CORPORATE 

BANKRUPTCY

Stakeholders Have 

Mixed Views on 

Attorneys' Fee 

Guidelines and Venue 

Selection for Large 

Chapter 11 Cases

Report to the Chairman, 

Committee on the Judiciary, 

U.S. Senate

September 2015

GAO-15-839

United States Government Accountability Office
Highlights of GAO-15-839, a report to the 

Chairman, Committee on the Judiciary, U.S. 

Senate

September 2015

CORPORATE BANKRUPTCY

Stakeholders Have Mixed Views on Attorneys’ Fee 

Guidelines and Venue Selection for Large Chapter 11 

Cases

Why GAO Did This Study

Since 2010, there have been at least 

765 Chapter 11 bankruptcy filings by 

large companies. The associated fees 

for bankruptcy professionals, including

attorneys, can run into the hundreds of 

millions of dollars. The size of these 

fees has raised questions about 

whether professionals have charged a 

premium for large bankruptcies and

used the venue selection process to 

file in courts where they believed they 

would receive higher fees. The USTP,

a Department of Justice component, is

responsible for, among other things, 

reviewing whether fees requested by 

professionals in bankruptcy cases are 

reasonable and necessary in 

accordance with the Bankruptcy Code. 

In 2013, the USTP issued new 

guidelines governing its review of 

attorney fee applications in large 

Chapter 11 cases.

GAO was asked to review the USTP’s 

2013 guidelines. This report examines 

(1) the extent to which fee applications 

observed the 2013 guidelines and 

bankruptcy stakeholders’ opinions

regarding the guidelines’ key 

provisions and their effects, and (2) 

what bankruptcy stakeholders and 

available research identify as

contributing factors and effects of

venue selection in large Chapter 11 

cases. GAO conducted 57

nongeneralizable interviews with 

bankruptcy judges, attorneys, and 

AUSTs in 15 bankruptcy court 

jurisdictions responsible for large 

Chapter 11 cases. GAO also reviewed 

USTP data and court documents on 

cases subject to the 2013 guidelines, 

and relevant academic literature on 

professional fees and venue selection.

The USTP generally agreed with 

GAO’s findings.

What GAO Found

GAO’s analysis of U.S. Trustee Program (USTP) data and interviews with 

bankruptcy stakeholders including Assistant U.S. Trustees (AUST), selected 

bankruptcy judges, and attorneys indicate that attorneys’ fee applications for 

cases subject to the USTP’s 2013 fee guidelines (cases involving assets and 

liabilities each of $50 million or more) have generally contained the information 

requested by the guidelines. This information is intended to assist the courts in 

determining whether requested fees are reasonable and necessary. Specifically, 

in the data GAO reviewed, the USTP identified no issues in submitted fee 

applications in 47 of the 94 cases filed since the guidelines went into effect in 

November 2013. Attorneys resolved almost all of the issues in the other 47 cases 

by providing an explanation or additional information. Bankruptcy stakeholders 

had mixed perspectives of the overall value of the guidelines and of their 

potential effect on the efficiency and transparency of the Chapter 11 bankruptcy 

process, or the fees awarded. Similarly, opinions regarding the effect of specific 

provisions of the 2013 guidelines also varied by group. For example, 15 of 18 

AUSTs said the provision requesting that attorneys provide budgets was likely to 

have a positive effect on the fee review process, while 10 of 14 attorneys said it 

was unlikely to have an effect. For example, stakeholders with a positive view 

said the budgeting provision encourages early communication in a case, while 

those with a negative view said that the unpredictability of bankruptcy cases limit 

the value of a budget.

Bankruptcy attorneys and judges GAO interviewed and academic research 

identify several factors that contribute to venue selection—the process of 

choosing where to file. Companies filing for bankruptcy have several options 

available to them when determining the venue, or court, in which to file their 

case, including their place of incorporation, principal place of business or assets, 

or where an affiliate has filed a Chapter 11 case. The most frequently cited 

factors—prior court rulings, the preferences of lenders, and judge experience—

all contribute to overall predictability in a case and can provide some insights into 

what to expect from a court as a case proceeds through the bankruptcy process. 

