct hours and 1,320 indirect hours, of which only 
546 are accounted for by chapter 11 filings. In other words, as of 
March 31, 2003, the workload per judge in the Middle District of 
Pennsylvania was 2,197 direct hours or 2,857 total hours, excluding any 
and all vacation, holiday, and sick leave.
    Therefore, the number of cases filed under a particular chapter of 
the Bankruptcy Code in a district is not, in itself, a determining 
factor whether a court needs additional judicial resources.

10.  For at least 5 districts for which additional judgeships are 
requested, the projected weighted filings for authorized and requested 
judgeships would be less than 1,500 weighted filings. Would you 
recommend that any additional judgeships for those districts be 
authorized, if at all, on anything other than a temporary basis?

    The Judicial Conference uses a per judgeship weighted caseload of 
1,500 as a baseline for a request for additional judgeships for a 
district, not as a recommended or required work volume. A district with 
per judgeship caseweighted filings at or above 1,500 is already 
strained and in need of additional resources. That the addition of 
judicial resources would lessen a district's weighted caseload below 
1,500 is the goal to ensure a manageable workload for the bankruptcy 
judges.
    The use of temporary judgeships, where warranted, gives the 
Judicial Conference and the Congress more flexibility in responding to 
requests for additional bankruptcy judgeships. The Judicial Conference 
policy on temporary bankruptcy judgeships provides a means of 
responding to situations in which sudden increases in bankruptcy 
filings may not be sustained in the future. The policy is to factor the 
requested additional judgeship(s) for each district into the most 
recent weighted filings per judgeship for that district. If, with the 
additional judgeship(s), a district would have per judgeship weighted 
filings in excess of 1,500, then the Judicial Conference requests 
permanent additional judgeship(s) for that district. If inclusion of 
the additional judgeship(s) into the calculation results in per 
judgeship weighted filings below 1,500 for a district, then the 
Judicial Conference requests a temporary judgeship for that district. 
The only exception is when a district specifically requests an 
additional temporary judgeship, even though that district's weighted 
filings with the additional judgeship would be in excess of 1,500.
    Based upon its calculations, the Judicial Conference recommends 
additional temporary judgeships for the five districts at issue.

From Congressman Tom Feeney:

1.  What effects would HR 1428 have on bankruptcy reform?

    The additional judgeships authorized by H.R. 1428 would not have a 
direct effect on bankruptcy reform legislation, but would greatly 
assist the judiciary in managing the increased work that will generate 
from a massive change to the existing system. Following enactment of 
bankruptcy reform legislation, the bankruptcy bench will face increased 
litigation on issues of first impression and statutory interpretation, 
as well as increased procedural duties and required findings. The 
additional judicial resources recommended to Congress in January 2003 
by the Judicial Conference will alleviate the pressure on today's 
overburdened courts. Without the additional judicial resources, the 
judicial districts here at issue will be completely overwhelmed by 
their existing caseload coupled with the additional burdens of 
interpreting the reform act and processing cases under that law. 
Regardless of passage of the bankruptcy reform measure, the judiciary 
has a critical need for additional judicial resources to manage its 
existing caseload, and a continuing need for the additional judicial 
resources as projections indicate that case filings will continue to 
increase in the future.

2.  Are there any studies or proposals that show that increasing the 
number of judges under HR 1428 would reduce the burden on bankruptcy 
courts or substantially modify them?

    The Federal Judicial Center developed a system to measure the 
weighted caseload of each bankruptcy court. The Judicial Conference 
adopted this system as a means to measure the need for judicial 
resources in each district. When one applies the caseweights to the 
current caseload in each district, the results indicate the need for 36 
more bankruptcy judges in 22 judicial districts.

From Ranking Member Mel Watt:

1.  What is the bankruptcy court system costing the U.S. taxpayer?

    In fiscal year 2003, the judiciary apportioned $766 million for the 
bankruptcy program, as follows:
                                                      ($ millions)
                Salaries & Benefits
                                                      $375
                Office space
                                                      $149
                Contracts, Travel & Other
                                                      $242

2.  Shouldn't the bankruptcy system be funded on a user fee theory, 
i.e. based on contributions from debtors and/or creditors?

    The bankruptcy system should not be solely funded by user fees. The 
fee principles endorsed by the Judicial Conference committees having 
jurisdiction over this issue recognize that, as a coordinate branch of 
government, the judiciary should be funded primarily by appropriations. 
At the same time, however, the fee principles recognize that users of 
the judicial system derive substantial direct benefits from it, and 
therefore should contribute through fees to its maintenance. Fees are 
also charged to discourage frivolous use of the system. The Judicial 
Conference is currently examining its miscellaneous fees schedule to 
assure that appropriate fees are imposed.
    The judiciary's share of bankruptcy fees collected during fiscal 
year 2002 was an estimated $162,330,000. The judiciary only keeps a 
portion of the total bankruptcy fees collected. A portion of the total 
bankruptcy fees collected are remitted to the United States Treasury 
for general use and to the United States trustee system. Therefore, the 
bankruptcy fees retained by the judiciary would be inadequate to fund 
the (FY 2002) $766 million allocation to the bankruptcy system by the 
judiciary.

3.  Who benefits from the bankruptcy system as a whole? Who benefits 
from the mega bankruptcy cases?

    Creditors and the economy in general benefit from a system within 
which the competing claims against a debtor's assets can be parsed and 
satisfied (in whole or in part) in the context of a system of 
priorities which reflect avowed public policy goals. Moreover, the 
public benefits from a system which gives a fresh start to individuals 
to mitigate the effects of overwhelming medical bills, divorce, job 
loss, and other events. The alternative is to saddle otherwise 
productive members of society with burdens from which they may never 
recover. For the wage earner to face a seemingly endless stream of 
garnishments and income seizures is to effectively destroy the 
incentive to produce, to try to improve his economic lot in life, or to 
seek ever more productive positions. For businesses, the availability 
of a system within which to reorganize can often mean the difference 
between preservation of jobs and the loss of employment for thousands 
of individuals. Mega-bankruptcies, whether caused by managerial 
excesses or bad luck, can benefit, first and foremost, the hundreds of 
thousands of employees who otherwise would be thrown out of work, and 
the suppliers who would otherwise see significant markets evaporate.
    The U.S. bankruptcy system stands apart from that of most other 
major economies in providing an individual or business with an escape 
from bad decisions made in good faith. Unlike other systems throughout 
Europe and Asia, it is possible in the United States for entrepreneurs 
with innovative ideas to pursue trying to take their ideas to market 
without exposing personal wealth to the claims of creditors and 
mortgaging the future of their children. It is the availability of this 
``escape hatch'' which can help explain the differentially higher 
historical growth rate of the U.S. economy and the consistently high 
level of innovation it exhibits compared to other countries. Small 
business has always been the backbone of the economy and the engine for 
much technological innovation. Among other factors, it is the U.S. 
bankruptcy system which has helped make this possible.

4.  Has there been a study on the projected impact on the bankruptcy 
system of the Bankruptcy reform bill if it passes?

    Neither the judiciary nor the Federal Judicial Center has conducted 
such a study. The Judicial Conference transmitted to Congress its 
positions on discrete issues in the reform bill that would impact the 
administration of the bankruptcy system. There has been, however, an 
analysis of the added cost to the judiciary of H.R. 975 by the 
Administrative Office of the United States Courts. Assuming enactment 
on October 1, 2003, the estimated cost in fiscal year 2004 is $53 
million, and the estimated annual cost in fiscal year 2005 is $35.7 
million. These costs relate to judges, support staff, modification of 
data systems, and promulgation of new rules and forms. The cost 
estimate also includes the impact of lost fee revenue.

5.  Will there be an increase or decrease in bankruptcy filings as a 
result of the new law if it passes?

    The effect of enactment of the bankruptcy reform bill upon future 
bankruptcy case filings is unknown.

6.  Will there be an increase in the efficiency of processing cases, 
whether or not there is an increase or decrease in filings, if the 
Bankruptcy reform bill passes?

