Bankruptcy Professional Fees: Guidelines for Reviewing Fee Applications
(Fact Sheet, 03/06/95, GAO/GGD-95-36FS).
This fact sheet provides information on the guidelines used by Assistant
U.S. Trustees within the Justice Department to assess the reasonableness
of fee requests from attorneys and other professionals involved in
bankruptcy cases. GAO surveyed Assistant U.S. Attorneys on (1) the
guidelines they used to review professionals' fee requests overall and
in chapter 11 cases specifically, (2) the reasons the local Office of
U.S. Trustees or other parties in bankruptcy cases have objected to
chapter 11 fee applications, and (3) the adequacy of compensation for
private trustees in chapter 7 cases. GAO also examines differences in
the offices with and without guidelines in U.S. Trustee activities, such
as the time spent reviewing professional fee applications, the frequency
and the types of objectives made to those applications, and the
frequency of informal consultation on fee applications.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: GGD-95-36FS
TITLE: Bankruptcy Professional Fees: Guidelines for Reviewing Fee
Applications
DATE: 03/06/95
SUBJECT: Bankruptcy
Administrative costs
Legal fees
Compensation
Lawyers
Civil procedure
Claims settlement
Legal aid
Trusts and estates law
Surveys
IDENTIFIER: DOJ U.S. Trustee Program
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Cover
================================================================ COVER
Fact Sheet for the Ranking Minority Member, Subcommittee on
Commercial and Administrative Law, Committee on the Judiciary, House
of Representatives
March 1995
BANKRUPTCY PROFESSIONAL FEES -
GUIDELINES FOR REVIEWING FEE
APPLICATIONS
GAO/GGD-95-36FS
Bankruptcy Professional Fees
(182006)
Abbreviations
=============================================================== ABBREV
AUST - Assistant U.S. Trustee
OUST - Office of U.S. Trustee
Letter
=============================================================== LETTER
B-259365
March 6, 1995
The Honorable John Conyers
Ranking Minority Member
Subcommittee on Commercial
and Administrative Law
Committee on the Judiciary
House of Representatives
Dear Mr. Conyers:
This fact sheet responds to the request of the former Chairman of the
Subcommittee for information on the guidelines available to and used
by Assistant U.S. Trustees (AUST) within the Department of Justice
to assess the reasonableness of fee requests from attorneys and other
professionals involved in bankruptcy cases. It reflects responses
from 97 AUSTs, or their designees, to our survey soliciting
information on their experiences and views regarding (1) the
guidelines available to and used by AUSTs to review professionals'
fee requests overall and in chapter 11 cases specifically, (2) the
reasons the local Office of U.S. Trustees (OUST) or other parties in
bankruptcy cases have objected to chapter 11 fee applications, and
(3) the adequacy of compensation for private trustees in chapter 7
cases.\1 As agreed with the Subcommittee, we also examined
differences in the offices with and without guidelines in U.S.
Trustee activities such as (1) the time spent reviewing professional
fee applications, (2) the frequency and/or types of objections made
to those applications, and (3) the frequency of informal
consultations on fee applications.
--------------------
\1 Private trustees usually are attorneys in private practice,
although some are accountants, real estate brokers, or other
professionals. Private trustees are appointed by the U.S. Trustees
to administer chapter 7, 12, and 13 bankruptcy cases. Their exact
responsibilities vary, depending upon the chapter under which the
bankruptcy was filed. For example, the responsibilities of chapter 7
trustees include collecting assets, converting them to cash, and,
upon court approval, distributing the proceeds to creditors and
professionals.
BACKGROUND
------------------------------------------------------------ Letter :1
The rapid rise in bankruptcy filings in the late 1980s generated
congressional concerns about the money paid to various professionals,
such as attorneys and accountants, hired to aid in the reorganization
or liquidation of bankrupt estates. Congress was particularly
concerned about the size of fees charged by professionals in complex
and large chapter 11 business bankruptcies, where professional fees
could total millions of dollars although these total fees were a
small percentage of estate assets.
Chapter 11 reorganization proceedings provide for the rehabilitation
of the business debtor. The U.S. Trustee's responsibilities in
chapter 11 cases include reviewing professionals' fee applications
and determining if the amounts requested are reasonable, given the
work performed.\2 In chapter 7 proceedings, which liquidate a
debtor's assets to pay creditors, the U.S. Trustee is responsible
for overseeing the activities of private trustees who liquidate the
debtor's nonexempt assets to pay creditors. The U.S. Trustee
generally has little direct, detailed knowledge of most chapter 11
cases. They receive 180-day reports in chapter 7 cases.
In chapter 11 cases, the role of the U.S. Trustee is substantially
more limited than that of other parties, such as the creditors
committees, debtors, and professionals. The U.S. Trustee does not
participate in the meetings between creditors committees and
professionals to determine goals and strategies of the parties, nor
is the U.S. Trustee involved in many of the motions and other
proceedings. The U.S. Trustee may, from time-to-time or in specific
cases, confer with creditors and professionals about these matters,
but generally this occurs on an ad hoc basis. Thus, the U.S.
Trustee usually has little first-hand knowledge of the workings of
creditors and professionals and may not have the detailed knowledge
of a case to judge whether time charged or staffing are adequate,
appropriate, or even reasonable for the type of work performed.
Moreover, professional fee applications, particularly in large and
complex bankruptcies, have generally been presented in a format that
showed billing entries in chronological order, making analysis and
review difficult.
Because the amount of fees can be large and the issues related to the
reasonableness of the fees complex, many courts and U.S. Trustee
offices have developed guidelines for professionals to use in
submitting their fee applications. These guidelines were designed,
in part, to help U.S. Trustees determine the reasonableness of
professional fee applications by assisting their review of whether
the time professionals charged for activities was accurately
reflected in their bills or whether the staffing of professionals was
excessive.
To facilitate the U.S. Trustees' review of professional fee
applications, many of the written U.S. Trustee guidelines prescribed
format and billing requirements. In addition, some court guidelines
have required that other professionals, designated by the fee
applicant, certify that fee applications comply with any local court
guidelines and that fees and disbursements are billed at rates in
accordance with those usually charged by the applicant and generally
accepted by the applicant's clients. Finally, the guidelines also
were designed to give professionals examples of the types of
objections that the U.S. Trustee may raise to fee applications.
U.S. Trustees may have formal written guidance and/or informal
guidance for reviewing fee applications. If reasons exist to
question all or a portion of a fee application, the U.S. Trustee may
file a fee objection with the bankruptcy court seeking a reduction in
the fee. However, the bankruptcy judge has final approval of
professional fee applications.
--------------------
\2 For cases filed under other chapters of the bankruptcy code, the
U.S. Trustee's responsibilities include appointing private trustees
(who are usually attorneys in private practice) to administer the
cases. A brief description of the major bankruptcy chapters and the
U.S. Trustee Program is found in app. I.
RESULTS IN BRIEF
------------------------------------------------------------ Letter :2
All 97 AUSTs surveyed, or their designees, returned the
questionnaire, although some respondents did not answer every
question. About one-third (31) of AUSTs said they had written U.S.