For example, knowing a judge’s level of experience with large cases and how a 

court has ruled on certain matters can help an attorney advise a client about how 

a court is likely to respond to issues in a specific case. Eight of the 39 attorneys 

and judges GAO interviewed cited perceived court attitudes on professional fees 

as a significant factor in venue selection. Approximately 61 percent of large 

Chapter 11 bankruptcy cases filed since October 2009 were filed in two 

jurisdictions–the Southern District of New York (SDNY) and the District of 

Delaware (Delaware). Bankruptcy attorneys and judges and academic research 

identified both positive and negative effects of the concentration of cases in these 

two jurisdictions. The positive effect most commonly cited by attorneys and 

judges was the significant large case experience developed by judges in the 

SDNY and Delaware. In contrast, the negative effects most commonly cited by 

attorneys were the difficulty local bankruptcy firms face in maintaining a 

bankruptcy practice outside of the SDNY and Delaware and the lack of 

opportunity for courts outside of these jurisdictions to develop precedent and 

expertise.

View GAO-15-839. For more information, 

contact David C. Maurer at (202) 512-9627 or 

MaurerD@gao.gov.

United States Government Accountability Office
Letter 1

Background 7

Attorneys Generally Observed the 2013 Guidelines; Opinions 

Regarding Their Effects Vary by Stakeholder Group 13

Bankruptcy Attorneys, Judges, and Academic Research Identify 

Contributing Factors and Effects of Venue Selection 21

Agency Comments 29

Appendix I Objectives, Scope, and Methodology 31

Appendix II Executive Office for U.S. Trustees 2013 Fee Guidelines for Attorneys

in Larger Chapter 11 Cases: Summary of Material Differences From 

1996 Guidelines 39

Appendix III Basis for Venue Selection in Cases Subject to the U.S. Trustee 

Program’s 2013 Guidelines 41

Appendix IV Comments from the Department of Justice 45

Appendix V GAO Contact and Staff Acknowledgments 48

Tables

Table 1: Six Types of Bankruptcy 8

Table 2: U.S. Trustee Program Offices, U.S. Bankruptcy Court 

Judicial Districts, and Associated Large Chapter 11 Cases 

with Number of Assistant U.S. Trustees and Number of 

Judges Included in Interview Sample 35

Table 3: Law Firms from Which Attorneys Were Selected for 

Interviews 37

Table 4: Guidelines Cases Filed by Companies Both within and 

outside Company Headquarters Location 42

Contents

Page i GAO-15-839 Corporate Bankruptcy
Figures

Figure 1: Typical Attorney Fee Application and Review Process in 

Chapter 11 Bankruptcies 9

Figure 2: Bankruptcy Stakeholders’ Opinions of the U.S. Trustee 

Program’s 2013 Guidelines 17

Figure 3: Bankruptcy Stakeholders’ Opinions of the Comparable 

Billing Rate Provision of the U.S. Trustee Program’s 2013 

Guidelines 20

Figure 4: Bankruptcy Stakeholders’ Opinions of the Budget and 

Staffing Plan Provision of the U.S. Trustee Program’s 

2013 Guidelines 21

Figure 5: Factors Identified as Significant or Most Important in 

Selecting Venue by the 39 Bankruptcy Attorneys and 

Judges Interviewed 23

Figure 6: Basis for Venue Selection for Companies Filing Cases 

outside their Headquarters Location 43

Figure 7: Basis for Venue Selection for Companies Filing Cases 

within their Headquarters Location 44

Abbreviations:

ABI American Bankruptcy Institute

AUST Assistant U.S. Trustee

Delaware District of Delaware

EOUST Executive Office for U.S. Trustees

FJC Federal Judicial Center 

LEDES legal electronic data exchange standard

NBC National Bankruptcy Conference

SARS Significant Accomplishments Reporting System 

SDNY Southern District of New York

SEC Securities and Exchange Commission

UST U.S. Trustee

USTP U.S. Trustee Program

This is a work of the U.S. government and is not subject to copyright protection in the 

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Page ii GAO-15-839 Corporate Bankruptcy
441 G St. N.W.

