[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]





                       BANKRUPTCY JUDGESHIP NEEDS

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

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                   COMMERCIAL AND ADMINISTRATIVE LAW

                                 OF THE

                       COMMITTEE ON THE JUDICIARY
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                             JUNE 16, 2009

                               __________

                           Serial No. 111-42

                               __________

         Printed for the use of the Committee on the Judiciary


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



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                       COMMITTEE ON THE JUDICIARY

                 JOHN CONYERS, Jr., Michigan, Chairman
HOWARD L. BERMAN, California         LAMAR SMITH, Texas
RICK BOUCHER, Virginia               F. JAMES SENSENBRENNER, Jr., 
JERROLD NADLER, New York                 Wisconsin
ROBERT C. ``BOBBY'' SCOTT, Virginia  HOWARD COBLE, North Carolina
MELVIN L. WATT, North Carolina       ELTON GALLEGLY, California
ZOE LOFGREN, California              BOB GOODLATTE, Virginia
SHEILA JACKSON LEE, Texas            DANIEL E. LUNGREN, California
MAXINE WATERS, California            DARRELL E. ISSA, California
WILLIAM D. DELAHUNT, Massachusetts   J. RANDY FORBES, Virginia
ROBERT WEXLER, Florida               STEVE KING, Iowa
STEVE COHEN, Tennessee               TRENT FRANKS, Arizona
HENRY C. ``HANK'' JOHNSON, Jr.,      LOUIE GOHMERT, Texas
  Georgia                            JIM JORDAN, Ohio
PEDRO PIERLUISI, Puerto Rico         TED POE, Texas
MIKE QUIGLEY, Illinois               JASON CHAFFETZ, Utah
LUIS V. GUTIERREZ, Illinois          TOM ROONEY, Florida
BRAD SHERMAN, California             GREGG HARPER, Mississippi
TAMMY BALDWIN, Wisconsin
CHARLES A. GONZALEZ, Texas
ANTHONY D. WEINER, New York
ADAM B. SCHIFF, California
LINDA T. SANCHEZ, California
DEBBIE WASSERMAN SCHULTZ, Florida
DANIEL MAFFEI, New York

       Perry Apelbaum, Majority Staff Director and Chief Counsel
      Sean McLaughlin, Minority Chief of Staff and General Counsel
                                 ------                                

           Subcommittee on Commercial and Administrative Law

                    STEVE COHEN, Tennessee, Chairman

WILLIAM D. DELAHUNT, Massachusetts   TRENT FRANKS, Arizona
MELVIN L. WATT, North Carolina       JIM JORDAN, Ohio
BRAD SHERMAN, California             DARRELL E. ISSA, California
DANIEL MAFFEI, New York              J. RANDY FORBES, Virginia
ZOE LOFGREN, California              HOWARD COBLE, North Carolina
HENRY C. ``HANK'' JOHNSON, Jr.,      STEVE KING, Iowa
  Georgia
ROBERT C. ``BOBBY'' SCOTT, Virginia
JOHN CONYERS, Jr., Michigan

                     Michone Johnson, Chief Counsel

                    Daniel Flores, Minority Counsel





                            C O N T E N T S

                              ----------                              

                             JUNE 16, 2009

                                                                   Page

                           OPENING STATEMENTS

The Honorable Steve Cohen, a Representative in Congress from the 
  State of Tennessee, and Chairman, Subcommittee on Commercial 
  and Administrative Law.........................................     1
The Honorable Jim Jordan, a Representative in Congress from the 
  State of Ohio, and Member, Subcommittee on Commercial and 
  Administrative Law.............................................     2
The Honorable John Conyers, Jr., a Representative in Congress 
  from the State of Michigan, Chairman, Committee on the 
  Judiciary, and Member, Subcommittee on Commercial and 
  Administrative Law.............................................     3

                               WITNESSES

The Honorable Barbara M.G. Lynn, United States District Court for 
  the Northern District of Texas, on behalf of the Judicial 
  Conference of the United States
  Oral Testimony.................................................     5
  Prepared Statement.............................................     7
The Honorable David S. Kennedy, United States Bankruptcy Court 
  for the Western District of Tennessee, on behalf of the 
  National Conference of Bankruptcy Judges
  Oral Testimony.................................................    55
  Prepared Statement.............................................    58
Mr. William Jenkins, Jr., Ph.D., United States Government 
  Accountability Office
  Oral Testimony.................................................    74
  Prepared Statement.............................................    76
Ms. Carey D. Ebert, Ebert Law Offices, P.C., on behalf of the 
  National Association of Consumer Bankruptcy Attorneys
  Oral Testimony.................................................    94
  Prepared Statement.............................................    96

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

Prepared Statement of the Honorable Henry C. ``Hank'' Johnson, 
  Jr., a Representative in Congress from the State of Georgia, 
  and Member, Subcommittee on Commercial and Administrative 
  LawNames here..................................................     4

                                APPENDIX
               Material Submitted for the Hearing Record

Response to Post-Hearing Questions from the Honorable Barbara 
  M.G. Lynn, United States District Court for the Northern 
  District of Texas..............................................   118
Prepared Statement of the Financial Counseling Research 
  Roundtable.....................................................   124

 
                       BANKRUPTCY JUDGESHIP NEEDS

                              ----------                              


                         TUESDAY, JUNE 16, 2009

              House of Representatives,    
                     Subcommittee on Commercial    
                            and Administrative Law,
                                Committee on the Judiciary,
                                                    Washington, DC.

    The Subcommittee met, pursuant to notice, at 11:14 a.m., in 
room 2141, Rayburn House Office Building, the Honorable Steve 
Cohen (Chairman of the Subcommittee) presiding.
    Present: Representatives Cohen, Conyers, Watt, Scott, and 
Jordan.
    Staff present: (Majority) James Park, Counsel; Adam 
Russell, Professional Staff; and (Minority) Zachary Somers, 
Counsel.
    Mr. Cohen. This hearing of the Committee on the Judiciary, 
Subcommittee on Commercial and Administrative Law, will now 
come to order.
    Without objection, the Chair will be authorized to declare 
a recess of the hearing. I will now recognize myself for a 
short statement.
    Bankruptcies have been steadily on the rise since October 
2006, well before the current economic downturn. With the 
significant recession that the country is currently 
experiencing, particularly when combined with the related 
foreclosure, consumer credit and health care crises, this trend 
has been exacerbated significantly.
    According to the Administrative Office of the U.S. Courts--
there were over 1 million bankruptcy filings nationwide for the 
12-month period ending March 31, 2009, representing a 33 
percent increase over the 12-month period ending March 31, 
2008.
    Moreover, the sharpest increase in filings was in Chapter 
11 cases, where there were--nearly 70 percent increase over the 
previous year. And bankruptcies involving primarily business 
debts were up almost 60 percent in that same period of time.
    We have had some hearings in this Committee on Chapter 11 
and problems associated therewith. We have been hearing for 
some time that the country is facing the greatest economic 
crisis since the great depression, and these numbers are stark 
evidence of that assertion.
    A well-functioning bankruptcy system is absolutely critical 
to helping individuals and businesses weather this economic 
storm, and having a sufficient number of bankruptcy judges is 
key to making that system work.
    Bankruptcies are extremely high in my district, in the 
Western District of Tennessee, and one of my predecessors, 
Walter Chandler, had a lot to do with drafting the bankruptcy 
laws back in the late 1930's.
    Today we consider the recommendations of the Judicial 
Conference of the United States with respect to bankruptcy 
judgeships.
    The Judicial Conference recommends the authorization of 13 
new bankruptcy judgeships, the conversion of 22 temporary 
judgeships to permanent status, and the extension of two 
temporary judgeships for another 5 years.
    In total, the recommendation affects 25 judicial districts 
in nine of the 12 geographically based Federal judicial 
circuits.
    The Judicial Conference's recommendations are based on its 
comprehensive study of bankruptcy judgeship needs.
    Last time Congress authorized or even addressed the issue 
of bankruptcy judgeships was almost 4 years ago, when it 
authorized 28 temporary judgeships in the Bankruptcy Abuse 
Prevention and Consumer Protection Act of 2005 that are now 
about to expire.
    Unfortunately, that is not all that is about to expire, but 
that is all.
    It is well past time that we revise and revisit the 
critical issue of bankruptcy judgeships needs and I am 
gratified that we are able to do so today. Accordingly, I look 
forward to hearing testimony this morning.
    And I would now like to recognize Mr. Jordan, who is the 
Ranking Member once removed, for his opening remarks.
    Mr. Jordan. Thank the Chair for recognizing--for that nice 
title.
    Mr. Chairman, I, too, want to begin by thanking you for 
holding this hearing and thank our witnesses who are here today 
for taking time out of their schedule.
    As some of you know, additional permanent bankruptcy judges 
have not been authorized since 1992. Although the House has 
passed on more than one occasion legislation authorizing 
additional permanent bankruptcy judges since--since that 1992 
date, the Senate, unfortunately, has not acted on this 
legislation.
    Obviously, judges are crucial to the bankruptcy process. 
They, with the help of bankruptcy trustees, ensure that the 
work is completed, creditors are paid, assets are properly 
disbursed.
    If judicial workloads become overburdened, it prevents 
bankruptcy cases from advancing as they should. This either 
prolongs the bankruptcy process or subtracts from the amount of 
time judges can dedicate to each of the cases on their dockets.
    As consumers and businesses seek to use bankruptcy as a 
means to receiving a fresh start from the economic stress 
they--the current recession has caused, it is important that we 
have a sufficient number of judges to make the system work 
properly.
    The need for additional judges is premised on a 
comprehensive study of judicial resource needs conducted by the 
Judicial Conference. With the expertise of our witnesses, 
today's hearing should provide a useful opportunity for us to 
obtain a greater understanding of how the Judicial Conference 
assesses the Nation's bankruptcy judgeship needs and assures 
that all currently authorized judicial resources are maximized.
    I do want to note that I have some concerns that the 1991 
case weights that are the basis for the current study of 
bankruptcy judgeship needs are woefully out of date. There are 
understandable reasons as to why the study is so out of date.
    Nonetheless, I will be interested in the witnesses' 
testimony regarding the current study, whether it can be relied 
on, and what the cost to the bankruptcy system will be of 
waiting until an updated survey and study--which I understand 
is currently in the works--is, in fact, completed.
    I look forward to our witnesses' testimony. Of course, I do 
have to leave here in about a half an hour, so--look forward to 
the--their testimony nonetheless, and yield back my time.
    Mr. Cohen. I thank the gentleman for his statement.
    And I now recognize Mr. Conyers, the most distinguished 
Member of the Subcommittee, from the great city of Detroit, 
which is having some interaction with the bankruptcy courts, I 
believe, for an opening statement and welcome him.
    Mr. Conyers. Thank you, Mr. Chairman.
    I am here to commend you for taking this subject up as 
rapidly as you have with the Committee. I am very proud of the 
witnesses that have joined us for this discussion.
    And I don't think it is tipping off anybody to anything, 
but we have a roughly bipartisan agreement, a consensus, on the 
need for more judges. Now, I won't say that that is elementary, 
because nothing in the Congress is elementary. You may think it 
is elementary, but it is very important.
    And I hope with the distinguished group that you have 
gathered here today for this discussion that we go underneath 
the--call a need for more numbers. I mean, that is--I don't 
know how you could argue that.
    But what else do we need to look at in--in this whole 
unique part of the Federal judiciary? What else needs to be 
examined? This is the Committee that has that jurisdiction.
    So we don't want to just have a superficial discussion 
about how many numbers we need, how fast we need them, how we 
need to make permanent all the temporaries that are about to 
expire, but what--what about the bankruptcy court and the 
procedures and rules and conduct in which it operates, and the 
tragedy that millions of people are now being forced into this 
as a way out?
    This is a relief valve. It is no longer an embarrassment. 
It used to be a disgrace. Nobody would ever want to talk about 
it. That period of time in our culture is gone. You are hoping 
you can get into bankruptcy.
    And now the problem is there is long lines. You can't even 
get there in a timely fashion. So a lot of damage goes on in 
the meantime, while you are processing a person, a family, a 
small business for this economic circumstance that has befallen 
them.
    So I am proud to be on your Committee.
    Mr. Cohen. Thank you. Appreciate your statement. Likewise, 
I reciprocate. I am proud to be on your Committee.
    Without objection, other Members' opening statements will 
be included in the record.
    [The prepared statement of Mr. Johnson follows:]
 Prepared Statement of the Honorable Henry C. ``Hank'' Johnson, Jr., a 
   Representative in Congress from the State of Georgia, and Member, 
           Subcommittee on Commercial and Administrative Law