Trustee guidelines, about one-half (50) had written court directives
regarding professional fees (17 had both), and about two-thirds (65)
had unwritten guidelines governing professional fee applications.
Of the AUSTs with written guidelines, about one-third (10 of 31) with
Trustee guidelines and one-half (26 of 50) with judicial directives
indicated they had guidelines specific to chapter 11 cases. About
two-fifths (26 of 65) of the AUSTs with unwritten court/judicial
guidelines had guidelines applicable to chapter 11 cases.\3
The written guidelines or directives used most often by AUSTs in
chapter 11 bankruptcy cases addressed the specific format for the
submission of professional fee applications and the lodestar
formula.\4 The two unwritten guidelines used most often were those
related to holdbacks\5 and the lodestar formula.
The most common reasons OUSTs objected to chapter 11 fee applications
were insufficient description of the work performed and "lumping," or
failing to list separately each task and the time required to
complete them. The OUSTs objected most frequently to applications
from attorneys for the debtor and least frequently to over-secured
creditors and realtors.
OUSTs with all three forms of guidelines--trustee and court written
guidelines plus unwritten guidelines--objected to chapter 11 fee
applications more frequently, held informal consultations prior to
fee hearings less frequently, and devoted a greater percentage of
staff time to reviewing fee applications than those offices with no
guidelines.
The majority of AUSTs (85) reported that bankruptcy judges awarded
private trustees in chapter 7 cases the statutory maximum
compensation permitted at least 81 percent of the time; and 27
reported judges awarded the maximum compensation 100 percent of the
time. The majority of AUSTs (89) believed private trustee
compensation should be increased.\6 AUSTs reported that excessive
paperwork was more important than insufficient compensation as a
reason private trustees voluntarily left their positions, while
challenging work and a dependable source of income were the most
important reasons private trustees remained in their positions.
--------------------
\3 We defined unwritten or informal guidelines as those known to be
used by judges or the courts but which are not formally recorded or
published as guidelines. According to one AUST the unwritten
guidelines or rules are generally based on case law. For example,
one court had an informal rule forbidding approval of chapter 7 fee
applications in which administrative expenses exceeded one-third of
total distributions from the dissolution of the estate.
\4 The lodestar formula is used to establish a standard for assessing
the reasonableness of professional fees. The formula is based on the
number of hours the professional expended multiplied by a reasonable
hourly rate. The formula is not designed to assess the
reasonableness of the hours expended.
\5 Holdbacks refer to the practice whereby only a portion of the
requested professional fees are allowed on an interim basis. The
remainder of the requested interim fees would be allowed, if at all,
at the conclusion of the representation along with the professional's
final fee application.
\6 The Bankruptcy Reform Act of 1994 (P.L. 103-394) contains several
provisions that provide for increased trustee compensation.
OBJECTIVES, SCOPE, AND
METHODOLOGY
------------------------------------------------------------ Letter :3
Our objectives were to obtain information on the (1) types of formal
and informal guidelines available to and used by U.S. Trustees to
review professional fee applications, (2) the type of objections made
to professional fee applications, and (3) the adequacy of
compensation to private trustees appointed to administer chapter 7
cases. We mailed questionnaires to survey 97 AUSTs or their
designees in the 92 U.S. Trustee field offices between May and July
1993\7 . We received responses from all 97 of those surveyed.\8
However, some respondents did not answer every question on the
questionnaire. We surveyed the AUSTs because they are responsible
for overseeing the private trustees --about 2,000 for chapter 7 cases
alone--who are directly responsible for the orderly administration of
bankrupt estates. We asked the AUSTs for their experiences and views
regarding professional fees in bankruptcy cases.
We reviewed the survey responses for any relationships between the
number of guidelines applicable to chapter 11 (U.S. Trustee
guidelines, judicial district directives, and judges/courts unwritten
guidelines or rules) and other factors, such as the frequency of
objections, frequency of informal consultations before fee hearings,
and the amount of staff's time spent reviewing applications. We also
reviewed the questionnaire results for differences in such factors as
the frequency of objections and informal consultations between
offices with all three forms of guidance and those with no guidance.
We did not obtain agency comments because the results of the survey
reflect the personal responses of those surveyed, and the fact sheet
does not include conclusions or recommendations.
The survey questions are shown in appendix II. Appendix III provides
more detailed data on the types of guidelines available to U.S.
Trustees, including the bankruptcy chapters to which those guidelines
apply. Appendix IV provides data on the use of the guidelines in
reviewing professional fee applications in chapter 11 cases.
Appendix V includes responses on chapter 7 questions, including the
compensation and retention of private trustees.
We are sending copies of this fact sheet to the Chairmen of the House
and Senate Judiciary Committees; the Ranking Minority Member of the
Senate Judiciary Committee; the Attorney General; the Executive
Director of the Executive Office for U.S. Trustees; the Director,
Office of Management and Budget; and other interested parties. We
will also make copies available to others upon request.
Please contact me on (202) 512-8777 if you have questions concerning
this fact sheet. The major contributors to this fact sheet are
listed in appendix VI.
Sincerely yours,
Laurie E. Ekstrand
Associate Director, Administration
of Justice Issues
--------------------
\7 Given our limited resources, We postponed formally reporting the
results of the survey while we completed a report for the
subcommittee on professional fees in chapter 7 cases.
\8 For nine offices in which the AUST position was either vacant or
not designated, the questionnaire was completed by the
attorney-in-charge. For two offices, the questionnaire was completed
by the U.S. Trustee in whose region the office was located. Both
the AUST and attorney-in charge responded for one office. Three
field offices had more than one AUST.
THE U.S. TRUSTEE PROGRAM
=========================================================== Appendix I
In 1978, Congress passed the Bankruptcy Reform Act (P.L. 95-598),
which established the U.S. Trustee Program as a pilot effort in 18
federal judicial districts. The act thereby shifted administrative
and supervisory responsibilities for bankruptcy cases in these 18
districts from the courts to the Department of Justice. The
legislation also prescribed maximum compensation levels for the
services rendered by private trustees and other professionals in
bankruptcy cases. In 1986, Public Law 99-554\1
expanded the program to all 94 judicial districts\2 and established
21 regions, each administered by a U.S. Trustee appointed by the
Attorney General. This law also provides for a self-funding
mechanism whereby the program receives, for example, a portion of the
fees assessed against those who file bankruptcy cases.
Currently, the program operates 92 U.S. Trustee field offices that
oversee the administration of bankruptcy cases filed in the 88
judicial districts. Field offices are typically staffed by one or
more Assistant U.S. Trustees (AUST), attorneys, bankruptcy analysts,
paralegals, case management specialists, legal clerks, legal data
technicians, and administrative support staff. While the field
offices can directly administer bankruptcy cases, they more commonly
oversee the administration of cases by private trustees in chapter 7,
12, and 13 cases--about 2,000 private trustees for chapter 7 cases
alone. The U.S. Trustee field offices supervise the administration
of cases filed under four of the five types of bankruptcy proceedings
defined under the Bankruptcy Code:
-- proceedings under chapter 7 in which the assets of the debtor
are liquidated;
-- reorganization proceedings under chapter 11 for rehabilitation
of the business debtor;
-- reorganization proceedings under chapter 12 for the adjustment
of debts of a family farmer; and
-- adjustment of debts of an individual with regular income under
chapter 13, pursuant to which an individual can adopt a plan to
discharge certain debts after making payments over a period of
time, usually not to exceed 36 months.