    Initially, we anticipate that enactment of the bankruptcy reform 
bill will increase the work required to process a bankruptcy case for 
the judges, the clerks' offices, the United States trustees, the panel 
trustees, and the attorneys. The bankruptcy reform legislation would 
impose new and additional duties and requirements on all participants 
in the bankruptcy system. Additionally, it is anticipated that the 
volume of bankruptcy litigation (adversaries and appeals) will 
substantially increase in the initial years following enactment of the 
reform measure, as bankruptcy attorneys (creditor and debtor) seek 
court interpretation of the meaning, scope, and effect of many of the 
provisions in the reform bill. It is unknown whether the new procedures 
will be more time-efficient, but eventually, as the new procedures 
become routine and legal issues are resolved, all participants in the 
bankruptcy system will become accustomed to the required process.

7.  Shouldn't we have the results of the new bankruptcy time study and 
the results of the impact of the new bankruptcy law if it passes before 
we proceed with H.R. 1428?

    No. As I stated during the hearing on H.R. 1428, Congress has not 
authorized new bankruptcy judgeships since 1992, and the need for more 
judgeships is critical. Moreover, the Federal Judicial Center and the 
Judicial Conference think the current case weights continue to provide 
a reliable means for assessing judgeship needs. At the hearing, Dr. 
Bermant testified that positive action on additional bankruptcy 
judgeships should not await a new study.
    The process to update the case weights with a new time study will 
take a minimum of 2\1/2\ years to complete, and perhaps more, if 
omnibus legislation is passed. If the judiciary were to suspend its 
recommendation for new bankruptcy judgeships pending completion of the 
proposed study or enactment of bankruptcy reform legislation, many 
districts would go without the help they need for a substantial period 
of time. It is feared that the judiciary may lose qualified members of 
the bench to private practice or retirement in reaction to 
overburdened, over-stressed dockets. A continuing shortage of 
bankruptcy judgeships detrimentally affects the public, whose economic, 
credit, employment, and retirement fund issues are directly related to 
the prompt resolution of bankruptcy cases.
                               __________
                                                       June 6, 2003
Dr. William Jenkins, Jr., Director,
Homeland Security & Justice
United States General Accounting Office
441 G Street
Washington, DC 20548

Dear Dr. Jenkins:
    Thank you for appearing before the Subcommittee on Commercial and 
Administrative Law at the hearing on H.R. 1428, the ``Bankruptcy 
Judgeship Act of 2003,'' on May 22, 2003. Your testimony, and the 
efforts you made to present it, are deeply appreciated and will help 
guide us in whatever action we take on this matter.
    Pursuant to the unanimous consent request agreed upon at the 
hearing, Subcommittee Members were given the opportunity to submit 
written questions to the witnesses. These questions are annexed. Your 
response will help inform subsequent legislative action on this 
important topic.
    Please submit your written response to these questions by 5:00 p.m. 
on Friday, June 13, 2003, to: Susan Jensen, Subcommittee on Commercial 
and Administrative Law, B353 Rayburn House Office Building, Washington, 
DC 20515. Your responses may also be submitted by e-mail to 
[email protected].
    In addition, we have enclosed for your review a copy of the 
official transcript of this hearing. The transcript is substantially a 
verbatim account of remarks actually made during the hearing. 
Accordingly, please only make corrections addressing technical, 
grammatical, or typographical errors. No substantive changes are 
permitted. Please return any corrections you have to: Susan Jensen, 
Subcommittee on Commercial and Administrative Law, B353 Rayburn House 
Office Building, Washington, DC 20515 by June 20, 2003.
    If you have any questions regarding the enclosed questions or 
transcript, please feel free to contact Ms. Jensen at (202) 225-2825.
    Thank you for your continued assistance.
            Sincerely,
                                              Chris Cannon,
                                                   Chairman
                             Subcommittee on Commercial and
                                         Administrative Law

Enclosures

CC/sj

c:
        The Honorable Mel Watt
        The Honorable Tom Feeney

                   QUESTIONS FOR DR. WILLIAM JENKINS

From Chairman Chris Cannon:

1.  In light of the fact that the Judicial Conference is in the process 
of updating its time study data, would you recommend that Congress 
await the results of that updated study and apply its results to the 
current case filings?

2.  You observed that the accuracy of the case weights is dependent 
upon accurately assigning the appropriate case weight category for each 
case filed in each bankruptcy court. If the case data system contains 
inaccurate case information, how would this affect the process by which 
judicial resources are determined?

3.  Did the General Accounting Office assess the Judicial Conference's 
criteria for characterization of a judgeship as ``permanent'' or 
``temporary?'' If so, were you satisfied about the appropriate 
designation of these judgeship requests?

4.  Given the potential fluidity of bankruptcy case filings, especially 
in light of the fact that comprehensive reforms to the bankruptcy law 
may be enacted in the near future, would you recommend that--at least 
for now--that any additional bankruptcy judgeships be authorized on a 
temporary basis?

From Vice-Chairman Tom Feeney:

1.  What effects would HR 1428 have on bankruptcy reform?

2.  Are there any studies or proposals that show that increasing the 
number of judges under HR 1428 would reduce the burden on bankruptcy 
courts or substantially modify them?

From Ranking Member Mel Watt:

1.  What is the bankruptcy court system costing the U.S. taxpayer?

2.  Shouldn't the bankruptcy system be funded based on a user fee 
theory, i.e., based on contributions from debtors and/or creditors?

3.  Who benefits from the bankruptcy system as a whole? Who benefits 
from the mega bankruptcy cases?

4.  Has there been a study on the projected impact on the bankruptcy 
system of the Bankruptcy reform bill if it passes?

5.  Will there be an increase or decrease in bankruptcy filings as a 
result of the new law if it passes?

6.  Will there be an increase in the efficiency of processing cases, 
whether or not there is an increase or decrease in filings, if the 
Bankruptcy reform bill passes?

7.  Shouldn't we have the results of the new bankruptcy time study and 
the results of the impact of the new bankruptcy law if it passes before 
we proceed with H.R. 1428?
                                 ______
                                 
                                                      June 13, 2003
The Honorable Chris Cannon, Chairman,
Subcommittee on Commercial and Administrative Law
House Committee on the Judiciary
United States House of Representatives

Dear Chairman Cannon:
    Thank you for the opportunity to respond to questions from the 
members of the Subcommittee regarding our work on bankruptcy judges' 
case-related workload. Enclosed are our written answers to those 
questions.
    If you have any questions, please call me at 202-512-8757 or 
contact me via e-mail at [email protected].
            Sincerely yours,
                                    William O. Jenkins, Jr.
               Director, Homeland Security & Justice Issues

Enclosure

From Chairman Chris Cannon:

1.  In light of the fact that the Judicial Conference is in the process 
of updating its time study data, would you recommend that Congress 
await the results of that updated study and apply its results to the 
current case filings?

    Weighted case filings are the first, but not the only, indicator of 
judgeship needs that the Judicial Conference uses to assess the need 
for additional bankruptcy judgeships. In reviewing the Judicial 
Conference's request for additional bankruptcy judgeships, Congress can 
review the totality of the information provided by the Judicial 
Conference and determine whether the weight of the evidence supports 
additional bankruptcy judgeships for any specific bankruptcy court.
    The results of the updated time study are unlikely to be available 
for a year or two. It will take some time to finalize the study 
protocols, collect and analyze the data, and develop final case 
weights. Once the new weights are available, Congress can request that 
the Judicial Conference review the judgeship needs for all bankruptcy 
courts, using the new case weights, and report on the continuing need 
for all existing bankruptcy judgeships, including any new judgeships 
that Congress may approve this year.

2.  You observed that the accuracy of the case weights is dependent 
upon accurately assigning the appropriate case weight category for each 
case filed in each bankruptcy court. If the case data system contains 
inaccurate case information, how would this affect the process by which 
judicial resources are determined?

    The net effect of any errors in correctly assigning case weights 
could understate or overstate a bankruptcy court's weighted case 
filings. To the extent that the net effect of any errors was to 
understate the weighted case filings for a specific court, it could 
potentially result in the Judicial Conference not requesting a 
judgeship for a court whose case-related workload would support an 
additional judgeship. To the extent that the net effect of the errors 
overstated the weighted case filings, it could potentially result in 
the Judicial Conference requesting a judgeship for a court whose case-
related workload did not support an additional judgeship.

3.  Did the General Accounting Office assess the Judicial Conference's 
criteria for characterization of a judgeship as ``permanent'' or 
``temporary''? If so, were you satisfied about the appropriate 
designation of these judgeship requests?

    We did not assess the Judicial Conference's criteria for 
determining whether a specific judgeship request should be for 
permanent or temporary judgeship(s).