                               __________

    Mr. Cohen. I am now pleased to introduce the witness--the 
first witness, and we introduce our witnesses just prior to 
their speaking in this hearing today.
    I want to thank everybody here for their appearing and 
their testimony. Without objection, your written statements 
will be placed in the record. We ask you limit your oral 
remarks to 5 minutes.
    There is a lighting system. It shows that if you--green 
light means you have started and you have got anywhere from 5 
to 1 minute left. When it hits yellow, you are in your last 
minute. And when it goes to red, you should have--be concluding 
promptly.
    After each witness has presented his or her testimony, 
Subcommittee Members will be permitted to ask questions, also 
subject to the 5-minute limitation. And you have got a button 
there when you do start to push to turn on your microphone.
    Our first witness is Ms. Barbara Lynn--it is to your right 
hand, your index finger, kind of like when you are going on the 
airplane on that clear deal.
    Our first witness is Barbara Lynn. Judge Lynn took the oath 
of office as United States district judge for the Northern 
District of Texas on Valentine's Day 2000.
    Judge Lynn is chair of the committee on the administration 
of bankruptcy systems, the Judicial Conference of the United 
States, and been very involved in different ABA activities. And 
we appreciate Judge Lynn for being here.
    And you can begin your testimony.
    Judge Lynn. Good morning.
    Mr. Cohen. Good morning.
    Is she on?
    Are you on?

  TESTIMONY OF THE HONORABLE BARBARA M.G. LYNN, UNITED STATES 
DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS, ON BEHALF OF 
          THE JUDICIAL CONFERENCE OF THE UNITED STATES

    Judge Lynn. Better? Yes. All right. Good morning.
    Chairman Cohen, Chairman Conyers and Members of the 
Subcommittee, as Chairman Cohen has told you, I am a district 
judge in Dallas, Texas. I am also the chair of the 
administration of the bankruptcy system committee of the 
Judicial Conference, and it is in that capacity that I appear 
before you today.
    I am pleased to testify in support of the recommendations 
for bankruptcy judges. Sufficient judicial resources are 
essential to ensure that our bankruptcy courts can effectively 
and efficiently determine the rights and the responsibilities 
of parties in cases before them.
    In performing its statutory duty to advise Congress on the 
need for bankruptcy judgeships, our Judicial Conference makes 
biennial recommendations for the authorization of additional 
bankruptcy judgeships, the continuing need for existing 
bankruptcy judgeships and other judgeship actions.
    In exercise of that duty, as the chairman has advised, we 
recommend that Congress authorize the following: 13 new 
permanent bankruptcy judgeships, the conversion of 22 existing 
temporary judgeships to permanent status, and the extension of 
two temporary bankruptcy judgeships for 5 years.
    The need for these judgeships is critical. Our filings are 
approaching near-record levels, just as the bankruptcy courts 
are in peril of losing many of their judicial resources--
specifically, the temporary judgeships, which were created or 
extended by Congress in connection with the passage of the 
Bankruptcy Abuse Prevention and Consumer Protection Act, which 
we in the field call BAPCPA.
    Today I urge your assistance in passing the judgeship 
legislation which will alleviate these overcrowded dockets and 
assure that the bankruptcy system can satisfy its vital 
mission, which is much in the minds of the public in our 
current economic circumstances.
    These judgeships are, I submit to you, essential to the 
administration of justice. Although the Judicial Conference 
sought 47 additional permanent and temporary judgeships in 
early 2005, the year when BAPCPA was passed, only 28 temporary 
judgeships were authorized, and most of those were based on an 
outdated 1999 judicial conference recommendation.
    All of the temporary judgeships authorized or extended by 
BAPCPA are now approaching their lapse dates, after which the 
next vacancies in those districts cannot be filled.
    At the same time, the workload of bankruptcy judges has 
substantially and steadily increased since the first full year 
after BAPCPA took effect, and filings are nearing pre-BAPCPA 
levels.
    Without congressional action on the judicial resources 
recommended by the conference, bankruptcy courts could 
simultaneously face record filings and a reduction in judicial 
resources needed to handle them.
    Both business and non-business case filings are increasing 
dramatically. Pro se filings, which require additional judicial 
time to equitably adjudicate, are among these increased 
filings.
    Moreover, the provisions of BAPCPA have added to the 
particular work required of bankruptcy judges in each case.
    To be specific about the picture of bankruptcy over the 
last several years, I note that bankruptcy case filings have 
increased steadily. The Chairman mentioned these numbers, so I 
will not repeat them, but I will simply say that as of the year 
ending March 31, 2009, the number of filings from 2006 had 
doubled.
    We are now at 1.2 million as of that time frame, without 
even accounting for seasonal adjustments. And that is nearly 60 
percent higher than it was during the first year following 
BAPCPA's passage.
    The judicial conference fully understands the current 
budget climate, and its recommendation for authorization of 
additional judgeships is not undertaken lightly. The districts 
that require additional resources have shown a sustained need 
for additional judgeships, and they remain overburdened by 
crushing caseloads.
    I will cite the Eastern District of Michigan as an example, 
and we have requested additional resources there since 1993.
    In the Western District of Tennessee, where my colleague 
Judge David Kennedy sits and Representative Cohen, of course--
is your district, a permanent judgeship has been recommended 
since 1997.
    If the temporary judgeship authorized by BAPCPA expires 
with the next vacancy in or after July 2011, that district will 
revert to the number of judges it had in 1992 before it 
experienced a dramatically increased workload.
    The conference takes seriously its role as a steward of 
taxpayer dollars, and I assure you that we have requested 
judgeship vacancies be filled only where there is a workload 
need after exploring all alternatives to filling the need for 
additional resources.
    It is our view that bankruptcy judgeship legislation is the 
necessary solution to cure the problem of inadequate resources 
to fill these needs.
    The survey that we conducted was mentioned. I will be happy 
in the question period, if you like, to detail all of the 
factors that we consider in addition to the weighted caseload.
    And, Mr. Jordan, I will happily entertain any questions you 
might choose to ask me about the weighted case load and how 
that works.
    But we believe we have sufficient data to fully justify 
that each of these judgeships be filled. We believe that to 
ensure that the bankruptcy court system operates as Congress 
has intended that we need all of these resources to fill a 
critical void in our system.
    I thank you very much for your kind attention, and I will 
be happy to answer any questions you might choose to ask me.
    [The prepared statement of Judge Lynn follows:]
         Prepared Statement of the Honorable Barbara M.G. Lynn




                               __________

    Mr. Cohen. Thank you, Judge Lynn, and we appreciate your 
testimony and your willingness to participate.
    Our second witness is Judge David Kennedy. Chief Judge 
Kennedy was appointed to the bankruptcy bench for the Western 
District of Tennessee in November 1980, became chief judge in 
1988.
    He has served the United States Judicial Conference in the 
bankruptcy area for quite a few years, and he is an esteemed 
member of the bench in my home town and the Western District of 
Tennessee, and it is my honor to have you here.
    Will you begin your testimony, Judge Kennedy?