U.S. Trustees have little role in proceedings under chapter 9, which
relates to the adjustment of debts of a municipality.
The U.S. Trustees' specific responsibilities include (1) monitoring
applications to employ professionals, (2) appointing private
trustees, (3) reviewing the fee applications of professionals, and
(4) filing objections with bankruptcy judges to fee applications that
the U.S. Trustee considers inappropriate and improper.
--------------------
\1 The Bankruptcy Judges, United States Trustees, and Family Farmer
Bankruptcy Act of 1986.
\2 Congress authorized six bankruptcy districts in the states of
North Carolina and Alabama to delay their entry into the U.S.
Trustee Program until 1992, subsequently extending the date 10 years
to 2002. In these six districts, a separate, parallel program with
objectives identical to those of the U.S. Trustee Program was
created and operates within the judicial branch. Thus, there are
currently 88 districts participating in the U.S. Trustee Program.
See Bankruptcy Administration: Justification Lacking for Continuing
Two Parallel Programs (GGD-92-133, Sept. 28, 1992).
SURVEY OF U.S. TRUSTEES
========================================================== Appendix II
Survey Questions
----------------------------------------------------------------------
1. In which judicial district(s) does your office have responsibility?
2. How many years have you held the Assistant U.S. Trustee position?
3. For your region, are there published U.S. Trustee guidelines on
professional fees in bankruptcy cases?
No
Yes
4. When did the published U.S. Trustee guidelines go into effect?
5. For which chapter(s) do these guidelines apply?
Chapter 7
Chapter 11
Chapter 12
Chapter 13
Published guidelines apply to no particular chapter
6. Has your district developed and published directives on
professional fees in bankruptcy cases?
No
Yes
7. Which of the following forms do the published directives in your
district take?
Formal orders
Local rules
Official forms
Other
8. When did your district's directives go into effect?
9. For which chapter(s), if any, do these directives apply?
Chapter 7
Chapter 11
Chapter 12
Chapter 13
Published directives apply to no particular chapter
10. Are there judge/court-specific unwritten guidelines or rules on
professional fees in bankruptcy cases?
No
Yes
11. For which of the following chapter(s) do these unwritten
guidelines apply?
Chapter 7
Chapter 11
Chapter 12
Chapter 13
Guidelines apply to no particular chapter
12. Regarding professional fees in bankruptcy cases, which of the
following have been used in the past year in your district in Chapter
11 cases by the court and the Office of U.S. Trustee?
Ad hoc committees
Fee analyst (outside entity used to examine fees)
Statements of expected services and costs in advance (up-front
budgets)
Limiting the number of committees
Limiting the size of committees
Mediation
Specific format for the submission of fee applications
Caps on hourly rates
OUST written response required on fee applications
Court hearing and appearance required on fee applications
Lodestar formula
Holdbacks
Restrictions on locations/participants in committee meetings
Sharing of professionals
Other
13. Is there anything about the court's use of unwritten guidelines/
rules that you would like to comment on or give additional information
about?
14. In your experience, in the past year, did anyone file an objection
to fee applications in Chapter 11 or Chapter 7 cases?
No
Yes
15. In the past year, about what percentage of your staff's time was
spent reviewing Chapter 11 fee applications?
16. Currently, for Chapter 11 fee applications, how often, if at all,
does informal consultation occur between your office and professionals
before fee hearings?
All of the time
81% to 99% of the time
61% to 80% of the time
41% to 60% of the time
21% to 40% of the time
1% to 20% of the time
None of the time
Not sure
No basis to judge
17. In the past year, in what percentage, if any, of Chapter 11 fee
applications did your office file an objection?
All of the applications
81% to 99% of the applications
61% to 80% of the applications
41% to 60% of the applications
21% to 40% of the applications
1% go 20% of the applications
None of the applications
Not sure
18. Consider Chapter 11 fee applications in which your office formally
objected. How often, if at all, in the past year, did your office
formally object for the following reasons?
Lack of showing benefit to the estate
Total amount of fees in relation to total value of estate
Duplication of services/efforts
Excessive hours worked
Excessive hourly rates for the services performed
Excessive hourly rates for the persons performing those services
Charges for fee application preparation
Full hourly rates for travel time
Excessive lodging and travel expenses
Charges for amenities while in travel status, etc.
Charging in excess of the tax deductible amount in mileage
Parking fees while appearing in court
Not complying with formatting requirements for fee applications or
requests for reimbursement of expenses
Not keeping time in appropriate increments
Insufficient description of the work done
Not listing separately each task and the time required for that task
("lumping")
Inadequate documentation of expenses for which reimbursement is
sought
Use of professionals to perform tasks which a paraprofessional could
perform
Computerized research charges in excess of actual costs as billed to
the professional
19. Consider Chapter 11 fee applications in which your office filed an
objection. How often, if at all, in the past year, did your office
make objections to the following professionals?
Attorney for debtor
Attorney for creditor
Attorney for creditors' committee
Investment banker/financial advisor
Accountants
Realtors
Attorney for equity holders' committee
Over-secured creditors
Other
20. In the past year, in Chapter 11 fee applications in which other
parties filed an objection, how often, if at all, did each of the
following parties object?
Trustee
Debtor
Creditor
Creditors' committee
Judge/court
Attorney for equity holders' committee
Other
21. For each party objecting in Question 20, please describe briefly
the reason(s) for objecting.
22. In the past year, about what percentage of staff time was spent
reviewing Chapter 7 fee applications?
23. Currently, for Chapter 7 fee applications, how often does informal
consultation occur between your office and professionals before fee
hearings?
All of the time
81% to 99% of the time
61% to 80% of the time
41% to 60% of the time
21% to 40% of the time
1% to 20% of the time
None of the time
Not sure
No basis to judge
24. In the past year, in what percentage of Chapter 7 fee
applications, if any, did your office formally object?
25. In the past year, of the private trustees in your district who are
attorneys, approximately what percentage of them retain themselves or
their law firm as attorney(s) for trustee?
26. In the past year, in approximately what percentage of bankruptcy
cases do the private trustees retain themselves or their law firm as
attorney(s) for trustee?
27. In the past year, in what percentage of bankruptcy cases do judges
in your district routinely award, as compensation to private trustees,
the statutory maximum on fees?
All of the cases
81% to 99% of the cases
61% to 80% of the cases
41% to 60% of the cases
21% to 40% of the cases
1% to 20% of the cases
None of the cases
Not sure
No basis to judge
28. In the past year, what problems, if any, did your district
experience in the Chapter 11 fee application process with the
following types of professionals?