Washington, DC 20548

September 23, 2015

The Honorable Charles E. Grassley

Chairman

Committee on the Judiciary

United States Senate

Dear Mr. Chairman:

Since 2010, there have been more than 53,000 Chapter 11 bankruptcy 

filings, with approximately 765 by large companies with assets and 

liabilities each of $50 million or more.1 The fees for bankruptcy 

professionals associated with large cases, such as attorneys and financial 

advisers, can run into the hundreds of millions of dollars, in part because 

of the size and complexity of such cases. For example, professional fees 

awarded in the 2011 American Airlines Chapter 11 bankruptcy case—the 

second-largest airline bankruptcy—totaled more than $375 million.2 The 

size of these fees, particularly during the recent economic recession in 

the United States, has raised questions about whether bankruptcy 

professionals are charging a premium for representing companies in 

financial distress, despite requirements in the Bankruptcy Code that fees 

be reasonable, necessary, and market-based.3 Additionally, concerns 

have been raised that bankruptcy professionals may be using the venue 

selection process (the process by which a debtor selects where to file) to 

file in courts where they believe they will receive higher fees. As a result 

of the venue selection process, the majority of large Chapter 11 

1

Bankruptcy is a specialized federal court procedure designed to help individuals and 

businesses eliminate or restructure debts they cannot fully repay and help creditors 

receive some payment according to the U.S. Bankruptcy Code’s priorities of distribution. 

See 11 U.S.C. §507. Business debtors (individuals or companies) seeking to reorganize 

their debts may do so under Chapter 11 of the Bankruptcy Code. 11 U.S.C. §§ 1101-1174. 

Reorganization under Chapter 11 allows debtors to continue some or all of their 

operations, subject to court supervision, as a way to satisfy creditor claims.

2

At the time its bankruptcy petition was filed, AMR, the parent company of American 

Airlines, listed approximately $54 billion in combined assets and liabilities. AMR is the 

second-largest airline bankruptcy and the 13th largest non-financial public bankruptcy 

filing since 1980.

3

11 U.S.C. § 330(a).

Letter

Page 1 GAO-15-839 Corporate Bankruptcy

 
bankruptcy cases are adjudicated in two jurisdictions—the Southern 

District of New York (SDNY) and the District of Delaware (Delaware).4

The U.S. Trustee Program (USTP)—a component of the Department of 

Justice—seeks to promote the efficiency and protect the integrity of the 

federal bankruptcy system by acting as a watchdog for the public interest 

and ensuring compliance with applicable laws and procedures. As part of 

its oversight and enforcement responsibilities, the USTP reviews whether 

requested fee amounts are reasonable and necessary, and comments or 

objects as appropriate, though bankruptcy courts have the final authority 

to award fees.5 If the USTP identifies a concern associated with a fee 

application it has reviewed, the USTP will generally seek more

information from the professionals (what is known as an inquiry) before 

filing an objection, and the answers or information may resolve the 

USTP’s need to object. In other instances, the USTP may file an objection 

with the court and then reach an agreement with the professional outside 

of court that resolves the objection. Ultimately, the court determines 

whether to award requested compensation and may reach a different 

conclusion than the USTP.

In accordance with amendments to the Bankruptcy Code, in 1996 the 

USTP published procedural guidelines for reviewing professional fee 

applications in bankruptcy cases.6 These guidelines focus on ensuring 

that fee applications contain information that could assist courts in 

determining whether requested fees are reasonable.7 Among other 

4

Debtors have several options to determine the court, or venue, in which to file their 

bankruptcy case. 28 U.S.C. § 1408. In 2011, Members of Congress introduced legislation 

to amend the existing statute. See Chapter 11 Bankruptcy Venue Reform Act of 2011, 

H.R. 2533, 112th Cong.

5

Under the Bankruptcy Code, attorneys and other professionals who provide services for 

the debtor and official committees may be paid from the bankruptcy estate–the pool of 

assets and monies otherwise available to pay creditors–but the attorneys and other 

professionals must first file applications to be paid with the court and have the court 

approve the payments. See 11 U.S.C. § 330-331; Fed. R. Bankr. P. 2016(a). The court 

may enter an order directing the bankruptcy estate to pay the fees if it determines that the 

applicant has shown that the requested fees and expenses comply with the Bankruptcy 

Code. See 11 U.S.C. § 330(a)(1).