  TESTIMONY OF THE HONORABLE DAVID S. KENNEDY, UNITED STATES 
  BANKRUPTCY COURT FOR THE WESTERN DISTRICT OF TENNESSEE, ON 
     BEHALF OF THE NATIONAL CONFERENCE OF BANKRUPTCY JUDGES

    Judge Kennedy. Thank you, Mr. Chairman--good morning--and 
Members of the Subcommittee.
    My name is David Kennedy. I have had the honor of serving 
as a United States bankruptcy judge for about 28-1/2 years in 
the Western District of Tennessee at Memphis, where I live and 
primarily hold court. Over the years, I hold court in Jackson, 
Tennessee from time to time on an as-needed basis.
    Chairman Cohen, you are right about Memphis having some 
deep roots in the field of bankruptcy with the Honorable Walter 
Chandler having had the 1938 amendments named after him and 
actually created the rehabilitory features of the bankruptcy 
code that we now know as Chapter 11--Chapter 13, a 
congressional policy that has existed in America since 1938, 
favoring repayment plans over liquidation where possible, and I 
emphasize where possible, because not all individuals who are 
unemployed would qualify to be eligible for relief in Chapter 
13.
    But I greatly thank you and the Subcommittee for this 
opportunity and pleasure to testify before you to discuss the 
bankruptcy judgeship needs.
    I appear before you today as a representative of the 
National Conference of Bankruptcy Judges. I strongly agree with 
everything that Judge Lynn has said regarding judgeship needs 
and also the standards used by the Judicial Conference in its 
thoughtful, deliberate, reality-based process.
    I also support strongly the Judicial Conference's 
recommendations regarding the 13 requested new judgeships, 
converting the 22 temporary conversions to permanent status, 
and the extension of the two temporaries.
    And it is my understanding that my friend Mr. William 
Jenkins of this panel will testify in a moment regarding the 
methodology used by the Judicial Conference in these matters, 
so I will not step on his turf either.
    And since I have previously submitted a prepared written 
statement that really speaks for itself, I thought my oral 
statements instead might focus more now on how this current 
workload impacts the day-to-day lives of bankruptcy judges, 
their staffs, the court security officers, the bankruptcy 
trustees, debtors, creditors and other litigants in the system, 
and also the public as a whole and, if time allows, to just 
briefly discuss how very carefully the Judicial Conference 
evaluates a district's request for a new judgeship and--and 
related needs.
    The work of the bankruptcy judges today is seemingly more 
complex and time-consuming than ever before. No doubt the 
attorneys and trustees are more sophisticated today. There are 
more pro se litigants, more pro se debtors. Additionally, case 
filings are increasing at, I think, an alarming rate, which 
makes a bad situation even worse.
    As you, Chairman Cohen, mentioned a moment ago, the filings 
for the 12-month period ending March 31, 2009 were up 33.3 
percent over bankruptcy filings for that same 12-year period 
ending March 31, 2008.
    Many are predicting that calendar year 2009 will result in 
approximately 1.5 million bankruptcy cases being filed. In 
fact, last week I heard the senior economist at the A.O. 
Bankruptcy Judges Division make that prediction, and others 
have as well.
    And that is significant for a number of reasons, but it is 
further significant because that is almost the same level that 
existed the year before the enactment of this controversial 
2005 bankruptcy act.
    Although the 2005 bankruptcy act certainly has positive 
provisions, even historic provisions, nonetheless it also has 
many provisions that are very complicated and are very time-
consuming. Approximately 35 new motions have been created by 
the 2005 act, and many of them are extremely time-sensitive.
    Actually, there are times and days when I feel like the 
bankruptcy court today is more a de facto emergency room for 
financially distressed consumer and commercial debtors.
    Costs under the 2005 act have increased, resulting in more 
individuals debtors and small creditors representing 
themselves--that is, acting pro se--and pro se litigants and 
debtors just ordinarily are more time-consuming, and usually it 
is a judge nightmare to have both parties pro se, and that is 
happening more and more--a real dilemma, but we just have to 
work our way through it.
    Because of these factors and others, the judges' workload 
within the cases have increased. Judges faced with overcrowded 
dockets are having to work late hours, requiring court staff, 
court security officers to also work late. The attorneys, the 
debtors, the creditors are having to stay late. And of course, 
their families--at least they are not there, but they are 
affected by all this.
    And as judges, I note that sometimes we can just get too 
busy. And I believe that the perception of justice is 
important, perhaps sometimes more important than the reality 
itself. But it is critical that debtors and creditors feel that 
they have had their full day in court.
    People sometimes just need an outlet. They want to appear 
before a judge and be heard and have an attentive judge hear 
them. So I think there is a public confidence consideration 
involved in all this, too.
    And it goes without saying that the overcrowded dockets 
sometimes may result in different kinds of problems. For 
example, because of the lack of judges, hearings may be 
delayed, continued, or postponed or fast-tracked, or judicial 
decisions may be delayed.
    Although creditor distribution under Chapter 11, 12 and 13 
confirmed plans and in asset Chapter 7 cases may be delayed, 
last calendar year in the Western District of Tennessee I am 
very pleased to report that over $260 million were distributed 
to creditors under Chapter 13 plans.
    So it could be said that a delayed distribution to 
creditors is, in essence, a denial of lost opportunity cost. 
And today's creditor may be tomorrow's debtor.
    Now to very briefly discuss how carefully the Judicial 
Conference evaluates a district request for a judgeship, I have 
served on many Judicial Conference judgeship survey committees, 
and I can personally attest to how very carefully the 
conference evaluates these judgeship requests and related needs 
based on this personal knowledge.
    And as noted a moment ago, it is a well conceived, 
implemented and reality-based process. That is set forth much 
more in detail in my written comment.
    And in summary, the need for these additional judgeships, 
the conversion of the temporaries to permanent status, the 
enlargement of the two temporary positions is real and acute. 
And simply put, we ask for your help. The needs exist.
    And please know that we greatly appreciate your time and 
attention. And I also would be happy to try to attempt to 
answer questions that you may have later.
    [The prepared statement of Judge Kennedy follows:]
          Prepared Statement of the Honorable David S. Kennedy



                               __________
    Mr. Cohen. Thank you, Judge Kennedy. I appreciate it.
    Our third witness is William Jenkins. Mr. Jenkins joined 
the Government Accountability Office in 1979 as a faculty 
fellow. Since February 2003 he has served as director of 
homeland security and justice issues, with a portfolio that 
includes emergency preparedness and response, elections and the 
judiciary.
    And we appreciate your testimony today, Mr. Jenkins. Will 
you proceed?