Accountants
Attorneys
Investment bankers/financial advisors
Management companies
Other
29. If your district encountered problems in the past year with any of
the professionals listed in Question 28 in connection with the Chapter
11 bankruptcy fee application process, briefly describe the
problem(s).
30. What do you view as the greatest problem(s) in the bankruptcy fee
application process?
31. What would your proposal be to reduce or control professional fees
in bankruptcy cases?
32. Consider all the work of your office. In your opinion, how much
priority, if any, would you give each of the following activities?
Administrative matters (e.g., quarterly fees, 180-day reports, etc.)
Monitoring private trustees
Investigating fraud and misconduct allegations
Analyzing Chapter 11 disclosure statements
Reviewing Chapter 11 fee applications
Responding to public inquiries
Other
33. Excluding those private trustees who left because they were
removed, about how many private trustees voluntarily left their
positions in the past two years?
34. Which of the following, if any, were important reasons for those
private trustees who have voluntarily left their positions?
Requirements by the Executive Office for U.S. Trustees
The caseload was too heavy
Income after expenses was too low
Too much paperwork involved in being a trustee
Trustees were not paid in a timely manner
Retired
Other
35. For those private trustees who have remained in their positions,
how important were the following reasons?
Self-marketing opportunities
Prestige
Interesting/challenging work
Financial rewards
Dependable income for law practice or other professional endeavor
Investment in time and equipment
Other
36. In your opinion, should private trustee compensation be increased,
decreased, or remain about the same?
Greatly increased
Somewhat increased
Remain about the same
Somewhat decreased
Greatly decreased
No opinion
----------------------------------------------------------------------
ASSISTANT U.S. TRUSTEES'
RESPONSES REGARDING GUIDELINES
AVAILABLE TO ASSESS PROFESSIONAL
FEES IN BANKRUPTCY CASES
========================================================= Appendix III
Of the 97 Assistant U.S. Trustees (AUST), or their designees, who
responded to our survey on guidelines for professional fees in
bankruptcy cases, about one-third reported having written U.S.
Trustee guidelines, about one-half had written judicial directives,
and about two-thirds had unwritten judge rules or directives (see
table III.1). The majority of the 31 AUSTs who reported having
written U.S. Trustee guidelines on fees reported having the other
two forms of guidance as well--written judicial directives and
unwritten judge/court rules or directives. About 52 percent of these
31 AUSTs indicated that their own written guidelines specifically
applied to at least one of four chapters (chs. 7, 11, 12 and 13)
under which bankruptcies are filed, as shown in figure III.1.
Of the remaining 66 AUSTs without written U.S. Trustee guidelines on
professional fees, all but 8 (12 percent) had guidance in the form of
judicial district directives or judges/courts unwritten guidelines or
rules (see fig. III.2). About one-third (10 of 31) of those with
written U.S. Trustee guidelines, one-half (26 of 49) of those with
written judicial district directives, and two-fifths (26 of 65) of
those with unwritten guidelines/rules had guidelines specifically
applicable to chapter 11 cases (see fig. III.3).
Table III.2 lists the types of guidelines that were available within
each district where the 97 AUSTs have offices. As the table
indicates, more than one type of guideline may have been available in
each AUST office. Table III.3 summarizes the different mixes of
guidelines that were available to AUSTs at the time of our survey.
Tables III.4 through III.7 provide additional information on specific
types of guidelines that were available and the bankruptcy chapters
to which they applied.
Table III.1
The Number of Assistant U.S. Trustees
Who Reported Having Some Type of
Guidelines on Fees in Bankruptcy Cases
Percen
Type of guideline Number t
------------------------------------------------------ ------ ------
Published U.S. Trustee guidelines 31\a 32%
Judicial district directives 50 52
Judges/court unwritten rules 65 67
----------------------------------------------------------------------
Note: All 97 AUSTs responded to this question.
\a Twenty-five respondents reported that guidelines took effect
between May 1988 and July 1993.
Figure III.1: Percentage of
Written U.S. Trustee
Guidelines on Professional Fees
That Applied to One or More
Bankruptcy Chapters or Applied
to No Specific Chapter
(See figure in printed
edition.)
Note 1: Percentages are based on the 31 AUSTs who reported having
written, published U.S. Trustee guidelines on professional fees in
bankruptcy cases.
Note 2: One respondent checked four bankruptcy chapters in addition
to no particular chapter on the questionnaire. This respondent was
included in the category of two to four chapters.
Note 3: Numbers do not add to 100 due to rounding.
Figure III.2: Type of Guidance
Available to 66 Assistant U.S.
Trustees Without Written U.S.
Trustee Guidelines on
Professional Fees in Bankruptcy
Cases
(See figure in printed
edition.)
Figure III.3: Types of
Guidance Available to Assistant
U.S. Trustees Regarding
Professional Fees in Bankruptcy
Cases (Guidance Applicable to
Chapter 11 Cases Shown
Separately)
(See figure in printed
edition.)
Note 1: Numbers are based on the responses of all 97 AUSTs surveyed.
Note 2: An AUST may have more than one type of guideline available,
as shown in table III.2.
Note 3: Guidelines applicable to chapter 11 may apply to other
chapters as well.
Table III.2
Guidelines on Professional Fees
Available Within the Districts Where
Assistant U.S. Trustees Have Offices
Unwritte
Published Published n
Judicial district Office of U.S. U.S. Trustee court guidelin
Trustee covers guidelines directives es
-------------------------------- ------------- ----------- --------
Alaska X X
Arizona X
Arkansas, Eastern X X
California, Central X X X
California, Central X X X
California, Central X X X
California, Central X X X
California, Central X X X
California, Eastern X
California, Eastern X X
California, Northern X X
California, Northern X X
California, Northern X
California, Southern X X X
California, Southern X X X
Colorado X X X
Connecticut X X
Florida, Middle X
Florida, Middle X X
Florida, Northern X
Florida, Northern X
Georgia, Middle
Georgia, Northern X X
Georgia, Southern
Guam X
Hawaii X
Idaho X
Illinois, Central X X
Illinois, Northern X
Illinois, Northern X
Indiana, Northern X
Indiana, Southern X
Iowa, Northern X X
Iowa, Southern X
Kansas X X
Kentucky, Western X
Kentucky, Western X
Louisiana, Eastern X
Louisiana, Western X X
Maine X X
Maryland X
Maryland X X
Massachusetts X
Massachusetts X X
Michigan, Eastern X
Michigan, Western X X
Minnesota X X
Mississippi, Northern X
Missouri, Eastern X
Missouri, Western X X
Montana X
Nebraska X
Nevada X X
Nevada
New Hampshire X X
New Jersey X X
New Mexico
New York, Eastern
New York, Northern X
New York, Northern X
New York, Southern X
New York, Western X
New York, Western
Ohio, Northern X
Ohio, Southern X X
Ohio, Southern X X
Oklahoma, Northern X X X
Oklahoma, Western
Oregon X
Oregon X
Pennsylvania, Eastern X
Pennsylvania, Middle X X
Pennsylvania, Western X
Puerto Rico X
South Carolina X
South Dakota X
Tennessee, Eastern X
Tennessee, Middle
Tennessee, Western X X
Texas, Eastern X
Texas, Northern X
Texas, Southern X X
Texas, Southern X X
Texas, Western X X
Texas, Western X X
Texas, Western X X
Utah X
Virginia, Eastern X X X
Virginia, Eastern X
Virginia, Eastern X X
Virginia, Western X X X
Washington, Eastern X X
Washington, Western X X
Wisconsin, Eastern X
Wisconsin, Western X
West Virginia, Northern X X
Wyoming X X
----------------------------------------------------------------------
Note: Some judicial districts have more than one AUSTs.