4.  Given the potential fluidity of bankruptcy case filings, especially 
in light of the fact that comprehensive reforms to the bankruptcy law 
may be enacted in the near future, would you recommend that--at least 
for now--any additional bankruptcy judgeships be authorized on a 
temporary basis?

    We did not examine the need for or advisability of permanent versus 
temporary new bankruptcy judgeships.

From Vice-Chairman Tom Feeney:

1.  What effects would HR 1428 have on bankruptcy reform?

    We have not examined that issue and are not in a position to answer 
this question.

2.  Are there any studies or proposals that show that increasing the 
number of judges under HR 1428 would reduce the burden on bankruptcy 
courts or substantially modify them?

    Other than the Judicial Conference's analysis, we know of no such 
studies or proposals.

3.  What is the bankruptcy court system costing the U.S. taxpayer?

    We have not examined that issue and cannot provide a complete 
answer. The taxpayer portion of the costs of the bankruptcy system is 
largely for the federal judiciary's costs of operating the bankruptcy 
courts. The Administrative Office of the U.S. Courts could provide an 
estimate of the judiciary's expenditures for the 90 bankruptcy courts. 
This would include taxpayer costs, if any, for the bankruptcy trustees 
in 6 bankruptcy districts in North Carolina and Alabama.
    In the remaining 84 bankruptcy districts, the Executive Office of 
U.S. Trustees, within the Department of Justice, is responsible for the 
trustees who review debtor income, assets, and liabilities, and 
administer bankruptcy court-approved reorganizations and repayment 
plans. In fiscal year 2004, the Executive Office has requested a total 
of 1,211 FTEs and $175,172,000, to be funded by the U.S. Trustee System 
Fund. The Fund's income is based on various user fees, including a 
portion of bankruptcy court filing fees, and interest earned on the 
fund's balances.

From Ranking Member Mel Watt:

1.  Shouldn't the bankruptcy system be funded based on a user fee 
theory, i.e., based on contributions from debtors and/or creditors?

    We have not examined that issue and therefore are not in a position 
to provide an answer to this question. Generally, the costs of 
bankruptcy trustees and the Executive Office of the U.S. Trustees are 
funded by user fees and the costs of operating the U.S. Bankruptcy 
courts is funded by annual appropriations.

2.  Who benefits from the bankruptcy system as a whole? Who benefits 
from the mega bankruptcy cases?

    We have not examined that issue and are not in a position to answer 
this question.

3.  Has there been a study on the projected impact on the bankruptcy 
system of the Bankruptcy reform bill, if it passes?

    The House Report (108-40) accompanying H.R. 975, has some 
information on the potential impact of reform on the bankruptcy system. 
Other studies, including ours, have examined the potential amount of 
debt that debtors could repay under bankruptcy reform (see, for 
example, Personal Bankruptcy: Analysis of Four Reports on Chapter 7 
Debtors' Ability to Pay, GAO/GGD-99-103, June 21, 1999).
    With regard to the costs of bankruptcy reform, the Congressional 
Budget Office has estimated the cost of enacting and implementing H.R. 
975 for fiscal years 2003-2008. CBO estimated that it would increase 
costs for U.S. Trustees by about $280 million, offset by an estimated 
$282 million in increased bankruptcy filing fees. CBO also estimated 
that the enactment of H.R. 975 would result in filling 28 additional 
temporary bankruptcy judgeships. Using information from the 
Administrative Office of the U.S. Courts, CBO estimated the mandatory 
pay and benefits for these additional judgeships would total about $23 
million over the 5-year period, and the supports costs--such as space 
and facilities and support staff, would be about $77 million.

4.  Will there be an increase or decrease in bankruptcy filings as a 
result of the new law if it passes?

    Any increase or decrease in filings after the law takes effect is 
difficult to estimate. However, if bankruptcy reform is enacted, there 
could be a surge of personal bankruptcy filings prior to the statute's 
effective date by those who believe that their ability to have their 
eligible debts discharged through chapter 7 proceedings would be 
circumscribed under bankruptcy reform.

5.  Will there be an increase in the efficiency of processing cases, 
whether or not there is an increase or decrease in filings, if the 
Bankruptcy reform bill passes?

    Initially, there may be less efficiency in processing cases 
affected by bankruptcy reform as procedures for implementing the law's 
provisions are developed, tested, refined, and perhaps litigated. If 
efficiency is measured by the speed with which cases are processed, 
then the law may reduce the efficiency of handling consumer bankruptcy 
cases, the vast majority of which currently are chapter 7 cases that 
are disposed of quickly with minimal judge time. To the extent that a 
substantial portion of those who file for chapter 7 proceedings under 
bankruptcy reform and are required to enter into chapter 13 repayment 
plans, it may require additional judge and trustee time to process such 
cases.

6.  Shouldn't we have the results of the new bankruptcy time study and 
the results of the impact of the new bankruptcy law if it passes before 
we proceed with H.R. 1428?

    Weighted case filings are the first, but not the only, indicator of 
judgeship needs that the Judicial Conference uses to assess the need 
for additional bankruptcy judgeships. In reviewing the Judicial 
Conference's request for additional bankruptcy judgeships, Congress can 
review the totality of the information provided by the Judicial 
Conference and determine whether the weight of the evidence supports 
additional bankruptcy judgeships for any specific bankruptcy court.
    The results of the updated time study are unlikely to be available 
for a year or two. It will take some time to finalize the study 
protocols, collect and analyze the data, and develop final case 
weights. Once the new weights are available, Congress can request that 
the Judicial Conference review the judgeship needs for all bankruptcy 
courts, using the new case weights, and report on the continuing need 
for all existing bankruptcy judgeships, including any new judgeships 
that Congress may approve this year.
                               __________
                                                       June 6, 2003
Gordon Bermant, Ph.D., J.D.
5603 Tilia Court
Burke, Virginia 22015

Dear Dr. Bermant:
    Thank you for appearing before the Subcommittee on Commercial and 
Administrative Law at the hearing on H.R. 1428, the ``Bankruptcy 
Judgeship Act of 2003,'' on May 22, 2003. Your testimony, and the 
efforts you made to present it, are deeply appreciated and will help 
guide us in whatever action we take on this matter.
    Pursuant to the unanimous consent request agreed upon at the 
hearing, Subcommittee Members were given the opportunity to submit 
written questions to the witnesses. These questions are annexed. Your 
response will help inform subsequent legislative action on this 
important topic.
    Please submit your written response to these questions by 5:00 p.m. 
on Friday, June 13, 2003, to: Susan Jensen, Subcommittee on Commercial 
and Administrative Law, B353 Rayburn House Office Building, Washington, 
DC 20515. Your responses may also be submitted by e-mail to: 
[email protected]
    In addition, we have enclosed for your review a copy of the 
official transcript of this hearing. The transcript is substantially a 
verbatim account of remarks actually made during the hearing. 
Accordingly, please only make corrections addressing technical, 
grammatical, or typographical errors. No substantive changes are 
permitted. Please return any corrections you have to: Susan Jensen, 
Subcommittee on Commercial and Administrative Law, B353 Rayburn House 
Office Building, Washington, DC 20515 by June 20, 2003.
    If you have any questions regarding the enclosed questions or 
transcript, please feel free to contact Ms. Jensen at (202) 225-2825.
    Thank you for your continued assistance.
            Sincerely,
                                              Chris Cannon,
                                                   Chairman
                             Subcommittee on Commercial and
                                         Administrative Law

Enclosures

CC/sj

c:
        The Honorable Mel Watt
        The Honorable Tom Feeney

                    QUESTIONS FOR DR. GORDON BERMANT

From Chairman Chris Cannon:

1.  Given the fluctuating nature of bankruptcy filings, would you 
recommend that any additional bankruptcy judgeships be authorized on a 
temporary as opposed to a permanent basis?

2.  Please explain your observation about the FJC's mega-case formula 
as it applies to consolidated cases and whether there is a potential 
that the amount of judicial work required for these cases may be 
overestimated.

3.  Although overall bankruptcy filings have generally increased over 
the past few years, the number of Chapter 11 case filings has remained 
somewhat stable. In fact, Chapter 11 cases decreased by 6.6% in 2002 as 
compared to the prior year. Indeed, business filings overall between 
1998 and 2002 have decreased by nearly one-third. Is not the vast bulk 
of judge time consumer by Chapter 11 cases? If so, would you agree that 
the need for judicial resources may not be that substantial in light of 
the relatively minor increase in the number of Chapter 11 cases filed 
in the last 10 years?