    TESTIMONY OF WILLIAM JENKINS, JR., Ph.D., UNITED STATES 
                GOVERNMENT ACCOUNTABILITY OFFICE

    Mr. Jenkins. Chairman Conyers and Chairman Cohen, Members 
of the Committee, I appreciate the opportunity to be here today 
to discuss our work reviewing the workload measures that the 
Judicial Conference uses to assess the need for additional 
bankruptcy judgeships.
    These workload measures, called weighted case filings, are 
now 18 years old. Their accuracy has almost certainly been 
affected by changes in the intervening years, such as changes 
in the nature of the workload, case management practices and 
the many new requirements of the Bankruptcy Abuse and 
Prevention and Consumer Protection Act, some of which Judge 
Kennedy discussed.
    Some of these changes may have increased judges' workload 
and some decreased it. To the extent that the current case 
weights understate or overstate the time demands on judges, the 
weights could potentially result in the Judicial Conference 
understating or overstating the need for new bankruptcy 
judgeships.
    The Federal Judicial Center has a study now under way to 
revise and update the current case weights. The time demands on 
bankruptcy judges are largely a function of the number and 
complexity of the cases on their dockets, with some cases 
taking time--more time than others.
    To measure these differences, the Judicial Conference uses 
weighted case filings, a statistical measure of the average 
estimated judge time that specific types of cases are expected 
to take.
    A weight is assigned to each case filed in a bankruptcy 
court, and the sum of those weights divided by the number of 
authorized judgeships in the court results in the number of 
weighted filings per judgeship for that court.
    The Judicial Conference considers 1,500 annual weighted 
filings per judgeship an indicator, and only an indicator, of 
the need for additional judgeships in that court.
    Thus, in assessing the need for judgeships, the Judicial 
Conference relies on the weighted filings to be a reasonably 
accurate measure of a judge's case-related workload.
    Whether they are, in fact, reasonably accurate depends, in 
turn, on the soundness of the methodology used to develop the 
weights. The current weights were developed using data judges 
recorded on the actual amount of time they were spending on 
cases filed in their courts over a 10-week period.
    In 2003, we reported that we found first that the 
methodology was reasonable and, second, that the resulting case 
weights, as approved by the Judicial Conference in 1991 and 
1996, were likely to be reasonably accurate at the time they 
were developed.
    The Federal Judicial Center began a study in 2005 to review 
the current case weights but suspended it after the enactment 
of the Bankruptcy Reform Act. This was prudent, given the fact 
that the act was expected to have an impact on bankruptcy 
filings, at least in the short term, and that the act included 
many new provisions whose effect on judges' workload could not 
be immediately known.
    And in fact, personal bankruptcy filings surged to more 
than 2 million in 2005 due to the surge in filings prior to the 
October 2005 effective date of the reform act. In calendar year 
2006, filings dropped to 600,000. Filings have since grown 
steadily, as mentioned, and reached about 1.2 million filings 
for the year ending in March 2009, at roughly the same level as 
calendar year 2004.
    The FJC began a new study in 2008 to review the current 
case weights. The study is designed to collect data on the time 
bankruptcy judges spend on cases filed during five 10-week data 
collection periods from May 2008 through May 2009.
    Active and recalled bankruptcy judges participate in the 
study during one of these five reporting periods. This study 
design permits the development of new case weights based on the 
same type of objective time data as the current weights, which 
we found to be reasonably accurate.
    Importantly, it permits the calculation of a statistical 
estimate of the error associated with each case weight.
    Finally, the accuracy of case weights as a measure of 
judicial workload is dependent upon accurately assigning each 
case file to the appropriate case weight category.
    In 2003, we identified the steps the Administrative Office 
takes to ensure the accurate categorization of case filings, 
but we did not evaluate how effectively these measures may be 
in ensuring data accuracy, and we have not reviewed the current 
judgeship request.
    That concludes my statement, Mr. Chairman. I would be 
pleased to respond to any questions you or other Members of the 
Subcommittee may have.
    [The prepared statement of Mr. Jenkins follows:]
               Prepared Statement of William Jenkins, Jr.



                               __________

    Mr. Cohen. Thank you, Mr. Jenkins. Appreciate it.
    Our final witness is Carey Ebert. She is a partner in the 
Fort Worth law firm of Ebert Law Offices, focusing on consumer 
and small business bankruptcies. She was president of the 
National Association--or became president of the National 
Association of Consumer Bankruptcy Attorneys this January 1, 
2009.
    She served two terms previously as vice president and 
serves as a panel trustee in the Northern District of Texas. So 
three of our four witnesses are from Conference USA, more or 
less--once removed, I guess, with CCU.
    Thank you, Ms. Ebert, and if we can proceed with your 
testimony.

TESTIMONY OF CAREY D. EBERT, EBERT LAW OFFICES, P.C., on behalf 
  of the NATIONAL ASSOCIATION OF CONSUMER BANKRUPTCY ATTORNEYS

    Ms. Ebert. Thank you. Thank you. Thank you, Mr. Chairman.
    Good morning. By way of background, the National 
Association of Bankruptcy Attorneys, or NACBA, on whose behalf 
I appear today, is the only national organization dedicated to 
serving the needs of consumer bankruptcy attorneys and 
protecting the rights of consumer debtors in bankruptcy.
    Formed in 1992, NACBA has more than 4,000 members located 
in all 50 states and Puerto Rico.
    Before I begin my statement in support of additional 
bankruptcy judgeships, I want to take just a minute to thank 
this Subcommittee, the full Judiciary Committee and, indeed, 
the entire House of Representatives for your tireless efforts 
on behalf of homeowners facing foreclosures.
    Perhaps the single most effective thing this Congress could 
do to stem the rising tide of foreclosures would be to give 
bankruptcy judges the ability to modify mortgages on primary 
residences in Chapter 13, as currently can be done for vacation 
homes, yachts, family farms and investment property.
    The House of Representatives passed legislation that makes 
this common-sense change to the bankruptcy code in instances 
where homeowners were unsuccessful in getting a sustainable 
loan modification from their lender. Regrettably, that 
provision was killed in the Senate.
    I understand there is some belief the foreclosure crisis is 
behind us. Based on what I see every day in my practice, I can 
assure you that it is not, and I suspect we will be taking up 
this issue again in the near future. And thank you for allowing 
this digression.
    NACBA supports the 2009 recommendation of the Judicial 
Conference of the United States for additional bankruptcy 
judges.
    We agree that 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.
    There have been no permanent judgeships authorized by 
Congress since 1992, despite a surge in consumer and business 
case loads and the increased complexity of cases since the 
October 2005 implementation of the Bankruptcy Abuse Prevention 
and Consumer Protection Act of 2005, BAPCPA.
    Although bankruptcy filings initially declined in the wake 
of BAPCPA's implementation, there has been a tremendous 
increase in recent years. It is estimated that filings this 
year will again exceed the 1 million mark, with an increase of 
27 percent in 2009, to more than 1.2 million cases.
    The state of the economy, particularly as it impacts home 
foreclosures, rising unemployment and credit availability, is a 
major factor in the rising number of personal bankruptcies, 
which traditionally constitute the majority of bankruptcy 
cases.
    The economic downturn is causing an increase in small 
business and corporate bankruptcies, some of which are very 
large and complex Chapter 11 cases.
    But the number of filings alone is not the sole indicator 
of the overall workload of the judiciary or those involved with 
the bankruptcy process. Perhaps the biggest impact of the 2005 
law has been the enormous increase in the cost and burdens of 
filing an individual bankruptcy case.
    While it may not have been the intention of some of those 
who voted for the bill, BAPCPA has increased documentation 
requirements, bureaucratic paperwork and other costs so much 
that the honest, low-income and working family, not the high 
rollers at whom the amendments were supposedly aimed, are 
deterred--are prevented from obtaining the bankruptcy relief 
that they need.
    Consider some of the new requirements as a result of the 
2005 law changes. Before a debtor can even file their petition 
for bankruptcy, that debtor must obtain all payment advices for 
the 60 days prior to filing, 4 years of their most recent tax 
returns or transcripts, provide their attorney with information 
detailing every penny of their income for the past 6 months, 
provide bank statements to the trustee and evidence of current 
income, attend a pre-petition credit counseling briefing no 
matter how hopeless their situation, and, regardless of whether 
their problems were caused by imprudent credit decisions or 
unavoidable medical catastrophes, attend a financial management 
course in order to receive a discharge. And the attorney must 
complete numerous additional forms, including a six-page means-
test form that requires arcane calculations about which there 
are many different legal interpretations.
    As such, bankruptcy has gone from being a low-priced 
proceeding that could be handled quickly and efficiently to an 
expensive minefield of new requirements and traps and tricks 
that can catch the innocent and unsuspecting debtor.
    All of these provisions add to the workload of bankruptcy 
judges, and if there are disputes as to whether debtors have 
complied with many of these new requirements, this will often 
result in additional court hearings and judicial oversight.
    In summary, BAPCPA has created new docketing, noticing and 
hearing requirements that make addressing the petitions far 
more complex and time-consuming for bankruptcy judges.
    While the Federal judiciary has implemented a number of 
cost-containment measures and continued to identify and explore 
new initiatives to further streamline operations to reduce 
costs, the bulging case loads demand that additional judgeships 
be approved. Thank you.
    [The prepared statement of Ms. Ebert follows:]
                  Prepared Statement of Carey D. Ebert