Table III.3
Number of Assistant U.S. Trustees
Reporting Different Types of Fee
Guidelines
Type of guideline Number
-------------------------------------------------------------- ------
Judicial district directives only 11
Judge/court unwritten rules only 25
U.S. Trustee guidelines and judicial district directives 6
U.S. Trustee guidelines and judge/court 7
unwritten rules
U.S. Trustee guidelines, judicial district directives and 11
judge/court unwritten rules
Judicial district directives and judge/court unwritten rules 22
No guidelines 8
======================================================================
Total 97
----------------------------------------------------------------------
Table III.4
The Percentage of Written U.S. Trustee
Fee Guidelines That Applied to Each
Bankruptcy Chapter
Percen
Chapter t
-------------------------------------------------------------- ------
No particular chapter 52%
Chapter 7 39
Chapter 11 32
Chapter 12 13
Chapter 13 16
----------------------------------------------------------------------
Note 1: Percentages based on the 31 AUSTs who reported having
written U.S. Trustee guidelines on bankruptcy professional fees.
Note 2: Guidelines may apply to more than one bankruptcy chapter.
Note 3: One respondent checked all the boxes--one for each chapter
plus one for no particular chapter.
Table III.5
Type of Form in Which Written Judicial
District Directives on Fees in
Bankruptcy Cases Were Published
Percen
Form directive takes t
-------------------------------------------------------------- ------
Local rules 80%
Formal orders 18
Official forms 12
Other 16
----------------------------------------------------------------------
Note: Percentages based on the 50 AUSTs who reported having written
judicial directives on bankruptcy professional fees.
Table III.6
The Percentage of Written Judicial
District Directives on Fees That Applied
to Each Bankruptcy Chapter
Percen
Chapter t
-------------------------------------------------------------- ------
No particular chapter 47
Chapter 7 51
Chapter 11 53%
Chapter 12 45
Chapter 13 41
----------------------------------------------------------------------
Note: Percentages based on the 49 AUSTs who reported having written
judicial directives on bankruptcy professional fees.
Table III.7
The Percentage of Unwritten Rules on
Fees That Applied to Each Bankruptcy
Chapter
Percen
Chapter t
-------------------------------------------------------------- ------
No particular chapter 55%
Chapter 7 34
Chapter 11 40
Chapter 12 14
Chapter 13 37
----------------------------------------------------------------------
Note: Percentages based on the 65 AUSTs who reported having
unwritten rules or guidelines on bankruptcy professional fees.
ASSISTANT U.S. TRUSTEES'
RESPONSES REGARDING THE REVIEW OF
PROFESSIONAL FEE APPLICATIONS IN
CHAPTER 11 CASES, INCLUDING THE
USE OF AVAILABLE GUIDELINES
========================================================== Appendix IV
This appendix provides, for chapter 11 cases, information on the
formal and informal guidelines used, the frequency of informal
consultations prior to formal fee hearings, the frequency of
objections to professional fee applications, the reasons U.S.
Trustees and other parties objected to fee applications, the
categories of professionals most and least frequently objected to,
and the activities to which U.S. Trustees gave highest priority.
OVERVIEW
-------------------------------------------------------- Appendix IV:1
Tables IV.1 and IV.2 show which formal and informal guidelines were
used by the courts, the U.S. Trustee, or both. About 90 percent of
the Assistant U.S. Trustees (AUST) reported that no more than
one-fifth of their staff time was spent reviewing applications; about
60 percent said no more than 10 percent of staff time was expended on
this task.
About 60 percent of the AUSTs reported that more than three-fifths of
the time the Office of U.S. Trustee (OUST) and professionals held
informal consultations on chapter 11 fee applications prior to formal
fee hearings (table IV.3). Just over 70 percent of AUSTs reported
filing formal objections to professional fees in no more than 40
percent of the chapter 11 fee applications (table IV.4). The two
most frequent reasons for objecting were insufficient description of
the work done and "lumping," or failing to list separately each task
and the time required to complete it (table IV.5). The category of
professional most frequently objected to was attorney for the
debtors. Over-secured creditors and realtors were the categories to
whom AUSTs least frequently objected. (See tables IV.6 and IV.7.)
Among other parties in bankruptcy cases, judges and creditors
objected most frequently to chapter 11 fees (table IV.8) and debtors
least frequently (table IV.9). The reasons other parties gave for
objecting to chapter 11 fee applications are shown in tables IV.10
(top 5 reasons) and IV.11 (detailed breakdown).
AUSTs reported experiencing the most problems with investment
bankers/financial advisors and accountants (table IV.12) and the
fewest problems with management companies and attorneys (table
IV.13). AUSTs reported giving highest priority to monitoring private
trustees, investigating fraud and misconduct allegations, and
completing administrative tasks (table IV.14).
Table IV.1
Type of Written Guidelines/Directives
Used Within the Past Year in Chapter 11
Cases
Court
and Not
Written guidelines Court only OUST only OUST Total used Total
------------------------ ---------- ---------- ------ ------ ------ ------
Specific format for the 30 7 15 52 25 77
submission of fee
applications
Lodestar formula 15 2 21 38 30 68
Court hearing and 0 13 26 46 72
appearance
required on fee
applications
Limiting the size of 0 13 3 16 56 72
committees
Holdbacks 5 2 8 15 42 57
Limiting the number of 0 8 5 13 60 73
committees
Ad hoc committees 2 6 4 12 67 79
OUST written response 2 4 5 11 63 74
required on fee
applications
Statements of expected 4 2 4 10 66 76
services and costs in
advance (up-front
budgets)
Sharing of professionals 0 0 9 9 59 68
Caps on hourly rates 7 0 1 8 61 69
Fee analyst (outside 6 0 2 8 71 79
entity used to examine
fees)
Mediation 5 1 0 6 70 76
Restrictions on 1 1 2 4 71 75
locations/participants
in committee meetings
--------------------------------------------------------------------------------
Note: Totals do not add to 97 because some AUSTs did not respond to
some questions.