6

United States Trustees; Guidelines Relating to the Bankruptcy Reform Act of 1994, 61 

Fed. Reg. 24889 (May 17, 1996).

7

28 C.F.R. pt. 58, App. A (Guidelines for Reviewing Applications for Compensation and 

Reimbursement of Expenses Filed Under 11 U.S.C. 330).

Page 2 GAO-15-839 Corporate Bankruptcy

 
things, the information requested by the 1996 guidelines includes detailed 

billing information by activity categories, such as activities associated with 

employee benefit issues or tax analysis. In 2013, the USTP issued new 

guidelines governing its review of attorney fee applications in larger 

Chapter 11 bankruptcy cases.8 According to senior USTP officials, the 

USTP began developing these additional guidelines in response to public 

concerns regarding the size of fees in large, well-publicized Chapter 11 

bankruptcies, such as the Lehman Brothers bankruptcy, where total 

professional fees were widely reported to have exceeded $2 billion. The 

additional USTP guidelines detail the criteria the USTP uses to review 

attorneys’ fee applications and were designed, in part, to improve 

transparency and help ensure that fees in large Chapter 11 bankruptcy 

cases (defined as those cases involving assets and liabilities each of $50 

million or more) are comparable to fees charged outside of bankruptcy. 

From November 2013, when the new guidelines went into effect, through 

March 2015, 94 Chapter 11 bankruptcy cases met the asset and liability 

thresholds and were subject to the guidelines (guidelines cases). Like the 

1996 guidelines, the 2013 guidelines focus on the disclosure of 

information that the USTP believes will better enable the court to 

determine whether requested fees are reasonable. In addition, the 2013 

guidelines identify specific information the USTP believes is necessary to 

assess attorneys’ fees in large cases, such as electronic billing data, 

budgets, and information about rates charged to nonbankruptcy clients.

Approximately 61 percent of the large Chapter 11 bankruptcies filed since 

October 2009 have been filed in the SDNY and Delaware, and many of 

the companies that filed for bankruptcy in these jurisdictions are 

headquartered elsewhere. For example, in 2009, General Motors, a 

company headquartered in Detroit, Michigan, filed for Chapter 11 

bankruptcy in the SDNY. More recently, the Dallas, Texas-based energy 

company Energy Future Holdings filed for Chapter 11 bankruptcy in 

Delaware. Academics and lawmakers have raised concerns about the 

possible negative effects on the ability of smaller parties, such as 

employees and small business creditors, to participate in the bankruptcy 

process when a case is filed far from the company’s home jurisdiction. 

Companies filing for Chapter 11 bankruptcy have several options 

available to them when determining the court, or venue, in which to file 

8

Appendix B Guidelines for Reviewing Applications for Compensation and 

Reimbursement of Expenses Filed Under United States Code by Attorneys in Larger 

Chapter 11 Cases, 78 Fed. Reg. 36248 (June 17, 2013).

Page 3 GAO-15-839 Corporate Bankruptcy

 
their cases.9 Specifically, a company may file a Chapter 11 bankruptcy 

case in any venue where it is domiciled, which has been interpreted as 

the company’s place of incorporation.10 A company may also file where it 

maintains its residence or principal place of business (headquarters) or 

assets. Finally, a company may file in a court where an affiliate, such as a 

franchise or dealership related to the parent company, already has a 

Chapter 11 bankruptcy case pending.11 For larger companies, each of the 

filing options allowed under the Bankruptcy Code may be in a separate 

venue. For example, a company headquartered in Los Angeles may be 

incorporated in Delaware, maintain its assets in New York, and have 

affiliates with pending bankruptcy proceedings in Chicago, allowing the 

company to file for bankruptcy in any of these locations.12

You requested that we review the USTP’s 2013 guidelines and issues 

associated with the bankruptcy venue selection process. Specifically, this 

report addresses the following questions:

1. To what extent have bankruptcy attorneys observed the 2013 

guidelines in fee applications, and what are the opinions of bankruptcy 

stakeholders, including attorneys, judges, and USTP officials, 

regarding the guidelines’ key provisions and their effects?

2. What do bankruptcy attorneys, judges, and available research identify 

as factors that contribute to venue selection and the effects, if any, of 

venue selection in large Chapter 11 cases?