4.  Is it possible for a bankruptcy judge to not expend any time on 
most Chapter 7 cases filed in his or her district?

From Vice-Chairman Tom Feeney:

1.  What effects would HR 1428 have on bankruptcy reform?

2.  Are there any studies or proposals that show that increasing the 
number of judges under HR 1428 would reduce the burden on bankruptcy 
courts or substantially modify them?

From Ranking Member Mel Watt:

1.  What is the bankruptcy court system costing the U.S. taxpayer?

2.  Shouldn't the bankruptcy system be funded based on a user fee 
theory, i.e., based on contributions from debtors and/or creditors?

3.  Who benefits from the bankruptcy system as a whole? Who benefits 
from the mega bankruptcy cases?

4.  Has there been a study on the projected impact on the bankruptcy 
system of the Bankruptcy reform bill if it passes?

5.  Will there be an increase or decrease in bankruptcy filings as a 
result of the new law if it passes?

6.  Will there be an increase in the efficiency of processing cases, 
whether or not there is an increase or decrease in filings, if the 
Bankruptcy reform bill passes?

7.  Shouldn't we have the results of the new bankruptcy time study and 
the results of the impact of the new bankruptcy law if it passes before 
we proceed with H.R. 1428?
                                 ______
                                 
                                                      June 11, 2003
The Honorable Chris Cannon, Chairman
Subcommittee on Commercial and Administrative Law
Committee on the Judiciary
B353 Rayburn House Office Building
Washington, DC 20515
VIA e-mail to [email protected]

Dear Chairman Cannon:
    Here are answers to the questions that you sent to me regarding 
H.R. 1428 on behalf of the Subcommittee. My answers are necessarily 
brief. Where I had factual information to support my answer, I have 
used it. But many of the questions require judgment calls that go 
beyond readily available information. In that regard, I want to 
reiterate that I am not representing any individuals or groups. My 
opinions are solely my own, for better or worse.

From Chairman Chris Cannon:

1.  . . . bankruptcy judgeships be authorized on a temporary as opposed 
to a permanent basis? The authorization of permanent bankruptcy 
judgeships (which are time-limited in an important sense) will not 
create a problem of judicial surplus. The Judicial Conference has been 
scrupulous in its assessment of judgeship needs. Moreover, there have 
been occasions when a bankruptcy judgeship has gone unfilled when the 
need was absent in the district where the judgeship was authorized. A 
very interesting question is whether there might be some way to 
increase the flexibility given to the Judicial Conference regarding the 
geographic distribution of judicial resources, so that judgeships could 
be moved with fluctuations in demand across districts and circuits.

2.  . . . the FJC mega-case formula potentially overestimates required 
judicial work? This is not a risk. The FJC mega-case formula has two 
components. The first guards against overestimation of judicial work 
and the second guards against underestimation. The first component 
corrects the inflationary effect on chapter 11 weighted case load 
created by related cases filed under the umbrella of a single huge 
corporate entity. This component has worked effectively, especially in 
Delaware, to reduce the weighted case load of that court from the value 
that would have been calculated without the mega-case correction. There 
is essentially zero risk that the second factor, an estimation of work 
load based on prior cases meeting an objective definition of a mega-
case, will increase a court's weighted case load beyond what is due. 
The 1996 mega-case correction was an important addition to the 
measurement technology of the 1988-1989 time study.

3.  . . . given that the vast bulk of judge time consumed by chapter 11 
cases, and given the current chapter 11 case load, is there a need for 
substantial additional judicial resources? Though the numbers of 
business cases generally, and chapter 11 cases specifically, have not 
grown at the rate that the numbers of consumer cases have grown, many 
have become more complex and litigious. That fact alone would caution 
against using the percentages of such cases in the total mix of cases 
as a sign that the Judicial Conference's assessment of need is 
inaccurate. But in addition, looking forward, the absolute and relative 
numbers of chapter 11 cases are likely to increase and stay up for a 
while. There are lags between changes in the economy and changes in 
business bankruptcy filings. Moreover, good times do not necessarily 
equate to fewer filings, because good times occasion the establishment 
of marginal businesses-the dot-com bubble is just the latest example. 
The history of bankruptcy filings is one of phased increases growing as 
the population, GDP, and reliance on credit grow. None of these is 
likely to show long term decline, so we shouldn't expect a long term 
decline in businesses that start then fail.

4.  . . . possible for a bankruptcy judge to not expend any time on 
most chapter 7 cases filed in his or district? Not only is it possible, 
it is likely that judges do not spend time on many no-asset cases that 
move through their courts in routine, virtually administrative fashion. 
Having said that, I hasten to add three comments to avoid the point 
being misconstrued: First, the case weight for the smallest chapter 7 
cases, which is approximately 5 minutes, already incorporates the fact 
that the actual time spent on many cases is essentially zero. That is 
why we have case weights, to iron out these kinds of differences. So 
long as the category of the smallest cases lumps uncontested no-asset 
cases (most of them) with relatively rare litigious no-asset cases and 
small asset cases (in which the trustee is able to liquidate the estate 
for a value of up to $50,000), then it will be true that the average 
time for cases in the category (i.e. the case weight) is about 5 
minutes, even though most cases in the category absorb zero time. This 
is just a statistical reality and nothing that needs to be worried 
about at the policy or legislative level. Second, the fact that judges 
spend zero time on these cases is exactly as it should be. Where the 
facts about the debtor's condition are clear to the trustee and the 
creditors, and no one objects, neither need nor virtue attaches to a 
pro forma judicial involvement. Third, it would be useful, but 
technically difficult and hence expensive, to sort no-asset cases out 
from small asset cases in the next time study. I suspect that the 
research people at the FJC are quite aware of both the value and the 
costs of making this separation, and I would certainly trust their 
judgment in making the final cost-benefit decision.

From Vice-Chairman Tom Feeney:

1.  . . . effects of H.R. 1428 on bankruptcy reform? I am not certain 
how to interpret the phrase bankruptcy reform here. If, on the one 
hand, the reference is to the bankruptcy reform bill that may pass, 
then I believe that positive action on H.R. 1428 is, if possible, even 
more crucial than otherwise. This is because a lot of new judicial work 
will be required under the pending reform legislation, particularly on 
the consumer side. If, on the other hand, the reference is to the 
health of the bankruptcy system more generally, then the effects will 
still be salutary. The system needs the judicial resources that are 
proposed in H.R. 1428 with or without the passage of the new reform 
legislation.

2.  . . . studies or proposals that show that increasing the number of 
judges under H.R. 1428 would reduce the burden on bankruptcy courts or 
substantially modify them? The weighted case load calculations 
presented as part of the Judicial Conference's justification for the 
judgeship requests are a direct demonstration of the reductions of 
burden that would follow from appointments made under the new 
judgeships. These calculations are as good a job as can be done to 
justify the need for new resources in an objective fashion. On-site 
judgeship surveys and interviews conducted by the Judicial Conference 
Bankruptcy Committee assisted by the Administrative Office go further 
to ensure that the quantitative aspect of the justification does not 
paint a misleading picture of work load.

From Ranking Member Mel Watt:

1.  What is the bankruptcy court system costing the U.S. taxpayer? A 
truly adequate answer can be supplied only by the Administrative 
Office, which has all the requisite numbers. It is important to 
emphasize, nevertheless, that filing fees, and other costs of 
bankruptcy borne by parties, substantially reduce the costs to 
taxpayers. There is a tricky problem associated with marking where the 
``court system'' ends and ancillary institutions begin. One example is 
the oversight of panel and standing trustees now accomplished by the 
U.S. Trustee Program within the Department of Justice for 48 states. 
(In Alabama and North Carolina, the function is still accomplished in 
the Third Branch). By statute, the U.S. Trustee Program runs on user 
fees, largely the quarterly payments made by chapter 11 debtors-in-
possession prior to plan confirmation. Also, the work of the panel and 
standing trustees is supported by payments from chapter 7 and chapter 
13 estates. Though coming directly from the debtors, these payments 
obviously reduce the amounts that creditors might finally receive. So 
both bankruptcy estates and creditors pay large portions of the cost of 
operating both business and consumer bankruptcy operations. These are 
not usually considered to be costs of the courts per se, but they are 
absolutely essential components of the bankruptcy courts' ability to 
function effectively. The point is that users already pay a very large 
portion of the costs of running the bankruptcy system.