                               __________

    Mr. Cohen. Thank you, Judge Lynn.
    We will now have questioning, and I will begin by 
recognizing myself.
    First, Judge Lynn, I take it that if you could be king for 
a day--or queen, excuse me--you could be king; it is just all 
imaginary--would you do away with the counseling provisions in 
the 2005 law?
    Ms. Ebert. Chairman Cohen, I think that the pre-petition 
counseling requirement that has been imposed on debtors is an 
utter waste of time and an----
    Mr. Cohen. An utter waste of time.
    Ms. Ebert. Utter waste of time, yes.
    Mr. Cohen. Does anybody on the panel think that it is 
getting within--that it is within the frame of--margin of 
error, but at least somewhere around there? Do you all agree 
with that?
    Judge Lynn. Well, since you asked the question of Judge 
Lynn, but Ms. Ebert, I think, you were intending to----
    Mr. Cohen. It was a trick question.
    Judge Lynn [continuing]. Have comment on it----
    Mr. Cohen. But I appreciate the---- [Laughter.]
    Judge Lynn. I got it. I got the trick, and so I am going to 
respond--Judge Lynn now speaking--and respectfully punt on your 
question, Mr. Chairman.
    From my perspective--I am a district judge, so I only hear 
bankruptcy matters on appeal--as a matter of policy, the 
Judicial Conference comes to this Committee asking for 
additional judgeships when there is a need based on whatever 
law you in your wisdom deem to be appropriate.
    I do not have a personal view----
    Mr. Cohen. So you don't have an opinion, but Ms. Ebert has 
a definite opinion.
    Ms. Ebert. Absolutely.
    Mr. Cohen. And, Judge Kennedy, do you have an opinion on 
that?
    Judge Kennedy. I do, and I think it is important to note 
exactly what this pre-petition credit counseling is. It is 
really a mere briefing that outlines the opportunities for 
credit counseling and, if desired, a detailed budget analysis.
    But if somebody is unemployed, it serves no purpose. In 
fact, I don't think I have--I go to various CLE seminars, and I 
don't think I have heard anybody praise this pre-petition 
credit counseling. It has been said--is a waste of time, waste 
of money.
    It is done over the telephone by either an individual or a 
group session. It lasts 30 minutes to an hour, I am told. The 
charge is $50 to $100. And it is just not serving the purpose 
intended.
    In fact, I think Ms. Ebert's organization has done some 
private studies and has talked with these credit counseling 
agencies, and they come back and say that approximately 97 
percent of the Chapter 7 debtors are unable to pay any debts 
under their plans.
    I think it is a waste of their time.
    Mr. Cohen. Is there another type of counseling at the end 
of the bankruptcy that might be--is worthwhile or might be 
worthwhile, or is not worthwhile?
    Judge Kennedy. I like what I call the post-petition 
instructional course better. I mean, we all support financial 
literacy. I have gone into schools in Memphis for many years 
trying to teach financial literacy and how to avoid abusive use 
of credit cards and the like.
    So I have no great opposition to the--to the debtor 
completing a post-petition instructional course concerning the 
debtor's personal financial management, but I would hope, 
Chairman Cohen, that the provision could be fine-tuned a little 
bit to give the bankruptcy judge some discretion as to whether 
or not to order that specific individual debtor to undergo 
post-petition instructional course training as a precondition 
of granting the discharge.
    I have had Ph.D.s in economics that have filed bankruptcy 
cases, very highly literate people. And to ask them to pay a 
$50 or $100 fee and then go sit in to a course that they ought 
to be teaching, if anything, I think is a little insulting on a 
case-by-case basis.
    So my response to that--yes, I do support--strongly support 
financial literacy, and I think the post-petition instructional 
course can serve some meaningful purpose, but I would like to 
see the bankruptcy judges have some----
    Mr. Cohen. Discretion.
    Judge Kennedy [continuing]. Discretion as to whether or not 
to order a particular debtor to undergo that program or not.
    Mr. Cohen. Thank you, Judge Kennedy.
    Ms. Ebert, do you concur?
    Ms. Ebert. I do, Mr. Chairman. I think that the debtor 
education, the post-filing--what we call the financial 
management course--many of my clients have felt they have 
really obtained something that was of a benefit to them. And it 
has helped them hopefully not to be back in my office in the 
future.
    And the pre-petition counseling briefing session that Judge 
Kennedy referred to serves no purpose when--when they are 
already unemployed, facing foreclosure and they are--they have 
already tried all the other options that were available to 
them.
    Mr. Cohen. Thank you.
    Judge Kennedy, let me ask you a question. The issue of 
venue is important in our area where we border Mississippi and 
Arkansas. Do you believe the venue laws ought to be changed in 
bankruptcy?
    Judge Kennedy. Chairman Cohen, I strongly urge Congress to 
at least reexamine the case venue issues. I think that issues 
exist within bankruptcy cases where venue is technically 
improper. I also think that venue issues exist in cases that 
are technically proper.
    Currently the issue of whether a bankruptcy judge, upon the 
filing of a timely motion, can dismiss a case or transfer it 
for another district or can retain this improperly venued case, 
if it is for the interest of justice or for the convenience of 
the parties, has resulted in a split of authority in the lower 
courts.
    Since 1984, the answer has not been clear. But by way of 
very, very brief background, the 1978 codes accompanying Title 
28 venue provisions expressly and clearly provided that a 
bankruptcy court could retain jurisdiction over a technically 
improperly venued case if it were for the convenience of the 
parties or the interest of justice, or it could transfer that 
case to another district for the convenience of the parties or 
the interest of justice. That was former Section 1477 of Title 
28 that is entitled ``Cure or Waiver of Defects.''
    What the 1978 code's venue provisions did was really to 
rely upon its transfer provisions, more so than its technical 
venue provisions, to assure a fair place to administer a 
bankruptcy case or a proceeding.
    However, as a result of the 1984 restructuring that 
occurred of the bankruptcy court system, Section 1477, the one 
entitled ``Cure or Waiver of Defects,'' was just deleted, and 
it is not clear whether or not the deletion was by design or 
whether or not it was intentional. I have my thoughts about it.
    But since 1984, this split of authority has developed in 
the lower courts. I took the view, and I generally don't talk 
about cases that I get reversed in, but I will get there in a 
moment.
    But I took the view that since there was no express 
statutory 28 provision, or an express Title 11 provision, or an 
express Federal Rule of Bankruptcy Procedure express provision 
prohibiting me from retaining a technically improperly venued 
case for the convenience of the parties or the interest of 
justice, I must have the inherent authority on a case-by-case 
basis of considering the convenience of the parties or the 
interest of justice. I was reversed by the Sixth Circuit Court 
of Appeals.
    Other courts have held--the other split of authority has 
held that the--that since there is no express prohibition that 
nonetheless the per se rule must exist that the bankruptcy 
court can't retain these cases that are filed technically in an 
improper district.
    In Hurley, the case that you talk about--as you know, 
Chairman Cohen, I could put my left foot in Southaven, 
Mississippi, a so-called bedroom community of Memphis. I could 
put my right foot in Memphis in the Western District of 
Tennessee.
    The debtor in my case actually lived in Mississippi. He 
worked in Memphis, had a bank account in Memphis, had two 
creditors in Memphis, had eight national creditors, no 
Mississippi creditors.
    The United States trustee for Region 8, Kentucky and 
Tennessee, filed a motion to dismiss or to transfer the case to 
another district because of the technically improperly venued 
case.
    I looked at it. I struggled with it, and I worried with it, 
because there was a split of authority. And I came to the 
conclusion that there was no express prohibition that I had the 
inherent authority, and I was reversed.
    But at least when the Sixth Circuit reversed, it urged 
Congress to fix the problem. The Sixth Circuit said in that In 
re Thompson case, the cited case at 507 F.3d 416, 1997, that 
fixing any perceived bankruptcy case venue problem is a job for 
Congress and not the courts.
    And I urge Congress to accept the invitation of the Sixth 
Circuit and legislatively fix this problem and thereby 
eliminate this unfortunate split of authority which is time-
consuming, it is expensive, and it also frustrates the 
bankruptcy goal of Bankruptcy Rule 1001 about securing the 
just, speedy and inexpensive determination of all these 
bankruptcy cases and proceedings.
    I would hope that Congress would go back to the venue 
concept that existed in 1978 where the emphasis was on the 
transfer provisions and not technical traditional venue 
provisions.
    It could be a real easy legislative fix just re-number and 
re-introduce former Section 1475, the ``Cure or Waiver of 
Defects,'' and that would take care of it.
    Mr. Cohen. Thank you, Judge Kennedy.
    And now, and most appropriate, as the Supreme Court--or the 
Sixth Circuit has urged a congressional fix, the man who can 
fix that, the Chairman of the Judiciary Committee.
    Judge Kennedy. Well, can I repeat my statements---- 
[Laughter.]
    Mr. Conyers. You don't have to. I have been listening to 
them.
    Mr. Cohen. The Honorable John Conyers, you are recognized 
for--Mr. Jordan had to leave.
    Mr. Conyers. Oh, okay. I was hoping we could continue our 
great relationship with him during this hearing.
    But this hearing stirs up some sad memories of what 
happened 4 years ago in this Committee and in this Congress in 
terms of the bankruptcy act, and I don't know how much--well, 
probably counsel remembers.
    The credit card people lobbied us for 8 or 9 years before 
they could finally persuade enough people to come in and do 
what we did. And that is part of the problem right now.
    Much of that is the fallout from all that horrible 
antidebtor bias that they carefully nurtured with the K Street 
lobbyists to help get us into this fix. It is terrible. Counsel 
has gone over some of it. It is not all of it.
    And then there is the problem of foreclosure relief. Now, 
here is a Congress--we have put the American people in hock for 
generations, trillions of dollars.
    And when you say, ``Let's help out a poor schlub who is 
losing his house, and he is under water, let's open it up and 