To address these questions, we reviewed the Bankruptcy Code and 

relevant bankruptcy filings related to professional fees and venue 

selection in Chapter 11 bankruptcy cases. We also reviewed the 1996 

and 2013 USTP fee guidelines for Chapter 11 bankruptcy cases. We 

9

28 U.S.C. § 1408.

1028 U.S.C. § 1408(1); In re Segno Communications, Inc., 264 B.R. 501, 506 (Bankr. N.D. 

Ill. 2001).

1128 U.S.C. § 1408(2).

12A party who disagrees with the debtor’s venue selection may file a motion to transfer the 

case to another jurisdiction. Motions to transfer venue occur infrequently. For example, 

according to information presented to the American Bankruptcy Institute (ABI) 

Commission to Study the Reform of Chapter 11, from 2006 through 2012, the Delaware 

court heard 13 motions to transfer cases to another venue and 9 of these motions were 

granted.

Page 4 GAO-15-839 Corporate Bankruptcy

 
analyzed USTP data related to Chapter 11 bankruptcy cases filed from 

October 2009 through March 2015 to identify USTP offices that had 5 or 

more large Chapter 11 cases filed during this time period. We selected 

this time period because it enabled us to identify case activity in the years 

both before and after the 2013 guidelines went into effect.13 We used 

these findings to select a nongeneralizable sample of bankruptcy 

stakeholders to interview from 18 USTP offices and 15 corresponding 

U.S. Bankruptcy Courts. While the views expressed in these interviews 

do not represent those of all bankruptcy stakeholders, they provide 

valuable insights from stakeholders who have experience with large 

Chapter 11 bankruptcy cases and the 2013 USTP guidelines. We 

conducted 57 semistructured interviews with 18 Assistant U.S. Trustees 

(AUST), 25 U.S. Bankruptcy Court judges, and bankruptcy attorneys from 

14 law firms that represented debtor companies in 1 or more of the 94 

cases subject to the 2013 guidelines.14 The AUSTs and judges 

represented all jurisdictions that had heard 5 or more large Chapter 11

bankruptcy cases since October 2009; however, not all had participated 

in a 2013 guidelines case.15 We asked all stakeholders questions 

regarding the 2013 guidelines, but did not ask AUSTs questions related to 

venue selection because they do not have a role in that process. We also 

conducted interviews with Executive Office for U.S. Trustees (EOUST) 

officials, and selected U.S. Trustees (UST), academics, and industry 

stakeholders.16

13Because the guidelines did not go into effect until November 2013, jurisdictions that

have historically heard large cases may not yet have had a guidelines case. We wanted to 

capture these jurisdictions in our review along with those that have had a guidelines case.

14Each USTP field office has 1 AUST. We interviewed either 2 or 3 judges in each of the 

courts that had heard 15 or more large Chapter 11 cases since October 2009, and 1 judge 

in each of the remaining courts. The 25 judges we interviewed were selected by the Chief 

Judge from the 15 U.S. Bankruptcy Courts in our scope. We selected the 14 law firms 

from which we interviewed attorneys both to capture firms with large case experience and 

to provide variation in geographic location and case size.

15Thirteen AUSTs participated in a case subject to the 2013 guidelines. Eleven judges 

presided over 1 or more cases subject to the guidelines, while 14 judges had not yet been 

involved with a guidelines case. With the exception of 1 judge who had been appointed to 

the bench in 2013, all judges interviewed had presided over at least 1 case between 

October 2009 and October 2013 that met the guidelines’ thresholds of assets and 

liabilities each of $50 million or more.

16We identified relevant academics and industry stakeholders through referrals from 

agency officials and a literature search on professional fees and venue selection in 

Chapter 11 bankruptcy cases.