Table IV.2
Type of Unwritten Guidelines/Rules Used
Within the Past Year in Chapter 11 Cases
Court
and Not
Unwritten guidelines Court only OUST only OUST Total used Total
------------------------ ---------- ---------- ------ ------ ------ ------
Holdbacks 26 4 44 74 14 88
Lodestar formula 15 4 46 65 15 80
Limiting the number of 1 33 10 44 37 81
committees
Caps on hourly rates 25 1 15 41 41 82
Limiting the size of 0 37 1 38 39 77
committees
Court hearing and 16 4 17 37 41 78
appearance required on
fee applications
Specific format for the 14 2 21 37 29 66
submission of fee
applications
Sharing of professionals 9 2 13 24 53 77
Statements of expected 7 6 9 22 55 77
services and costs in
advance (up-front
budgets)
Mediation 10 4 1 15 63 78
OUST written response 1 6 7 14 68 82
required on fee
applications
Fee analyst (outside 7 0 2 9 71 80
entity used to examine
fees)
Restrictions on 4 3 1 8 70 78
locations/participants
in committee meetings
Ad hoc committees 3 1 1 5 72 77
--------------------------------------------------------------------------------
Note: Totals do not add to 97 because some AUSTs did not respond to
some questions.
Table IV.3
Percentage of Time Informal
Consultations Occurred Before Chapter 11
Fee Hearings
Number of
Percent of time AUSTs
------------------------------------------------------ --------------
1% to 20% 13
21 to 40 15
41 to 60 13
61 to 80 20
81 to 99 28
100 8
----------------------------------------------------------------------
Note: All 97 AUSTS surveyed responded to this question.
Table IV.4
The Percentage of Chapter 11 Fee
Applications To Which the Office of U.S.
Trustees Filed an Objection Within the
Past Year
Number of
Percent of applications AUSTs
------------------------------------------------------ --------------
None 1
1% to 20% 41
21 to 40 27
41 to 60 11
61 to 80 10
81 to 99 5
100 1
----------------------------------------------------------------------
Note 1: A total of 96 AUSTs responded to this question.
Note 2: Assistant U.S. Trustees reported on average that 13 percent
of staff's time was spent reviewing applications.
Table IV.5
Reasons the Office of U.S. Trustees
Formally Objected to Chapter 11 Fee
Applications
Most of About half Some of Seldom or
Reasons for objection the time the time the time never Total
------------------------ ---------- ---------- ---------- ---------- ------
Insufficient description 55 15 18 8 96
of the work done
Not listing separately 47 15 21 13 96
each task and the time
required for that task
("lumping")
Not keeping time in 30 8 28 30 96
appropriate increments
Not complying with 29 16 17 26 88
formatting requirements
for fee applications or
requests for
reimbursement of
expenses
Overhead or any of the 26 14 28 28 96
normally accepted
components of overhead
Inadequate documentation 25 22 26 24 97
of expenses for which
reimbursement is sought
Lack of showing benefit 21 15 30 31 97
to the estate
Duplication of services/ 17 20 40 19 96
efforts
Fax charges for sending 15 9 21 51 96
or receiving a fax
other than telephone
toll charges
Full hourly rates for 15 17 27 36 95
travel time
Word processing charges 14 10 20 50 94
Use of professionals to 14 16 27 40 97
perform tasks which a
paraprofessional could
perform
Total amount of fees in 12 9 24 51 96
relation to total value
of estate
Charges for amenities 10 2 13 68 93
while on travel status,
etc.
Unnecessary use of 10 2 19 66 97
overnight delivery or
messenger services
Staff overtime 10 4 24 56 94
Excessive hours worked 9 10 42 36 97
Local meals for 9 4 11 67 91
professionals or staff
required to work during
lunch or after hours
Excessive hourly rates 8 8 23 57 96
for the persons
performing those
services
Excessive lodging and 7 0 21 67 95
travel expenses
Excessive hourly rates 7 10 28 51 96
for the services
performed
Computerized research 7 1 9 78 95
charges in excess of
actual cost as billed
to the professional
Charges for fee 6 9 15 64 94
application preparation
Reimbursement of 4 1 5 86 96
creditors' committee
out-of-pocket expenses
Parking fees while 4 0 3 83 90
appearing in court
Charging in excess of 4 0 7 79 90
the tax deductible
amount in mileage
--------------------------------------------------------------------------------
Note: Some totals do not add to 97 because some AUSTs either checked
"do not apply" or did not respond.
Table IV.6
Professionals Who Were Most Often
Objected to in Chapter 11 Cases
Number Percen
of t of
Professional AUSTs AUSTs
------------------------------------------------------ ------ ------
Attorney for debtor\a 65 68%
Accountants\b 38 40
----------------------------------------------------------------------
Note 1: Responses reflected those professionals who AUSTs said were
objected to at least half the time.
Note 2: The total number of responses varied as follows:
\a A total of 95 AUSTs responded to this question.
\b A total of 96 AUSTs responded to this question.
Table IV.7
Professionals Who Were Least Often
Objected to in Chapter 11 Cases
Number Percen
of t of
Professional AUSTs AUSTs
------------------------------------------------------ ------ ------
Over-secured creditors\a 71 78%
Realtors\b 73 77
Attorney for creditor\c 70 73
Attorney for equity holders' committee\b 52 55
----------------------------------------------------------------------
Note 1: Responses reflect those professionals to whom AUSTs said
they seldom or never objected.
Note 2: The total number of responses to each question varied as
follows:
\a A total of 91 AUSTs responded to this question.
\b A total of 95 AUSTs responded to this question.
\c A total of 96 AUSTs responded to this question.
Table IV.8
Other Parties Who Objected Most Often to
Chapter 11 Fees
Number Percen
of t of
Party AUSTs AUSTs
------------------------------------------------------ ------ ------
Creditor 27 28%
Judge/court 24 25
----------------------------------------------------------------------
Note 1: Responses reflect other parties who AUSTs said objected at
least half the time.
Note 2: A total of 95 AUSTs responded to this question.
Table IV.9
Other Parties Who Objected Least Often
to Chapter 11 Fees
Number Percen
of t of
Party AUSTs AUSTs
------------------------------------------------------ ------ ------
Debtor\a 72 76%
Private trustee\a 66 69
Attorney for equity holders' committee\b 51 54
----------------------------------------------------------------------
Note 1: Responses reflected other parties who AUSTs said seldom or
never objected.
Note 2: The total number of responses varied as follows:
\a A total of 95 AUSTs responded to this question.
\b A total of 94 AUSTs responded to this question.
Table IV.10
The Top Five Reasons Other Parties Gave
for Objecting to Chapter 11 Fee
Applications
Reasons for objections
----------------------------------------------------------------------
Lack of showing benefit to the estate
Total amount of fees in relation to total value of estate
Duplication of services/efforts
Insufficient description of the work done
Excessive hours worked
----------------------------------------------------------------------
Note: Respondents were given a choice of 26 reasons for objections
from which to select. See table IV.11 for a more detailed breakdown.