2.  . . . bankruptcy system be based on a user fee theory? To a 
significant extent, as described just above, the system already is 
based on user fees.

3.  . . . Who benefits from the bankruptcy system as a whole? Who 
benefits from the mega bankruptcy cases? It has been correctly said 
that America's reliance on free contracting for goods and services 
depends on a trustworthy system for resolving the problems that arise 
when contracts are not honored because of consumer and business 
failures. Bankruptcy law, along with state debtor-creditor laws, 
supports our reliance on contract law in a trustworthy way. The current 
contours of bankruptcy law arose from the problems encountered in 
sorting out the multi-state debts of failed railroads during the 
nineteenth century. The need for national jurisdiction and service of 
process has only increased since that time, and only bankruptcy law can 
provide these functions. Further, the combination of bankruptcy 
discharge (``a fresh start for the honest but unfortunate debtor''), 
opportunity for repayment to preserve non-exempt assets (in chapters 
11, 12, and 13), a court-administered, statutorily-defined system of 
re-payment priorities, and the all-important ``automatic stay'' 
(preventing the chaos of races to the courthouse under state law)--in 
brief, the key components of our bankruptcy system--benefit everyone: 
creditors, debtors, consumers, taxpayers. As to mega-bankruptcies, the 
key beneficiaries, in principle, are the reorganized debtor and those 
creditors of the debtor-in-possession whose treatment by the plan of 
reorganization is satisfactory to them. If mega-bankruptcies result in 
continuing operations of entities that would otherwise close their 
doors, then the employees and ongoing trade creditors of the entities 
also benefit. It is also well-known and sometimes lamented that the 
lawyers and other bankruptcy professionals who are retained by chapter 
11 estates are very highly paid for their services. Whether their fees 
are too large is a question I am not prepared to address here. It is 
also clear, but perhaps not sufficiently emphasized, that small equity 
holders are almost always complete losers in these cases. Of course, 
they might have been casualties under any other legal outcome as well, 
so one cannot merely lay blame on the priority system of the Bankruptcy 
Code for the unfortunate effects of share-price collapse. When the 
chapter 11 filing is accompanied by fraud or rank strategizing, 
however, there perhaps is a question of whether small equity should 
take such a big hit as a result of such a ``strategic'' bankruptcy 
filing.

4.  . . . study on the projected impact on the bankruptcy system of the 
Bankruptcy reform bill if it passes? I will mention two studies. The 
first is the GAO report 99-103, PERSONAL BANKRUPTCY: ANALYSIS OF FOUR 
REPORTS OF CHAPTER 7 DEBTORS' ABILITY TO PAY. This report clearly and 
accurately summarizes four separate studies of the likely impact, in 
terms of increased creditor payments in chapter 13, of the means-
testing regime that was proposed under H.R. 833 (or the closely related 
S.625) during the 106th Congress. Two points about the research 
described by GAO in this report: 1) in the interest of full disclosure, 
I note that I was an author of one of the four studies; and 2) nothing 
has happened in the meantime to change my opinion about the accuracy of 
our findings and their significance for evaluating consumer means-
testing proposals. The second study was a modest effort at predicting 
the effects of reform legislation on filings. It was published in the 
May, 2001 issue of the American Bankruptcy Law Journal, and may be 
retrieved in manuscript form at http://www.usdoj.gov/ust/press/
articles/abi01maynumbers.html This paper, of which I was also an 
author, concluded that passage will lead to an immediate run-up in 
filings as attorneys and their clients hurry to file under a familiar 
rubric. We also believe that there will be a brief lull immediately 
after implementation, as practitioners catch their breath and begin to 
assess more carefully their new obligations and risks under the law, 
which are considerable. However, after this dust settles, the usual 
secular trends in bankruptcy will reassert themselves. Filings will 
grow, in phases, with growth in population, GDP, and use of credit. The 
impact of mandatory credit counseling may slow the rate of growth in 
filings but not reverse its direction. The burdens on debtors's lawyers 
under the new act are likely to make it more difficult for deserving 
debtors to obtain adequate representation. There will be a period of 
substantially increased litigation over the implementation of many 
provisions of the legislation, both on the business and consumer sides. 
Whether creditors or anyone else will have benefited much from these 
new burdens imposed on debtors and their counsel remains to be seen.

5.  . . . increase or decrease in filings as a result of the new law? 
Please see the answer just above.

6.  . . . increase in efficiency of processing cases if the reform bill 
passes? No, there will not be. Efficiency gains have been taken to just 
about the limit in many if not most bankruptcy courts around the 
country. These gains have been driven to the place where there is a 
risk that the quality of judicial work per case either has become 
inadequate or soon will become so. The additional administrative and 
regulatory apparatus associated with the reform legislation (means 
testing, record keeping, lawyer sanctioning, etc.) is not designed to 
increase efficiency--quite the contrary is true. Of course the burdens 
associated with the legislation may slow or reduce filings, but it 
would be an error to believe that this is because undeserving or 
crooked would-be debtors have been selectively barred by the new 
provisions from cheating the system. Legal services for debtors may be 
harmed by the legislation, but this should not be counted as an example 
of efficiency.

7.  . . . should action on new judgeships await the results of the new 
time study and the impact of reform legislation? Absolutely not. The 
courts need the judges now, and in many cases have needed them for a 
while. As noted above, efficiency gains have been wrung out about as 
far as possible, and perhaps already are eroding quality of judicial 
oversight in some courts.

    Thank you for giving the opportunity to answer these questions. 
Please do not hesitate to call on me again if I can be useful to you.
            Sincerely,
                                                        /s/
                                             Gordon Bermant
                               __________
                                                       June 6, 2003
The Honorable Paul Mannes,
United States Bankruptcy Judge,
United States Bankruptcy Court for the District of Maryland
6500 Cherrywood Lane
Greenbelt, Maryland 20770

Dear Judge Mannes:
    Thank you for appearing before the Subcommittee on Commercial and 
Administrative Law at the hearing on H.R. 1428, the ``Bankruptcy 
Judgeship Act of 2003,'' on May 22, 2003. Your testimony, and the 
efforts you made to present it, are deeply appreciated and will help 
guide us in whatever action we take on this matter.
    Pursuant to the unanimous consent request agreed upon at the 
hearing, Subcommittee Members were given the opportunity to submit 
written questions to the witnesses. These questions are annexed. Your 
response will help inform subsequent legislative action on this 
important topic.
    Please submit your written response to these questions by 5:00 p.m. 
on Friday, June 13, 2003, to: Susan Jensen, Subcommittee on Commercial 
and Administrative Law, B353 Rayburn House Office Building, Washington, 
DC 20515. Your responses may also be submitted by e-mail to: 
[email protected]
    In addition, we have enclosed for your review a copy of the 
official transcript of this hearing. The transcript is substantially a 
verbatim account of remarks actually made during the hearing. 
Accordingly, please only make corrections addressing technical, 
grammatical, or typographical errors. No substantive changes are 
permitted. Please return any corrections you have to: Susan Jensen, 
Subcommittee on Commercial and Administrative Law, B353 Rayburn House 
Office Building, Washington, DC 20515 by June 20, 2003.
    If you have any questions regarding the enclosed questions or 
transcript, please feel free to contact Ms. Jensen at (202) 225-2825.
    Thank you for your continued assistance.
            Sincerely,
                                              Chris Cannon,
                                                   Chairman
                             Subcommittee on Commercial and
                                         Administrative Law

Enclosures

CC/sj

c:
        The Honorable Mel Watt
        The Honorable Tom Feeney

                QUESTIONS FOR THE HONORABLE PAUL MANNES

From Chairman Chris Cannon:

1.  In light of the fact that the current Judicial Conference request 
for additional bankruptcy judgeships eliminates judgeships previously 
requested for several districts, why should any newly authorized 
judgeship be appointed on a permanent as opposed to a temporary basis?

2.  Although no bankruptcy judgeships have been authorized for more 
than ten years, during a period in which bankruptcy filings skyrocketed 
and some of the largest Chapter 11 cases in our nation's history were 
filed, the federal bankruptcy judiciary was able to accommodate this 
increased case load without additional resources. Given this fact, why 
is it necessary at this time, after an elapse of ten years, to have 
additional bankruptcy judgeships authorized?