Page 5 GAO-15-839 Corporate Bankruptcy

 
To further address the first question, we reviewed data from the USTP’s 

Significant Accomplishments Reporting System (SARS) on the USTP’s 

objection and inquiry activities related to professional fees in guidelines 

cases filed from November 2013 through March 2015. We analyzed the 

objections and inquiry data to identify USTP actions related to the new 

provisions in the 2013 guidelines. To assess the reliability of these data, 

we interviewed officials responsible for entering and maintaining the data 

and reviewed internal documentation and guidance associated with data 

entry and internal review processes. We determined that the data were 

sufficiently reliable for our purposes. We also reviewed information 

collected by the EOUST about the 2013 guidelines to determine the 

extent to which attorneys filing fee applications in guidelines cases 

included information related to the 2013 guidelines’ provisions. Finally, we 

reviewed local rules of bankruptcy practice for the 15 jurisdictions in our 

scope to determine whether they incorporated provisions of the 2013 

guidelines.17

To further address the second question, we reviewed relevant academic 

literature on the factors that contribute to venue selection and the effects 

of the concentration of cases in the SDNY and Delaware. We reviewed 

the methodologies of these studies to ensure they were sound and 

determined they were sufficiently reliable for our purposes. To identify the 

basis for venue selection companies used when filing cases, we reviewed 

the bankruptcy filing petition and first day declaration for each of the 94 

guidelines cases filed from November 2013 through March 2015.18

Additional information about our scope and methodology is provided in 

appendix I.

We conducted this performance audit from November 2014 to September

2015 in accordance with generally accepted government auditing 

17Local rules refer to a particular set of rules for each federal jurisdiction that supplement 

the Federal Rules of Bankruptcy Procedure. Local rules reflect the courts’ traditional 

authority to manage their own affairs so as to achieve the orderly and expeditious 

disposition of cases.

18A first day declaration is an affidavit by a debtor company executive regarding the 

company’s background and finances in support of the bankruptcy filing. First day 

declarations generally accompany first day pleadings, or first day motions, which are 

documents filed with the court at the outset of a bankruptcy case by debtors-in-possession 

seeking expedited relief, including court approval to continue certain operations, such as 

permission to pay prepetition payroll or to authorize maintenance of existing bank 

accounts.

Page 6 GAO-15-839 Corporate Bankruptcy

 
standards. Those standards require that we plan and perform the audit to 

obtain sufficient, appropriate evidence to provide a reasonable basis for 

our findings and conclusions based on our audit objectives. We believe 

that the evidence obtained provides a reasonable basis for our findings 

and conclusions based on our audit objectives.

The USTP is one of several federal agencies involved in the U.S. 

bankruptcy system, but is the only executive branch agency responsible 

for providing oversight of bankruptcy cases.19 The agency consists of the 

EOUST, which provides general policy and legal guidance, oversees 

operations, and handles administrative functions; and 21 USTs who 

oversee 93 field office locations and supervise the administration of 

federal bankruptcy cases. Each of the field offices is managed by an 

AUST, who is responsible for day-to-day oversight of federal bankruptcy 

cases. In addition to fee review activity, the USTP also investigates and 

civilly prosecutes bankruptcy fraud and abuse; refers suspected criminal 

activity to the U.S. Attorney and other law enforcement partners; monitors 

and takes action to address the conduct of debtors, creditors, attorneys, 

credit counselors, and others; oversees private trustees; and ensures 

compliance with applicable laws and regulations in all bankruptcy cases, 

from individual consumer filings to large corporate reorganizations.

Six basic types of bankruptcy are provided for under chapters of the 

Bankruptcy Code, depending on factors such as whether the debtor is an 

individual, corporation, or municipality, and whether the debtor seeks to 

reorganize or liquidate existing assets and liabilities.20 Table 1 shows the 

19Other federal entities involved in the U.S. bankruptcy system are all part of the judicial 

branch and include the 90 bankruptcy courts, the Administrative Office of the United 

States Courts, which provides the courts with central support functions; the Judicial 

Conference of the United States, which serves as the judiciary’s principal policy-making 

body; and the Federal Judicial Center (FJC), which is the education and research agency 

for the federal courts. The judiciary’s Bankruptcy Administrator Program is responsible for 

overseeing the six judicial districts in Alabama and North Carolina, and generally performs 

the oversight functions of the USTP in those districts. Other federal entities may be 

involved in the bankruptcy system as creditors or other litigants.

20See 11 U.S.C. ch. 7 (liquidation), 9 (municipality), 11 (reorganization), 12 (family farmers 

and fishermen), 13 (individual debt adjustment), and 15 (cross-border).

Background

Role of the U.S. Trustee 

Program in the U.S. 