Table IV.11
Reasons Other Parties Gave for Objecting
to Chapter 11 Fee Applications
Attorney
for
Creditors Judge equity
Truste Credit ' or holders'
Reasons for objecting e Debtor or committee court committee
------------------------ ------ ------ ------ --------- ------ -----------
Lack of showing benefit 60 49 62 68 43 21
to the estate
Total amount of fees in 27 32 29 28 26 14
relation to value of
estate
Duplication of services/ 27 26 36 36 23 10
efforts
Excessive hours worked 24 29 29 28 24 9
Insufficient description 24 19 33 31 30 6
of the work done
Excessive hourly rates 16 20 28 30 24 7
for the services
performed
Excessive hourly rates 13 19 27 25 24 8
for the persons
performing those
services
Charges for fee 9 9 15 13 12 3
application preparation
Full hourly rates for 10 12 20 17 19 4
travel time
Excessive lodging and 9 8 15 17 13 4
travel expenses
Charges for amenities 10 10 12 14 11 3
while on travel status,
etc.
Charging in excess of 5 4 6 6 6 2
the tax deductible
amount in mileage
Parking fees while 6 5 8 7 8 3
appearing in court
Not complying with 16 16 21 20 14 7
formatting requirements
for fee applications or
requests for
reimbursement of
expenses
Not keeping time in 17 14 18 19 17 5
appropriate increments
Not listing separately 20 18 26 26 22 6
each task and the time
required for that task
("lumping")
Inadequate documentation 16 13 21 21 18 4
of expenses for which
reimbursement is sought
Use of professionals to 12 10 11 14 12 4
perform tasks which a
paraprofessional could
perform
Computerized research 6 5 8 8 9 3
charges in excess of
actual cost as billed
to the professional
Overhead or any of the 10 10 17 15 13 3
normally accepted
components of overhead
Staff overtime 8 7 11 11 9 3
Local meals for 9 8 11 11 7 3
professionals or staff
required to work during
lunch or after hours
Word processing charges 6 6 10 11 11 3
Fax charges for sending 6 5 8 9 13 3
or receiving a fax
other than telephone
toll charges
Unnecessary use of 6 5 8 9 14 3
overnight delivery or
messenger services
Reimbursement of 6 7 6 7 9 2
creditors' committee
out-of-pocket expenses
--------------------------------------------------------------------------------
Table IV.12
Professionals With Whom the Assistant
U.S. Trustees Experienced the Greatest
Problems in Chapter 11 Cases
Number Percen
of t of
Professional AUSTs AUSTs
------------------------------------------------------ ------ ------
Investment bankers/financial advisors\a 17 18%
Accountants\b 13 14
----------------------------------------------------------------------
Note 1: Responses reflected those professionals with whom the AUSTs
said they experienced great or very great problems.
Note 2: The total number of responses varied as follows:
\a A total of 95 AUSTs responded to this question.
\b A total of 96 AUSTs responded to this question.
Table IV.13
Professionals With Whom the Assistant
U.S. Trustees Experienced the Fewest
Problems in Chapter 11 Cases
Number Percen
of t of
Professional AUSTs AUSTs
------------------------------------------------------ ------ ------
Management companies\a 55 58%
Attorneys\b 51 53
Accountants\b 44 46
Investment bankers/financial advisors\a 39 41
----------------------------------------------------------------------
Note 1: Responses reflected those professionals with whom the AUSTs
said they experienced some or no problems.
Note 2: The total number of responses varied as follows:
\a A total of 95 AUSTs responded to this question.
\b A total of 96 AUSTs responded to this question.
Table IV.14
Activities to Which Assistant U.S.
Trustees Gave Highest Priority
Number Percen
of t of
Activity AUSTs AUSTs
------------------------------------------------------ ------ ------
Monitoring private trustees\a 97 100%
Investigating fraud and misconduct allegations\a 82 85
Administrative matters\a 81 84
Responding to public inquiries\b 74 77
Analyzing Chapter 11 disclosure statements\a 54 56
Analyzing Chapter 11 fee applications\a 54 56
----------------------------------------------------------------------
Note 1: Responses reflected those activities given high or very high
priority.
Note 2: The total number of responses varied as follows:
\a All 97 AUSTs surveyed responded to this question.
\b A total of 96 AUSTs responded to this question.
DIFFERENCES IN OFFICES WITH AND
WITHOUT FORMAL GUIDELINES
-------------------------------------------------------- Appendix IV:2
As requested, we also compared differences in those offices without
guidelines and those offices with one or more types of formal
guidelines. We found differences in the amount of staff's time spent
reviewing applications, the frequency of objections and informal
consultations, the professionals with whom AUSTs reported problems,
and the priority given selected activities.
Specifically, 69 percent of the AUSTs whose offices had no guidelines
reported 10 percent or less of staff's time was spent reviewing
Chapter 11 fee applications. In comparison, 22 percent of the AUSTs
whose offices had three forms of guidelines reported that 10 percent
or less of staff time was spent reviewing applications.
One-third of the offices with all three forms of guidance reported
few objections to applications, while 79 percent of those with no
guidelines reported few objections. Moreover, 21 percent of
respondents with no guidelines reported little informal consultation
occurred with professionals before fee hearings compared to 56
percent of those with all three types of guidelines. Offices with no
guidelines reported fewer problems with accountants, attorneys, and
investment bankers/financial advisors than offices with one or more
types of guidelines. The specific problems encountered, according to
some AUSTs included lumping and insufficient details regarding
services performed.
We also asked the AUSTs about the priority given selected activities.
A smaller proportion of those whose offices had no guidelines
reportedly gave high or very high priority to investigating fraud and
analyzing chapter 11 disclosure statements than those whose offices
had one or more types of guidelines. Administrative matters,
monitoring private trustees, reviewing chapter 11 fee applications
and responding to public inquiries were each given about the same
level of priority by AUSTs with and without guidelines.
ASSISTANT U.S. TRUSTEES RESPONSES
REGARDING CHAPTER 7 CASES,
INCLUDING COMPENSATION AND
RETENTION OF PRIVATE TRUSTEES
=========================================================== Appendix V
As shown in table V.1, about 40 percent (44 of 97) of Assistant U.S.
Trustees (AUSTs) reported that informal consultations on fee
applications occurred more than 80 percent of the time, but there was
considerable variation among respondents. Formal objections to fee
applications were relatively infrequent, with about three-fourths of
AUSTs reporting they had formally objected in the past year to 20
percent or less of professional fee applications (see table V.2).
Table V.1
Frequency of Informal Consultations
Prior to Chapter 7 Fee Hearings
Number of
Percent of time AUSTs
------------------------------------------------------- -------------
1% to 20% 14
21 to 40 11
41 to 60 17
61 to 80 11
81 to 99 30
100 14
----------------------------------------------------------------------
Note: All 97 AUSTs surveyed responded to this question.
Table V.2
The Percentage of Chapter 7 Fee
Applications To Which the Office of U.S.
Trustees Formally Objected
Number of
Percent of applications AUSTs
------------------------------------------------------- -------------
None 4
1% to 20% 67
21 to 40 12
41 to 60 8
61 to 80 3
81 to 99 1
100 2
----------------------------------------------------------------------
Note 1: All 97 AUSTs surveyed responded to this question.
Note 2: AUSTs reported on average that 14 percent of staff time was
spent reviewing applications.