3.  Although overall bankruptcy filings have generally increased over 
the past few years, the number of Chapter 11 case filings have remained 
somewhat stable. In fact, Chapter 11 cases decreased by 6.6% in 2002 as 
compared to the prior year. Indeed, business filings overall between 
1998 and 2002 have decreased by nearly one-third. Is not the vast bulk 
of judge time consumer by Chapter 11 cases? If so, would you agree that 
the need for judicial resources may not be that substantial in light of 
the relatively minor increase in the number of Chapter 11 cases filed 
in the last 10 years?

4.  In certain districts, the number of Chapter 11 cases filed can be 
fairly nominal. For example, in the District of Vermont, only 7 Chapter 
11 cases were filed during the last year. Likewise, only 6 Chapter 11 
cases were filed in the District of Rhode Island during 2002. To your 
knowledge, are all judges in low-volume districts helping out in 
districts with high volumes?

From Vice-Chairman Tom Feeney:

1.  What effects would HR 1428 have on bankruptcy reform?

2.  Are there any studies or proposals that show that increasing the 
number of judges under HR 1428 would reduce the burden on bankruptcy 
courts or substantially modify them?

From Ranking Member Mel Watt:

1.  What is the bankruptcy court system costing the U.S. taxpayer?

2.  Shouldn't the bankruptcy system be funded based on a user fee 
theory, i.e., based on contributions from debtors and/or creditors?

3.  Who benefits from the bankruptcy system as a whole? Who benefits 
from the mega bankruptcy cases?

4.  Has there been a study on the projected impact on the bankruptcy 
system of the Bankruptcy reform bill if it passes?

5.  Will there be an increase or decrease in bankruptcy filings as a 
result of the new law if it passes?

6.  Will there be an increase in the efficiency of processing cases, 
whether or not there is an increase or decrease in filings, if the 
Bankruptcy reform bill passes?

7.  Shouldn't we have the results of the new bankruptcy time study and 
the results of the impact of the new bankruptcy law if it passes before 
we proceed with H.R. 1428?
                                 ______
                                 
                                                      June 13, 2003
The Honorable Chris Cannon, Chairman,
Subcommittee on Commercial and Administrative Law
2138 Rayburn House Office Building
Washington, DC 20515

Dear Chairman Cannon:
    Attached are the answers to the June 6 follow up questions to the 
May 22 hearing on H.R. 1428, the Bankruptcy Judgeship Act of 2003.
    These answers are submitted on behalf of the National Conference of 
Bankruptcy Judges (``NCBJ''). It has long been the policy of the NCBJ 
not to take positions as to substantive questions of bankruptcy law. 
Our comments as an organization are limited to matters of procedure 
only. We see our role as limited to making suggestions with respect to 
improvements in administration of the law as enacted. My answers also 
reflect my personal experience as a judge in the Bankruptcy Court for 
the District of Maryland. For some questions, I have deferred to the 
answers of the Judicial Conference.
            Sincerely,
                                 The Honorable Paul Mannes,
                             United States Bankruptcy Judge
                             United States Bankruptcy Court
                               for the District of Maryland
                                       6500 Cherrywood Lane
                                        Greenbelt, MD 20770
                                             (301) 344-8040

From Chairman Chris Cannon:

1.  In light of the fact that the current Judicial Conference request 
for additional bankruptcy judgeships eliminates judgeships previously 
requested for several districts, why should any newly authorized 
judgeship be appointed on a permanent as opposed to a temporary basis?

    The Judicial Conference's decision to propose a temporary or 
permanent judgeship for a judicial district is based upon the most 
recent caseweighted filings for that district. Additionally, the 
Judicial Conference reviews several other factors in determining 
whether to recommend a temporary or permanent judgeship. Such factors 
may anticipate the continuation or recession of a particular court's 
high case weight levels. The factors include the requesting district's 
present and historic case weights and filing trends, the nature and mix 
of the district's caseload, any geographic, economic, and demographic 
factors, the effectiveness of the court's case management efforts, and 
the availability of alternative resources for handling the court's 
caseload. The Judicial Conference will also consider a specific request 
by a circuit for a temporary or permanent judgeship for the judicial 
district at issue.
    The Conference does not automatically recommend that all new 
bankruptcy judgeships be temporary judgeships because many of the 
judicial districts at issue will continue to experience increasing case 
filings and burdensome case weight levels requiring permanent 
judgeships. To create only temporary judgeships promises the Judicial 
Conference's repeated return to Congress to request extension or 
conversion of those positions on a piece-meal basis. For example, in 
1997, the Judicial Conference recommended an extension of the temporary 
judgeship in the district of Delaware. Following two more years of 
sustained high case weight levels in that district, the Judicial 
Conference revised its recommendation for the district of Delaware's 
temporary judgeship in 1999, and now requests that judgeship be 
converted to permanent. If that judgeship were to remain temporary, the 
Judicial Conference may be required to return repeatedly to Congress 
for extensions.
    Further, an additional temporary judgeship may not be the most 
effective solution for a judicial district. For example, in 1992, 
bankruptcy judgeship legislation authorized one temporary bankruptcy 
judgeship for the District of South Carolina, increasing the authorized 
judgeships for that district from two to three. Prior to receiving the 
additional judgeship, South Carolina's weighted case filings were 
1,947; after the new judgeship the district's weighted case filings 
fell to 1,336. In December 2000 that temporary judgeship expired 
pursuant to the terms of the statute. Although its workload required 
three judges, the District of South Carolina was unable to prevent the 
statutory elimination of one of its judgeships. South Carolina now 
struggles with only two bankruptcy judges and a weighted caseload per 
judgeship of 2,898.
    In January 2003, the Judicial Conference transmitted its 
recommendation for additional bankruptcy judgeships to Congress. This 
recommendation did not include requests for additional judgeships for 
three judicial districts that were included in the Judicial 
Conference's 1999 recommendation. The Conference recommends additional 
temporary judgeships as a means to stabilize a district that needs 
immediate assistance, but for which the long term needs are uncertain. 
From 1995 through 1999, the Judicial Conference recommended a temporary 
judgeship for the Eastern District of New York. This is a district that 
exemplifies that theory. If a temporary judgeship had been created for 
the Eastern District of New York in 1995, that judgeship today would be 
past the five year mark at which point the next judgeship vacancy in 
that district would not be filled.
    There is a significant difference between merely accommodating a 
caseload and handling that caseload efficiently and effectively. As a 
result of the crush of cases felt in many districts, procedures have 
been adopted which attempt to expedite case resolution without the need 
for judicial intervention. For example, negative noticing has been used 
in some courts to eliminate the need for an appearance by the parties 
at a confirmation hearing unless one of the parties in interest 
provides written notice of intent to appear. This procedure has made it 
possible for judges in such districts to handle calendars of 150 to 300 
cases in a day. However, most judges would prefer to have an 
opportunity to hear from and speak to the debtor prior to confirmation. 
The reality is that the opportunity is too costly in terms of time.
    Another symptom of the pressure under which many districts are 
operating is the near impossibility of scheduling a hearing on short 
notice. In many districts, calendars are so crowded that a hearing 
which ordinarily would take several hours or a day is spread over 
months with snatches of time grabbed where possible. One result of this 
crowding is that it is not always possible to hear a matter as quickly 
as might otherwise be desired, with the consequence that one or more 
party's interests are impaired, as in the case of a dissipating asset.
    It is also important to note the critical function of the councils 
of the circuit courts of appeal in appointing bankruptcy judges. 
Circuit councils act as careful stewards of funds appropriated for the 
administration of the bankruptcy system. The fact that an unfilled 
bankruptcy judgeship position exists does not mandate that a judge be 
appointed to fill that position. For example, four authorized 
bankruptcy judgeships have never been filled. There are now six 
bankruptcy judgeships that are vacant as a result of decisions by the 
circuit courts not to fill them. These positions will remain so until 
the need arises for appointing a judge to fill that position. On the 
other hand, if temporary judgeships are created, and the district's 
needs continue to justify the continuance of the temporary judgeship, 
those needs are unfilled with respect to vacancies occurring five years 
after the appointment of the temporary judge. For example, because the 
retirement of Judge J. Bratton Davis of South Carolina occurred on 
December 31, 2000, more than five years after the appointment of Judge 
John Waites to a temporary bankruptcy judgeship position in 1994, that 
district has been seriously understaffed ever since.