Bankruptcy Process

Page 7 GAO-15-839 Corporate Bankruptcy

 
differences between the types of bankruptcy and whether the USTP is 

responsible for reviewing professional fee applications for that bankruptcy 

type.

Table 1: Six Types of Bankruptcy 

Bankruptcy chapter Type of debtor Purpose of bankruptcy

United States Trustee 

Program reviews 

fee applications

Chapter 7 Businesses and individuals Liquidationa Yes

Chapter 9 Municipality Reorganizationb No

Chapter 11 Businesses and individuals Reorganization Yes

Chapter 12 Family farmers and fishermen Reorganization Yes

Chapter 13 Individuals with regular income Reorganization Yes

Chapter 15 Cross-border cases Incorporate model law on crossborder insolvencyNoc

Source: GAO analysis of the Bankruptcy Code. | GAO 15-839

a

Liquidation involves the sale of certain assets of the debtor, and the distribution of the proceeds to 

creditors in accordance with the priorities of the Bankruptcy Code; operations usually cease and 

assets are sold.

b

Generally, reorganization occurs when a company or individual (or municipality in the case of 

Chapter 9) agrees with the creditors on a plan for payment of their claims; some plans may be 

approved without the creditors’ consent in certain instances. In most instances, the company or 

individual emerges from bankruptcy after the plan is confirmed by the court.

c

Generally, when the foreign proceeding is merely recognized in a U.S. federal bankruptcy court, fees 

are not awarded in connection with the U.S. proceeding. If, however, the foreign representative is

permitted to file a case under Chapter 7 or 11 and files such a case in a U.S. bankruptcy court, then 

the foreign representative may seek compensation for fees in connection with the U.S. proceeding.

Per the Bankruptcy Code, the USTP is responsible for reviewing fee 

applications for five types of cases–cases under Chapters 7, 11, 12, 13, 

and 15 of the Bankruptcy Code.21 According to USTP officials, the 

USTP’s fee review responsibilities for Chapter 11 bankruptcy cases 

compose approximately 5 to 10 percent of the agency’s activities, though 

the amount of time varies by office and the type of case. Figure 1 

provides an overview of the fee application and review process in Chapter 

11 bankruptcy, including cases subject to the 2013 guidelines.

2128 U.S.C. § 586(a)(3).

Page 8 GAO-15-839 Corporate Bankruptcy

 
Figure 1: Typical Attorney Fee Application and Review Process in Chapter 11 Bankruptcies

a

The USTP and other parties may also make inquiries or file objections with the court regarding 

retention applications. The judge must approve the retention application before fee applications may 

be submitted.

b

This figure reflects additional actions that can be taken by the USTP as needed. Other parties may 

also file objections to fee applications with the court.

After a bankruptcy petition is filed, attorneys seeking to represent debtors 

or others must submit retention applications for approval by the court.22

Once their retention is approved, attorneys seeking to be compensated 

from the estate (the pool of assets and monies available to pay creditors) 

may submit interim fee applications every 120 days, or more often if 

22Under sections 327 and 1103 of the Bankruptcy Code, with limited exceptions, 

professionals employed in connection with a Chapter 11 case must be approved by the 

court. Professionals apply for employment through a retention application, which 

demonstrates that their services are necessary and that no conflicts of interest exist.

Page 9 GAO-15-839 Corporate Bankruptcy

 
permitted by the court.23 The interim fee application allows attorneys to 

receive compensation for their work before the conclusion of the 

bankruptcy proceeding. At the conclusion of the case, attorneys submit a 

final fee application to the court. Both the USTP and the bankruptcy judge 

are responsible for ensuring that fees are reasonable and necessary, and 

may review any submitted documentation associated with fees to assist in 

that determination. While the USTP has standing to object to requested 

fees, the bankruptcy judge is responsible for determining the final fee 

amount to be awarded.24 According to USTP officials, if the USTP 

identifies a concern associated with a fee application it has reviewed, 

such as staffing inefficiencies including duplication of work or requesting 

compensation for first-class travel, the USTP may seek to resolve it by 

informally contacting the firm submitting the application through an inquiry 

or by filing an objection to the fee application for the bankruptcy court to 

consider. Several factors influence how many inquiries and objections are 

made by the USTP offices in a given case with regard to professional fee 

applications. According to USTP officials, these can include the 

complexity of the case, the preferences of the court or USTP, or the 

experience of the firm filing the application. For instance, an experienced 

firm may be familiar with the USTP’s expectations for fee applications, 

reducing the need for the USTP to request additional information.