lower the rate, and lengthen the terms,'' what did they say in 
the other body?
    They said, ``Well, how do you know these people are in good 
faith? Didn't they read their contract? I mean, why do--why do 
I have to''--as she points out, everybody--the judge can do it 
for everything else except a home, the one last thing that most 
people have--the only thing that many people have. So this 
really gets me off to a very unhappy set of remembrances.
    And then, as the President has commanded that we do 
something about health care reform, the number of individual 
bankruptcy filings keep going up in terms of what it is that 
brings you to the court in the first place.
    Well, I would like each of you, starting with the lawyer, 
to either make me feel better or worse about my point of view 
of things.
    Ms. Ebert. Mr. Conyers, I agree that the reason many, many 
individuals are filing for bankruptcy are due to either 
underinsured or have no medical insurance, and they end up in 
bankruptcy because they have expended all of their resources 
trying to pay their medical bills, or they have to use credit 
cards to pay for their health care costs.
    And without some form of relief--obviously health care 
being a relief for many, many people in this country who have 
no health insurance or underinsured--I hope that this Congress 
will continue to fight for those people and allow them relief 
through bankruptcy that their--and to continue to push.
    For them to say the only thing that they have, which is 
their home--not only are they filing bankruptcy but they are 
having to walk away from a home that they simply can no longer 
afford because they were victimized by mortgage lenders, 
brokers and unscrupulous Realtors attempting to make a sale on 
a home that they never could have afforded by selling them a 
product that was simply not financially feasible.
    And I am certain that based on the numbers that I have 
been--there has been several reports done--that the second wave 
of foreclosures that will be coming through between 2009 and 
2011 will be just as many as there were in the last 2 years.
    This is not over, and we will need to revisit this again, 
and I hope that this Committee will take up our cause.
    Mr. Conyers. Your Honor, Judge Kennedy?
    Judge Kennedy. I will say the second wave--I think that is 
the wave it is contemplated will be not of subprime mortgages, 
that these have been traditionally sound, solid mortgages for 
years, 30-year mortgages.
    Some people are 20 years into them, and now they have lost 
their jobs and they can't pay for the mortgage. Now they have 
lost their job, now they have lost their health insurance as 
well--that indeed, these bankruptcy laws are a safety net.
    In talking about the home, one thing that I was really 
struck by--I know over the--since the 1800 bankruptcy act, and 
1841, 1867, 1898, and 1978 code and amendments in between, it 
seems like there is a little ``catch me if you can'' going on, 
and the pendulum swings back and forth, this debtor, creditor, 
and they--going through their exercises.
    But I must say, talking about this home mortgage 
modification, the matter--that I was particularly struck by the 
letter written back in January of 2009 to the congressional 
leadership from the attorney generals from the 22 states and 
the District of Columbia, whereby they thought--and they 
supported the mortgage modification provision--somewhat of an 
independent voice, I thought, that supported the legislation.
    And in their opinion, in their collective opinion, in their 
independent view--that such legislation would actually 
stabilize the housing market, the financial market and also 
state and local tax bases, and it could be done without--
without any taxpayer expense.
    The bankruptcy court is already in place with personnel. 
There would be no need to create a new agency, create new 
personnel. We got courthouses, already got the facilities for 
it, wouldn't have to build any new buildings--with no cost to 
the taxpayer.
    I support that.
    Judge Lynn. Mr. Conyers, may I? I am not sure if I am going 
to be able to make you feel better about the past, but I would 
like to address some of the comments you made, particularly as 
it affects the request that we have made.
    I very much respect Dr. Jenkins' comments on the case 
weights, and I would like to comment on that as it relates to 
your question. As has been mentioned, the case weights, which 
are in part the basis for our request, are 1991 case weights.
    We considered doing a study much earlier than we did, but 
for the same reasons that you have mentioned--that long 8-or 9-
year period when we were hearing that there might be an 
amendment to the bankruptcy statute--we waited, and we waited, 
and we waited and we concluded we couldn't wait any more, so we 
began the study.
    It is like watering your lawn. And of course, thereafter it 
rained. So we were 40 percent through our new study in 2005 
when BAPCPA was passed.
    I think prudent administration of our Judicial Conference 
and of our Committee in particular caused us to think that we 
should stop the study, and I believe Dr. Jenkins in his comment 
indicated that that was prudent, and I feel that it was, to 
wait and see what would happen under BAPCPA.
    There was a time shortly after BAPCPA was passed when we 
came over here with some technical amendments that we were 
pursuing--and I take your comments, Representative Conyers, as 
an indication that perhaps we should do so again.
    We still have that book of technical amendments, and I 
think that you may be talking about more than technical 
amendments. But at the least, you would want the statute to 
read in a way that makes sense on its face, and frankly, there 
are some deficiencies there.
    So we are at your service in assisting you if you would 
like to hear from us on that.
    With respect to BAPCPA and its impact not only on consumers 
but on businesses, those who come to the bankruptcy courts for 
justice and disposition of their cases, they want to achieve 
that within a reasonable time frame, and at the least they 
should be able to achieve that.
    And if we have overloaded courts such as in Michigan, where 
the case weights are 3,032 when they should be 1,500--we could 
come here and legitimately on those numbers ask for five new 
bankruptcy judgeships. We are not. We are asking for three.
    And we believe that these 1991 case weighs--I appreciate 
from an academic perspective they could either be over--they 
could be under. But in reality, we know that they are low.
    We had to make a decision whether to come to you now and 
seek judgeships where there was a critical need and then come 
back to you again when the case weight study is fully completed 
and analyzed, and that is what we will do.
    We are here now for urgent, critical need. We took a peek 
at the 40 percent study that was done immediately before the 
statute. We have taken a peek at the numbers we have gotten in 
the new case weighting study. And I feel completely confident 
in telling you that we come to you with a very conservative 
approach.
    These numbers have to be low. BAPCPA requires 35 new 
motions that were not even present before. The workload of 
bankruptcy judges in these courts where we seek permanent 
positions and new positions is critical. It is terribly 
overloaded. We cannot achieve the paradigm of justice to which 
I know we all aspire.
    And I urge you, Congressman Conyers and all Members of the 
Committee, to consider that we can achieve justice, even in the 
face of some provisions of BAPCPA that you think do not achieve 
that, if we allow people to enter our courts and get a fair 
disposition within a reasonable time frame. Thank you.
    Mr. Conyers. We need a considerable number of additional 
good bankruptcy judges. And we are tasked--our Committee is 
tasked to that. We need to go back to this incredible piece of 
so-called legislation called the 2005 bankruptcy act. I mean, 
we need to really go through that again.
    We could hold, under our new Chairman, some tremendously 
important hearings that we hope will impress or impact the 
other body as well.
    We need foreclosure relief. We can't walk away. They told 
us that it was hopeless, we couldn't get it in the housing 
bill. We have got to go back over to the Senate. House is in 
good shape on that.
    But it is a disgrace that the same body that votes out 
trillions of dollars tells the little schlock that is losing 
his house that we can't do that, we don't have enough senators 
to do it, sorry. When we know there are a few good people--but 
how do we know that everybody is on the up and up?
    I mean, the whole thing is so outrageous, and now we are 
passing it on to generations. They are stuck whether this 
bailout works or not. And the guy that loses his home--he is 
never going to--there is no return in an economy like this from 
what the system has done to him and then what the Congress has 
done to the homeowner after that.
    So I welcome any ideas from this hearing on--that you could 
provide us with recommendations. We would love to continue this 
dialogue.
    And I thank you, Mr. Chairman.
    Mr. Cohen. Thank you, Mr. Chairman.
    I appreciate as well the responses.
    Now I would like to recognize the gentleman from North 
Carolina, Mr. Watt.
    Mr. Watt. Thank you, Mr. Chairman.
    And I am going to try to go back to the subject of the 
hearing itself and start by expressing a sentiment that you 
must have found yourself in a very difficult position trying to 
do what we normally do with these hearings.
    Having served as a Ranking Member of this Subcommittee and 
some other Subcommittees on Judiciary, and now serving as a 
Chair of some Subcommittees--a Subcommittee and--on Financial 
Services, I always try to follow a policy of having both a pro 
and a con at a hearing.
    I would almost be willing to bet that there was probably 
nobody you could find to give a counter view of whether we need 
additional bankruptcy judges. You were in an unenviable 
position, I--no doubt.
    And so I was kind of glad when we got to Ms. Ebert that she 
changed the subject of the hearing, taking only 1 of her 
minutes to talk about the subject of this hearing, whether we 
need some additional judges, and taking the other 4 minutes to 
talk about other things. And I see that the hearing has 
wandered off in that direction.
    But I do want to ask a serious question, because on a 
number of different fronts, we could probably reach a fair 
amount of bipartisan consensus that things are needed. Where we 
run into real problems is trying to figure out how to pay for 
them.
    And so the question I want to ask is I know we need new 
judges, but--Ms. Lynn--Judge Lynn, I think you would probably 
be able--maybe Dr. Jenkins would probably be able to answer 
this question. Is the fee schedule that we set up for 
bankruptcies paying for judges?
    Is the system generating enough revenues that the taxpayers 