2.  Although no bankruptcy judgeships have been authorized for more 
than ten years, during a period in which bankruptcy filings skyrocketed 
and some of the largest Chapter 11 cases in our nation's history were 
filed, the federal bankruptcy judiciary was able to accommodate this 
increased caseload without additional resources. Given this fact, why 
is it necessary at this time, after an elapse of ten years, to have 
additional bankruptcy judgeships authorized?

    The Judicial Conference has requested Congressional authorization 
of additional bankruptcy judges for ten years. Many of the same 
districts repeatedly request additional judgeships and increase the 
number of requested judgeships because the need in those districts has 
not abated. The backlog of recommended additional bankruptcy judges 
coupled with rising case filing has caused the need for 36 additional 
judgeships. The judiciary is unable to authorize additional judgeships 
when they are needed, and must rely upon Congress to do so. In the 
absence of Congressional action on the Judicial Conference's bankruptcy 
judgeship request, the judiciary has done its best to assist 
overburdened courts with temporary measures, such as recalled 
bankruptcy judges, intercircuit assignment of bankruptcy judges, 
advanced case management techniques, and the use of technology, such as 
video conferencing. At this point, however, even the temporary measures 
are at capacity. The overburdened courts are unable to provide the 
level of service that litigants deserve--the most frequently heard 
complaint from the bar is the lack of access to hearing time and 
overcrowded dockets. In light of record-breaking case filings, rising 
weighted caseload per judgeship, and complex mega-cases, the judiciary 
cannot continue to accommodate the increasing workload with existing 
judicial resources.
    With the heavy caseloads affecting the districts for which help is 
being sought, bankruptcy judges are unable to give cases the attention 
that they require. This failure is felt in many sectors. In business 
cases, it is critical that companies not stay in the expensive mode of 
doing business a minute longer than necessary while these companies 
operate under the regime of Title 11. This is an expensive and awkward 
means of handling the affairs of an ongoing business. Favorable 
transactions often fall through because of the inability to get rapid 
court approval, particularly if a party in interest objects. In the 
course of administration of a bankruptcy case many matters do not get 
the close attention that the bankruptcy code requires because of the 
lack of judicial resources. Examples of such are complex fee 
applications, motions to settle disputes arising on claims or in 
actions by the bankruptcy estate to recover money, and motions to 
assume executory contracts. Individual debtors, particularly those 
representing themselves, often leave the court with the bitter 
impression with some justification that their cases have not received 
enough time for serious consideration. They do not understand what has 
taken place. Pro se representation occurs in more and more cases with 
the passage of time, because of the escalating costs of delivery of 
legal services puts adequate representation out of the reach of poor 
debtors most in need of the fresh start that Congress has provided by 
the bankruptcy discharge. Pro se cases generally take up multiples of 
the amount of time required to handle a matter where the parties are 
represented by counsel. Parties representing themselves will adopt wild 
theories downloaded from the Internet as to such matters as the Federal 
Reserve System or their obligation to pay income tax. Finally, in those 
few cases where fraudulent schemes are woven through the case, the 
judges do not have the time to unweave the complexities of the case 
where only the tip of the iceberg appears.

3.  Although overall bankruptcy filings have generally increased over 
the past few years, the numbers of Chapter 11 case filings have 
remained somewhat stable. In fact, Chapter 11 cases decreased by 6.6% 
in 2002 as compared to the prior year. Indeed, business filings overall 
between 1998 and 2002 have decreased by nearly one-third. Is not the 
vast bulk of judge time consumer by Chapter 11 cases? If so, would you 
agree that the need for judicial resources may not be that substantial 
in light of the relatively minor increase in the number of Chapter 11 
cases filed in the last 10 years?

    While it is true that the most time consuming type of case is the 
average Chapter 11 case, Chapter 11 cases do not consume most, or even 
the majority of judge time. For the year ended March 31, 2003, the 
average Chapter 11 case required 8.4 hours of direct judge time. But, 
there were many more cases filed in other chapters. Thus, while the 
average Chapter 7 case required on 0.12 hours of judge time, there were 
106 such cases filed for each Chapter 11 case. Chapter 13 cases 
required on average about 0.4 hours of judge time apiece, but there 
were 43 filed for each Chapter 11 case filed.
    For the year ended March 31, 2003, the average judge was assigned 
33 Chapter 11 cases, AND was assigned 3,504 Chapter 7 cases, 1,433 
Chapter 13 cases, and 491 adversary proceedings. The Chapter 11 cases 
will require a total of about 277 judge hours, but the other cases, 
together, will require 1,493 hours of judge time. In addition, the 
Federal Judicial Center estimates that the average judge will spend 
about 660 hours in research, court and chambers administrative matters 
and other activities not directly traceable to a specific case. This 
total of 2,430 hours of judicial time per year excludes any time for 
vacation, holidays or sick time.
    The individual debt repayment cases of Chapter 13 can be enormously 
complex with several valuation hearings, claims objections and motions 
for relief from stay in addition to confirmation issues. 
Dischargeability and discharge cases brought under 11 U.S.C. 
Sec. 523(a) and Sec. 727(a) can be time consuming as they are fact 
intensive. A case can take several days that is brought by the ex-
spouse of a debtor in proper person under 11 U.S.C. Sec. 523(a) (15) 
against the debtor who can no longer afford an attorney to defend. 
Chapter 7 cases of failed businesses bring with them large numbers of 
adversary proceedings to collect outstanding bills or to recover 
preferences and fraudulent conveyances. In order for a bankruptcy judge 
to proceed in the capacity of prosecuting cases for substantial abuse 
of Chapter 7 of the bankruptcy code under 11 U.S.C. Sec. 707(b), that 
judge must have the time to sift through schedules. Few judges in 
impacted courts have the time to devote to this function, and as a 
consequence these cases are left only to the United States Trustee to 
prosecute.

4.  In certain districts, the number of Chapter 11 cases filed can be 
fairly nominal. For example, in the District of Vermont, only 7 Chapter 
11 cases were filed during the last year. Likewise, only 6 Chapter 11 
cases were filed in the District of Rhode Island during 2002. To your 
knowledge, are all judges in low-volume districts helping out in 
districts with high volumes?

    Of the courts with relatively low judicial workload, virtually all 
are either one- or two-judgeship courts. It is impractical in most 
cases for a judge sitting in one of these courts to provide significant 
services as a visiting judge in another district because it would leave 
the judge's home district with no bankruptcy judge (in the case of one-
judge courts) or because it would overburden the remaining home 
district judge (in the case of a two-judge court).
    Through intercircuit and intracircuit assignment, bankruptcy judges 
are able to provide assistance to overburdened courts in other 
districts and circuits. Participation in the intercircuit and 
intracircuit system is voluntary, both for the judge who provides 
assistance and the district requesting assistance. Intercircuit 
assignment of a bankruptcy judge is agreed upon between the two 
circuits involved; the judiciary does not assign bankruptcy judges to 
intercircuit assignments. Intercircuit assignments can be of varying 
length, but usually involve several weeks of service in another 
district per year in addition to that judge's duties and obligations in 
his or her home district.
    However, judges in low volume districts have in the past and will 
continue to help out their overloaded colleagues. In my court for 
example, we have received help from judges from Illinois, New Mexico, 
West Virginia, Virginia, North Carolina, Oklahoma and Louisiana among 
other districts. However, the help rendered by a visiting judge must be 
limited to certain well-defined matters such as discrete adversary 
proceedings or objections to specific claims, as much of the bankruptcy 
judge's work involves application of local law. Delegating parts of 
larger cases to visiting judges does not work in the most part as there 
is a great benefit to having a single judge handle a case from 
beginning to end. Often parties take advantage of visiting judges by 
changing positions in mid-stream and ``forgetting'' what they said to 
the judge assigned to the case. In addition, the visiting judge often 
has to rely upon the legal assistant or law clerk of the judge being 
assisted. This detracts from the benefit, as that judge must take time 
to do matters that the staff would otherwise do.
    Further, there are more factors than home district case filings 
involved in a bankruptcy judge's ability to voluntarily travel to 
assist an overburdened circuit. In some states, bankruptcy judges 
travel extensively to hold court around a geographically vast area 
(e.g. the Eastern and Western Districts of Arkansas, the District of 
Alaska, the District of North Dakota). Those judges who have time 
beyond that required administering their own districts often serve on 
the Bankruptcy Appellate Panels of several circuits, a process that 
produces speedy and informed reviews of the judgments of bankruptcy 
judges. This process takes a large caseload of unfamiliar matter off 
the backs of District Judges, who must give priority in administering 
their caseload to criminal cases. Additionally, some judges with 
lighter caseloads are unable to travel based upon individual family 
circumstances, such as aged parents or special needs children. 
Therefore, all bankruptcy judges from ``low volume'' districts are not 
assisting in overburdened courts.