COMPENSATION AND RETENTION OF
PRIVATE TRUSTEES
--------------------------------------------------------- Appendix V:1
Compensation of private trustees in chapter 7 cases is derived from
three basic statutory sources and is subject to certain statutory
limitations. First, for each chapter 7 case, private trustees
receive a fixed amount of the total bankruptcy filing fee in each
case--$45 at the time of our survey.\1 Second, for work in chapter 7
asset cases--those with assets that can be liquidated to pay
creditors--the bankruptcy court may allow reasonable compensation for
actual and necessary services subject to a statutorily defined
maximum of estate receipts. Third, with court authorization, private
trustees may receive income from self-retention as attorney or
accountant to perform certain duties outside their trustee
responsibilities.\2
Almost 90 percent of AUSTs reported that in more than 80 percent of
chapter 7 cases, judges routinely awarded the statutory maximum
compensation to private trustees (table V.3). About 93 percent of
them believed that private trustee compensation should at least be
increased somewhat (table VI.4). About two-thirds of AUSTs reported
that between one and seven private trustees voluntarily left their
positions in the past 2 years (table VI.5). About 40 percent of
respondents believed that insufficient compensation was of little or
no importance as the reason that private trustees voluntarily left
their positions, while 31 percent believed it was of great or very
great importance (table IV.6). Excessive paperwork was most
frequently cited as an important reason for trustee departures; 29
percent of respondents considered it of little or no importance,
while 35 percent considered it to be of great or very great
importance. For those who remained in their positions, about 45
percent of AUSTs credited this to interesting and challenging work
and to bankruptcy work as a dependable source of income. (See table
V.7.)
We also asked whether private trustees hired themselves or their law
firms as attorney for the trustee. Such self-retentions can be an
additional source of income for private trustees. Eighty-percent of
AUSTs reported that at least 61 percent of private trustees who are
attorneys have retained themselves or their law firm as attorney for
the trustee (see table V.8). While a majority of private trustees
have at some point retained themselves or their law firm as attorney
for the trustee, they did not necessarily do so in the majority of
bankruptcy cases. Only 38 percent of AUSTs reported that private
trustees retained themselves or their law firm in more than 60
percent of the cases (see table V.9).
Table V.3
The Percentage of Cases That Judges
Routinely Awarded Private Trustees the
Statutory Maximum on Fees
Number of
Percent of cases AUSTs\a
------------------------------------------------------ --------------
None 2
1% to 20% 1
21 to 40 2
41 to 60 0
61 to 80 6
81 to 99 58
100 27
----------------------------------------------------------------------
\a There was one response of "unsure."
Note: All 97 AUSTs surveyed responded to this question.
Table V.4
Assistant U.S. Trustees Opinion on
Whether Private Trustees Compensation
Should Be Increased, Decreased, or
Remain About the Same
Number of
Opinion on compensation AUSTs\a
------------------------------------------------------ --------------
Greatly increased 28
Somewhat increased 61
Remain about the same 2
Somewhat decreased 2
Greatly decreased 1
----------------------------------------------------------------------
\a There were two responses of "no opinion."
Note: A total of 96 AUSTs responded to this question.
Table V.5
Assistant U.S. Trustee Responses on the
Number of Private Trustees Who
Voluntarily Left Their Positions in the
Past Two Years
Number of
Number of trustees leaving AUSTs
------------------------------------------------------ --------------
None 31
One 18
Two 27
Three to seven 16
Twenty-two\a 1
----------------------------------------------------------------------
\a Because the turnover was unusually high, the results for this one
respondent are shown separately.
Note: A total of 93 AUSTs responded to this question.
Table V.6
The Most Important Reasons Cited For Why
Private Trustees Voluntarily Left Their
Positions
Number of
Reasons for leaving AUSTs
------------------------------------------------------ --------------
Requirements by the Executive Office for U.S. 17
Trustees\a
Caseload too heavy\b 3
Income after expenses too low\c 20
Too much paperwork\d 23
Not paid in a timely manner\e 8
Retired\f 13
----------------------------------------------------------------------
Note: Responses reflected those reasons that were considered to be
of great or very great importance.
\a A total of 64 AUSTs responded to this question.
\b A total of 61 AUSTs responded to this question.
\c A total of 65 AUSTs responded to this question.
\d A total of 66 AUSTs responded to this question.
\e A total of 60 AUSTs responded to this question.
\f A total of 51 AUSTs responded to this question.
Table V.7
Important Reasons Cited for Why Private
Trustees Remained in Their Positions
Number of
Reasons for remaining AUSTs
------------------------------------------------------- -------------
Self-marketing opportunities\a 33
Prestige\a 22
Interesting/challenging work\a 44
Financial rewards\a 37
Dependable income for law practice or other 43
professional endeavor\b
Investment in time and equipment\c 15
----------------------------------------------------------------------
Note: Responses reflected those reasons that were considered to be
of great or very great importance.
\a A total of 94 AUSTs responded to this question.
\b A total of 95 AUSTs responded to this question.
\c A total of 93 AUSTs responded to this question.
Table V.8
Percentage of Private Trustees Who are
Attorneys and Retained Themselves or
Their Law Firm as Attorney(s) for the
Trustee
Number of
Percent of panel trustees AUSTs
------------------------------------------------------- -------------
None 8
0.5% to 20% 3
21 to 40 2
41 to 60 6
61 to 80 14
81 to 99 21
100 43
----------------------------------------------------------------------
Note: All 97 AUSTs surveyed responded to this question.
Table V.9
Percentage of Cases in Which Private
Trustees Retained Themselves or Their
Law Firm as Attorney(s) for the Trustee
Number of
Percent of cases AUSTs
------------------------------------------------------- -------------
None 9
1% to 20% 43
21 to 40 6
41 to 60 2
61 to 80 15
81 to 99 19
100 3
----------------------------------------------------------------------
Note: All 97 AUSTs surveyed responded to this question.
--------------------
\1 Responses were based on the compensation maximums in effect in the
summer of 1993. In 1994, legislation was enacted that increased the
maximums and raised from $45 to $60 the trustee payments from the
filing fees in each case.
\2 More detailed information on private trustees income from all
three sources can be found in our report on professional fees in
chapter 7 cases entitled Bankruptcy Administration: Case Receipts
Paid to Creditors and Professionals (GAO/GGD-94-173, July 13, 1994).
MAJOR CONTRIBUTORS TO THIS FACT
SHEET
========================================================== Appendix VI
GENERAL GOVERNMENT DIVISION,
WASHINGTON, D.C.
-------------------------------------------------------- Appendix VI:1
William O. Jenkins, Jr., Assistant Director, Administration of
Justice Issues
Robert L. Giusti, Assignment Manager
William J. Sabol, Senior Social Science Analyst
LOS ANGELES FIELD OFFICE
-------------------------------------------------------- Appendix VI:2
Shannon Kessler, Evaluator
DETROIT FIELD OFFICE
-------------------------------------------------------- Appendix VI:3
Henry L. Malone, Regional Management Representative
Brenda J. Trotter, Evaluator-in-Charge
OFFICE OF THE GENERAL COUNSEL
-------------------------------------------------------- Appendix VI:4
Geoffrey R. Hamilton, Attorney/Advisor
*** End of document. ***