are not subsidizing the bankruptcy courts? Or do we know that?
    Judge Lynn. Representative Watt, I think the fair answer to 
your question is in part we would pay for new bankruptcy judges 
and staffs associated with them out of filing fees but not in 
full.\1\
---------------------------------------------------------------------------
    \1\ Judge Lynn appends: Let me provide a fuller explanation of how 
our judiciary budgeting and appropriations work. Funding for the 
bankruptcy system is not directly linked to bankruptcy filing fee 
revenue. We tally up and justify to Congress' Appropriations Committees 
the total amount of money we need to operate the courts. We also tell 
them how much we collect in fees. They then subtract from the total 
amount that we need to operate the amount that we collect in fees. The 
difference is what they give us for our appropriation. Therefore, the 
amount we collect in fees offsets or lowers the amount that we need to 
get through our appropriation. Now, in the case of statutory bankruptcy 
filing fees, the judiciary does not keep the entire amount. The 
judiciary keeps a percentage, but a portion also goes to the U.S. 
Treasury, in part for deficit reduction as specified by the Deficit 
Reduction Act of 2005. Other portions go for other costs, including the 
U.S. Trustee system in the Department of Justice, and private Chapter 7 
trustees. It's therefore important to realize that when the 
appropriators are calculating the amount of our appropriation, only the 
portion of the statutory filing fees that are actually kept by the 
judiciary is available to offset our need for appropriations. So, to 
the extent that our appropriation can be partially offset by the 
portion of the statutory filing fee that is kept by the judiciary, one 
might view the fees as partially paying for bankruptcy judgeships (or, 
for that matter, other costs of operating the bankruptcy courts), but 
there is no direct relationship between the two.
---------------------------------------------------------------------------
    Mr. Watt. Okay.
    Judge Lynn. And let me----
    Mr. Watt. What about the existing number of bankruptcy 
judges? Are we paying for them in full? Are we----
    Judge Lynn. We are covering those out of our current budget 
submission to Congress, and----\2\
---------------------------------------------------------------------------
    \2\ Judge Lynn appends: We are covering those out of our current 
appropriation that Congress provides after taking into account the 
amount of fee revenue that the judiciary is projected to receive.
---------------------------------------------------------------------------
    Mr. Watt. Okay. So then my next question would be should 
this bankruptcy system be self-sustaining, I suppose, is it--
and if it should be, how can we get it self-sustaining--
financially self-sustaining without imposing this cost on 
taxpayers and without being unfair to people who really need to 
be going into bankruptcy?
    Who ought to be paying for this system? And I guess----
    Judge Lynn. Well----
    Mr. Watt [continuing]. That is the question I am asking.
    Judge Lynn [continuing]. That is the $64,000 question, or 
to bring it more to what you might be thinking of, that is 
probably the $64 million question.
    In our view, it is inappropriate to raise bankruptcy filing 
fees every time there is a financial need within the bankruptcy 
system. The taxpayers----
    Mr. Watt. I happen to agree with you. And I am asking these 
questions genuinely, not as an adversary----
    Judge Lynn. Right.
    Mr. Watt [continuing]. But just because since Mr. Jordan 
isn't here, he can't ask these questions.
    Judge Lynn. That is fine.
    Mr. Watt. So I have----
    Judge Lynn. I appreciate the opportunity, and I----
    Mr. Watt. I have to ask him--ask them for him so we can 
build the record here, because I know--I mean, I know Mr. 
Jordan. Probably nobody on the other side of the aisle is going 
to raise a question about the need for judges.
    But I also know that every time we talk about a need, we 
also have to talk about a ``pay for.''
    Judge Lynn. Right. Well, let me begin--of course, our--the 
temporary judgeship positions are already being paid for. That 
is not new expense that we would----
    Mr. Watt. Paid for from what source?
    Judge Lynn. Well, we are paying for them now because they 
exist now, and----
    Mr. Watt. From what source, though?
    Judge Lynn. From the----
    Mr. Watt. Are taxpayers paying for it, or----
    Judge Lynn. From the judiciary budget and in part from 
bankruptcy filing fees, which are on the revenue side.\3\ I 
don't think that we have made an effort to necessarily equate 
all aspects of the judiciary budget to filing fees to see what 
percentage of judges' salaries and staff salaries is paid for 
out of filing fees.
---------------------------------------------------------------------------
    \3\ Judge Lynn appends: This is because the amount the judiciary 
gets in appropriations is reduced by the amount of the filing fees we 
are projected to receive.
---------------------------------------------------------------------------
    But filing fees, in large part, support judgeships and 
their staffs, not in full. So part of the money for the 
judiciary budget, indeed, comes from the taxpayers. That is 
true now and will be true then.
    I was simply making the limited point that with respect to 
temporary judgeships, making them permanent does not add to the 
pot of money that we would be seeking.
    Mr. Watt. All right. My time actually has expired, and I am 
a great admirer of the 5-minute rule----
    Judge Lynn. All right.
    Mr. Watt [continuing]. Until they apply it to me.
    I think the question I want to ask is maybe for you all to 
do some thinking about this and maybe give us some ideas, 
because there is a school of thought that the bankruptcy system 
ought to be a--based on a user fee system. I mean, you know, 
the people who use it ought to pay for it.
    I am not subscribing to that notion, don't get me wrong. I 
actually think there is some public benefit to having a 
bankruptcy system and a bankruptcy court.
    There is probably public benefit to having any judicial 
system, but the people who never use it don't always understand 
that public benefit, and they want it to pay for itself.
    So I guess what I am seeking is if you--if any of you have 
any good ingenious ideas about we might be able to generate 
some revenues and who ought to be paying them, people who are--
who may be going through reorganizations as opposed to people 
who are doing regular filings.
    You know, I don't know what would be----
    Judge Lynn. Well, if I----
    Mr. Watt [continuing]. What it would look like.
    Judge Lynn [continuing]. If I might, let me just close by 
saying that the only good news about the dramatic increase in 
bankruptcy filings is that we are generating substantial 
additional bankruptcy fees. And those do contribute to the 
budget of the judiciary.
    For the judgeships we are requesting, I believe that we can 
almost completely fund them out of what we have in our 
resources. There may be some additional supplementals that we 
would have to come back to Congress about, but I think they are 
quite limited.
    So without even raising fees, these are increased, of 
course, by increased filings, and I think that does cover most 
of it. We in our Committee look very frequently at fees as a 
means of revenue generation, tempering that with administering 
justice to those who need it in the bankruptcy courts.
    Mr. Watt. Mr. Chairman, you have been generous with the 
time, and--as you were with your judge, I noticed.
    I told him--I said, ``Don't you dare cut your judge off.'' 
[Laughter.]
    He might be practicing law before this judge again one of 
these days. [Laughter.]
    That is a no-no. I mean, you waive the rules for the--for 
your judge, especially your hometown judge. See, I am trying to 
educate him on some of these nuances of the rules here. 
[Laughter.]
    Mr. Cohen. Thank you. And I appreciate----
    Mr. Watt. Thank you, Mr. Chairman.
    Mr. Cohen. Thank you for your questioning and for your 
advice. I learn much from you and other more senior Members, 
and I will be practicing law at some time in the future, but I 
will be very, very, very, very old. [Laughter.]
    I now recognize the distinguished Subcommittee Chairman 
from the State of Virginia, Mr. Scott.
    Mr. Scott. Thank you, Mr. Chairman.
    Judge Lynn, did I understand you to say that there was 
essentially no additional cost for converting a temporary 
judgeship to a permanent judgeship?
    Judge Lynn. Yes, Representative Scott. Of course, there are 
mandatory increases from year to year--cost of living--cost of 
living kinds of adjustments. But beyond that, that is correct.
    Mr. Scott. Now, there has been a question about whether or 
not the need for the additional judges will continue after the 
economic collapse--if the economy improves, we might not need 
additional judges.
    I know in Virginia, for our district court vacancies, we 
have a process that requires a certification--that is, if 
someone retires, we certify that the judgeship is still needed 
based on case loads, and if not, the judgeship is not filled. 
Is there such a thing for the bankruptcy judges?
    Judge Lynn. Yes, sir, there is, and we have a number of 
positions that were authorized--I mentioned in connection with 
the 2005 statute Congress acted on an old judgeship request, 
and there were--I believe it was five judgeships that were 
authorized that we had not requested, and those have not been 
filled because there was, in fact, not a need for those.
    And before we come to Congress with a request for 
additional judgeships, we make sure that the circuits 
understand that they should only come if there is a significant 
need.
    And there are many examples that I could give you of 
circumstances where there was an authorized judgeship that had 
not been filled, or even where there might be a technical need 
that they have met in other ways.
    Mr. Scott. Now, we talk about need and weighted case load. 
Obviously, the different cases have different needs. Some 
individual cases could take a judge pretty much full time and 
others are fairly routine.
    How accurate is the case weighting formula? And how do we 
know that 1,500 is not too high or too low?
    Judge Lynn. Well, the case weighting study takes into 
account the different mix of cases and the workload required to 
administer them. We all know that since 1991, 1992 time frame, 
there have been many mega bankruptcies, very large Chapter 11s 
which really we did not have many of back under the old case 
weights.
    Mr. Scott. Well, is G.M. counted as one?
    Judge Lynn. Well, it counts as one, but the amount of time 
that it takes to administer it is obviously more significant 
than a routine Chapter 7 case. All of that comes into play in 
formulation of the case weights.
    Mr. Scott. Well, the formulation is whether it is a 