From Vice-Chairman Tom Feeney:

1.  What effects would H.R. 1428 have on bankruptcy reform?

    H.R. 1428 will provide the judicial resources to deal with the 
existing and crushing overload on the system, so that the 
implementation of Bankruptcy Reform legislation will be far less 
burdensome to the system. In the 180 days following enactment of 
Bankruptcy Reform, judges, particularly those in the impacted 
districts, will have more time to become familiar with the massive 
revision of bankruptcy law. However it should be observed that the 
process of selecting and appointing bankruptcy judges can take 
considerable time. In my district our fourth position was created by 
the Act of August 26, 1992, P.L. 102-361. The position was not filled 
until the appointment of Judge Duncan Wray Keir on November 12, 1993.

2.  Are there any studies or proposals that show that increasing the 
number of judges under H.R. 1428 would reduce the burden on bankruptcy 
courts or substantially modify them?

    I will defer to the Judicial Conference on the issues of studies. 
In my opinion, having more judges to share the load will be a great 
benefit to the administration of justice. Parties in impacted districts 
will get quicker hearings that are not artificially limited by the need 
of the bankruptcy judge to get to other matters. Judges will have time 
to review papers in advance of the hearings and to explain decisions. 
In addition there will be more time available to smoke out those few 
but very disturbing cases involving bankruptcy fraud or oppressive 
creditor conduct.

From Ranking Member Mel Watt:

1.  What is the bankruptcy court system costing the U.S. taxpayer?

    I understand that the answer to this question will be provided by 
Judge Melloy representing the Judicial Conference.

2.  Shouldn't the bankruptcy system be funded on a user fee theory, 
i.e., based on contributions from debtors and/or creditors?

    This question is one of policy. As stated earlier the NCBJ does not 
take positions on such matters.

3.  Who benefits from the bankruptcy system as a whole? Who benefits 
from the mega bankruptcy cases?

    The benefits to the bankruptcy system are manifest by asking the 
question, ``What would the situation be, if Title 11 did not exist?'' 
This inquiry begins with the honest debtor who has incurred debt beyond 
any reasonable ability to repay. These debts could have arisen from 
such causes as uninsured medical expenses, loss of employment, failed 
business ventures, imprudent borrowing and so forth. If the person is 
employed, earnings will be attached. Any property owned is subject to 
seizure for payment of the debts. The individual is left to live from 
day to day at the subsistence level, without hope of acquiring 
anything. The individual must live on in a state of perpetual 
indentured servitude. There is a temptation to live ``off the books'' 
and engage in other unlawful activity. Further as Prof. Thomas H. 
Jackson points out in The Logic and Limits of Bankruptcy Law, 231 
(1986), ``if there were no right of discharge, an individual who lost 
his assets to creditors might rely instead on social welfare 
programs.'' Congress decides what debts are not discharged, such as 
taxes, child support and those arising out of dishonest actions of the 
debtor. For the most part, state exemption laws determine how much 
property of the debtor is exempt from the claims of creditors. These 
vary among the states, for example, Maryland allots $6,000.00 in 
exemptions to debtors, while some states allow unlimited homestead 
exemptions.
    Bankruptcy provides an efficient collective means of debt 
collection. With insolvent debtors, such assets as exist are divided 
among creditors of equal priority. The rush to the courthouse to devour 
the carcass of a failing business are of no avail, because the trustee 
may recapture those pre-bankruptcy payments as a preference and divide 
them equitably among creditors. To assist with the collective effort, 
the trustee has extraordinary powers to avoid fraudulent conveyances, 
recover property and collect accounts. Bankruptcy provides an efficient 
forum to maximize returns to creditors.
    Chapter 11 provides a means to provide to creditors the value of a 
going concern as opposed to the liquidation of buckets of used parts. 
If the debtor can propose a plan to meet the rigorous test of 11 U.S.C. 
Sec. 1129 and obtain necessary creditor approval, then the debtor as an 
ongoing business will be able to pay back far more over the course of 
the plan then would be paid back through liquidation of its assets 
through forced sales. The business remains intact, and jobs of working 
people are saved. It is a ``win win'' situation. Companies file cases 
under Chapter 11 for a variety of reasons. An important customer may 
default on an account. A bank that has dealt with a debtor for 30 or 
more years may be swallowed up in a merger, and the mega-bank taking 
over may have no interest in continuing to do business with a company 
that has never been late in any payment and never defaulted in any 
respect. In many cases, the bankruptcy court is the only place to turn 
for that company and others facing a temporary liquidity problem. The 
bankruptcy process allows that company time to recover and make 
arrangements.
    Chapters 12 and 13 of the bankruptcy code allow individuals and 
farmers to enter into arrangements supervised by a trustee where future 
income is devoted to plans for the extension or composition of debts. 
This enables families to save their homes and to remain together when 
the wage earner is laid off or sustains an injury. It is especially 
helpful in cases involving the elderly who are often victimized and 
make unwise choices. Unlike younger debtors who have income and little 
property, the older debtor may have property and little income aside 
from social security or a pension. One untoward event can disturb the 
delicate equilibrium keeping their financial ship afloat. In Chapter 13 
they are able to work out a plan to live out their lives in dignity.

4.  Has there been a study on the projected impact on the bankruptcy 
system of the Bankruptcy reform bill if it passes?

    I will defer to the Judicial Conference on the answer to this 
question.

5.  Will there be an increase or decrease in bankruptcy filings as a 
result of the new law if it passes?

    I think that the same numbers of debtors will seek relief under the 
bankruptcy code. I suspect that more cases will be filed or converted 
to cases under Chapter 13, and cases under Chapter 13 are generally 
more time-consuming for the bankruptcy judge. In any event, if history 
is any reference, there will be an extraordinary number of cases filed 
immediately before the Reform Bill becomes law. In 1981, when Maryland 
opted out of the federal scheme of exemptions pursuant to 11 U.S.C. 
Sec. 522(b)(1), there were so many cases filed that the clerk accepted 
petitions in the parking lot of the court much like last minute tax 
return filings on April 15.

6.  Will there be an increase in the efficiency of processing cases, 
whether or not there is an increase or decrease in filings, if the 
Bankruptcy reform bill passes?

    I will defer to the Judicial Conference on the answer to this 
question. I would also observe that there will be additional work for 
bankruptcy judges in implementing the means test for individual 
debtors. Findings of fact would be required for each case. My 
experience is that trustees have quite a struggle in getting pro se 
debtors to produce records. I see this often in cases under Chapter 13 
where debtors take a great deal of time to come up with records as to 
income and expenses, and where the trustee must have proof of payment 
of taxes that if unpaid would be entitled to priority.

7.  Shouldn't we have the results of the new bankruptcy time study and 
the results of the impact of the new bankruptcy law if it passes before 
we proceed with H.R. 1428?

    We should not wait for the results of the bankruptcy time study and 
results of the impact of the new bankruptcy law if it passes before 
H.R.1428 is enacted. There has not been an additional bankruptcy 
judgeship slot authorized since August 1992. Yet in those 10 years, 
there has been a tremendous increase in the caseload. As the Judicial 
Conference has reported, the volume of bankruptcy filings reached an 
historic high of over 1.5 million filings for fiscal year 2002. This is 
a 59% increase in the caseload since Congress last authorized 
judgeships in 1992. These additional judgeships are critical to ensure 
that our bankruptcy court system continues to function effectively.
    The 36 judgeships in HR 1428 reflect the most current 
recommendation of the Judicial Conference, based on the most recent 
data. These judgeships are requested for those districts with a 
justified need now for additional assistance. A review of the latest 
weighted filings per judge data for the 12 months ending March 31, 
2003, shows that in 20 of the 22 districts that qualify for judgeships, 
the weighted filings are over 2000 per judgeship. For example, in the 
District of Utah, the weighted caseload per judge is 2,115. In the 
District of Delaware, the weighted caseload per judge is 12,566.

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