business or non-business, whether it is Chapter 7, 11 or 13. Is 
a G.M. bankruptcy the same as----
    Judge Lynn. No.
    Mr. Scott [continuing]. John Doe, Incorporated?
    Judge Lynn. It doesn't take the same amount of time, and 
the case weights take that into account. All of the functions 
that a bankruptcy judge would perform in connection with 
different kinds of bankruptcy matters--that is why we have 
surveyed all of the bankruptcy judges of the United States, 
handling small cases, large cases. These adjust for that.
    As I have indicated to you, it is our considered judgment 
that the case weights of 1991 are understated, not overstated, 
because of what has happened since and because many of these 
needs long pre-date BAPCPA. We had needs that were not related 
to the current economic climate. We have looked at that 
historically.
    That is definitely true in the Eastern District of 
Michigan. And I keep mentioning it not just because of 
Representative Conyers being here--because it is the most 
compelling of the needs we have and has remained so for more 
than a decade.
    Mr. Scott. Well, I haven't looked at the numbers, but I 
assume that bankruptcy reform increased the number of Chapter 
13s. Is that not right? And that would be----
    Judge Lynn. Yes, that is true, but I----
    Mr. Scott [continuing]. Which would be----
    Judge Lynn [continuing]. Don't have more detailed numbers.
    Mr. Scott [continuing]. Which would mean that more judicial 
work needed to be done.
    Judge Lynn. That is true. And BAPCPA itself requires more 
work on all of the matters that are handled after the reform 
act.
    Mr. Scott. Now, how much of the case load problem could be 
solved with more trustees rather than more judges?
    Judge Lynn. I am of the opinion that none of the need could 
be solved by more trustees. The functions that are before--
being performed by judges should be performed by judges.
    We need trustees. I am certainly not speaking negatively 
about that. But I don't think that these functions can be 
passed to trustees to perform.
    Mr. Scott. Most of the kind of accounting work and getting 
the case together is not done by the trustees?
    Judge Lynn. The trustees do that work now, and they will do 
that work. What I am talking about judges doing are judicial 
functions. I don't think you see many cases where the judges 
are doing routine kind of accounting work.
    Mr. Scott. Okay, and what effect does the lack of judges 
have on time it takes to resolve a case?
    Judge Lynn. That is a very good question, Representative 
Scott. I do not have that, except sort of stories I am told. We 
have not worked those numbers. That is a sophisticated analysis 
to do.
    But from talking to bankruptcy judges, I believe 
disposition time has increased rather than decreased. Judges 
are working as hard as they can. They can't process things as 
quickly and as efficiently as they used to because they have 
more work to do. And that is part of what requires us to come 
here and ask for additional----
    Mr. Scott. As the representative from the ``rocket docket'' 
Eastern District of Virginia, is there a standard time after 
filing that these things ought to be resolved?
    Judge Lynn. I am not prepared to tell you that there should 
be a time from filing to disposition. I think the devil is in 
the details. For example, I am well familiar with the ``rocket 
docket'' as a former trial lawyer. But cases vary from one to 
one.
    I don't think--you know, certain bankruptcies come out real 
quick when they are pre-packed. But if you have 10,000 
creditors spread across the country in a medium-sized 
bankruptcy, you may not be able to resolve it that quickly. I 
don't think this is a one-size-fits-all problem.
    Mr. Scott. Thank you.
    And, Judge Kennedy, you mentioned venue. I thought there 
was a difference between venue and jurisdiction, that venue was 
permissible--if nobody complains, you could stay where you are. 
Who complained in the case that removed it from Tennessee to 
Mississippi?
    Judge Kennedy. Under 11 USC Section 307, the United States 
trustee has very broad standing. It can raise and appear and be 
heard on any issue. It was the United States trustee that filed 
the motion to dismiss or to transfer the West Tennessee case to 
the Northern District of Mississippi.
    Mr. Scott. And your suggestion would be for good cause 
shown you could keep it where it is?
    Judge Kennedy. If it is for the convenience of the parties 
or the interest of justice, absolutely. And that is exactly, 
Congressman, what the former Section 1477 provided for.
    It was styled ``Cure or Waiver of Defects,'' and it 
expressly provided that the bankruptcy court could retain 
jurisdiction over a technically improperly venued case if it 
were for the convenience of the parties or the interest of 
justice, or the court could transfer it to another district if 
it were for the convenience of the parties or the interest of 
justice, again relying more on these transfer--these flexible 
transfer provisions to promote a fair place to administer a 
bankruptcy case or to try an adversary proceeding.
    Mr. Scott. Okay. As one that doesn't like to reinvent the 
wheel, is there anything wrong with just recodifying the old 
language?
    Judge Kennedy. Not at all. It would have to be slightly 
remodified and renumbered and merely reintroduced and passed, 
and that is it. It would be a--it would be the simplest 
legislative fix I can think of.
    Mr. Scott. Thank, you, Mr. Chairman.
    Mr. Cohen. Thank you. Sounds like something right up my 
alley. [Laughter.]
    Judge Kennedy, according to a recently updated Harvard 
study, 62 percent of bankruptcy debtors could trace the cause 
of their bankruptcy to medical debt.
    If this Congress is successful in passing affordable health 
care for all people in this country, how much would that, do 
you believe, would relieve bankruptcy courts of the cases that 
they see?
    Judge Kennedy. I, of course, can't give you a definite 
answer, but----
    Mr. Cohen. Right.
    Judge Kennedy [continuing]. But my answer would be I think 
it would reduce the number of filings. As you know, currently 
medical problems are a measure of contribution to bankruptcy 
filings, and if they were to be substantially eliminated, yes, 
indeed, I think the case filings would decrease.
    Now, job losses is another problem. Marital problems, 
domestic problems--some people are financially illiterate. I 
mean, there are other causes of bankruptcy besides medical 
problems. But medical problems is one of the major, if not the 
major, contributor.
    And yes, my answer is it would reduce the filings, but I 
don't know to what extent.
    Mr. Cohen. Yeah. I was just thinking if that happened, 
there are so many repercussions, and if you didn't have the 
medical debts--there are other debts, and people wouldn't go 
into bankruptcy, and other debts they have they could handle, 
and so the medical--the affordable health care not only helps 
the folks with their health care but it helps a lot of 
creditors out there who otherwise would be paid.
    Judge Kennedy. Yes.
    Mr. Cohen. Do you think that the bankruptcy judges are 
capable of handling--if we had the so-called cram-down 
provision pass, that the present bankruptcy--the judges could 
handle the--the case load increase?
    Judge Kennedy. I think bankruptcy judges are well 
qualified, Mr. Chairman, to do that. After all, as someone 
noted, we have been doing this for years with family farms, 
second homes, vacation homes, rental properties, investment 
properties.
    Actually, I think if the mortgage modification legislation 
were to pass, some even say it might result in a slight 
reduction of cases. Some draw the analogy of being what 
happened in the mid 1980's regarding family farms.
    You will recall that there were family farms being lost 
left and right in America due to foreclosures. Commodity prices 
were falling. Congress stepped in and responded to allow for 
the cram-down.
    Yes, bankruptcy judges tried a few valuation hearings. Word 
travels real quick at the bar once the predictability factor 
kicks in for a bankruptcy judge. After a short period of time, 
the lawyers started settling many of these valuation hearings.
    And after a while, they got together and said, ``Well, why 
even file the case? We know pretty much how these judges are 
going to rule anyway. Let's just settle it and don't have to 
file at all, save the money to be paid for something else.''
    So yes, to be responsive to your question, I, indeed, think 
bankruptcy judges are very well qualified. And again, the home 
mortgage secured only by the debtor's principal residence is 
the only home that can't be subject to being modified.
    Mr. Cohen. Thank you.
    Judge Lynn, the conference recommended the 13 new judges 
and the conversion of the 22 to permanent status and the 
extension of two temporary judges, so that is a total of 37. Is 
there, in fact, a need for more judges, do you believe?
    Judge Lynn. When the results of the new case weighting 
study are completed and analyzed, my informed judgment is that 
there will be some additional need shown. But we don't feel 
that at this moment in time we have a legitimate basis to ask 
you to authorize those.
    So we have elected to go forward with those that we think 
are critical and crucial, and if the numbers and the other 
factors that we consider support additional judgeship requests 
in the future, then we will come to you with those.
    Mr. Cohen. Thank you.
    I believe that finishes our questioning. The second round 
is finished. I thank all the witnesses for their testimony 
today.
    Without objection, Members will have 5 legislative days to 
submit any additional written questions which we will forward 
to the witnesses and ask you promptly to answer them. They will 
be made part of the record.
    Without objection, the record will remain open for 5 
legislative days for the submission of any other additional 
materials. Again, I thank you everyone for their time, their 
patience, their contribution.
    I believe that this hearing will result in legislation soon 
introduced in a bipartisan fashion that will result in action 
taken by this Congress to help improve the--and remedy the 
problems to some extent that we have heard about.
    So this hearing of the Subcommittee on Commercial and 
Administrative Law is therefore adjourned.
    [Whereupon, at 12:35 p.m., the Subcommittee was adjourned.]
                            A P P E N D I X

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               Material Submitted for the Hearing Record

  Response to Post-Hearing Questions from the Honorable Barbara M.G. 
 Lynn, United States District Court for the Northern District of Texas





   Prepared Statement of the Financial Counseling Research Roundtable



                               ATTACHMENT





                                 
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