The goals of the 2013 guidelines are to, among other things, help ensure 

attorneys’ fees in bankruptcy cases are comparable to those charged for 

nonbankruptcy activities, increase the transparency and efficiency of the 

fee application and review process, and increase public confidence in the 

integrity of the process. As discussed previously, the USTP established 

fee review guidelines in 1996. The 1996 guidelines detailed the type of 

information and disclosures that the USTP expects professionals to 

include in their fee applications.25 Like the 1996 guidelines, the 2013 

2311 U.S.C. § 331. Many bankruptcy courts allow firms, mostly in larger cases, to receive 

partial compensation (typically 80 percent of fees and 100 percent of expenses) on a 

monthly basis, with the remainder paid upon approval of the interim or final fee 

applications.

24Other parties, such as a fee examiner, fee committee, or other parties to the case may 

also review and object to submitted fee applications. However, according to USTP 

officials, the USTP is often the only party to object to fee applications.

25This includes, among other information, detailed billing information by activity 

categories, such as employee benefit issues or tax analysis, and standards for 

reimbursement of certain expenses, such as travel.

Development of the 

2013 Guidelines

Page 10 GAO-15-839 Corporate Bankruptcy

 
guidelines are policies and procedures for USTP staff to follow when 

reviewing fee applications.26 Unlike the 1996 guidelines, however, the 

2013 guidelines apply only to attorneys’ fee applications in Chapter 11 

cases where the debtor’s bankruptcy petition lists assets and liabilities 

each of $50 million or more.27 In addition to the provisions detailed in the 

1996 guidelines, the 2013 guidelines outline the USTP’s expectations that 

attorneys provide the following information in their fee applications:

• information about the firm’s blended hourly rates for nonbankruptcy 

activities (comparable billing rates);28

• budgets and staffing plans, to include explanations when fees 

requested exceed the budget by 10 percent;

• electronic billing data, generally in the form of LEDES (legal electronic 

data exchange standard) data;

• client and applicant statements on issues including customary billing 

rates, fees, or terms of service; and

• disclosures regarding rate increases.29

26The 1996 and 2013 guidelines are not law, and accordingly, are not binding on courts, 

debtors, or attorneys. 

27In some cases, the asset and liability information provided on the bankruptcy petition is 

insufficient for the USTP to determine whether the 2013 guidelines will apply. In these 

cases, the USTP will rely on other information, such as Securities and Exchange 

Commission (SEC) filings, to determine whether the case meets the thresholds. The 2013 

guidelines’ thresholds also apply to aggregated assets and liabilities for jointly 

administered cases. The 1996 guidelines remain in effect for other professionals’ fee 

applications in large cases, single-asset real estate cases, and smaller Chapter 11 cases. 

According to EOUST officials, the USTP is in the process of reviewing the guidelines for 

other types of bankruptcy professionals.

28Blended hourly rates are calculated for all employees at a particular level (such as 

partner or associate) by dividing the dollar value of hours billed by the total number of 

hours billed during the time period covered by the fee application. Firms may exclude pro 

bono, charitable, or firm-employee engagements that were never contemplated to be 

billed at or near standard or full rates.

29The 2013 guidelines also encourage the use of efficiency co-counsel for routine legal 

tasks to minimize costs, provide models for using fee examiners or fee committees, and 

provide model forms for applicants to use when submitting the newly required information. 

See app. II for the USTP’s summary of material differences between the 1996 and 2013 

guidelines.

Page 11 GAO-15-839 Corporate Bankruptcy

 
According to senior USTP officials, the USTP began to develop the 2013 

guidelines in 2010 in an effort to address concerns about the size of 

attorneys’ fees in large Chapter 11 cases. The 2013 guidelines were also 

intended to update the USTP’s fee review practices to better reflect 

advancements in law firm billing practices and technology. To develop the 

2013 guidelines, officials created an internal working group and sought 

input from bankruptcy stakeholders, such as judges, legal industry 

groups, and attorneys. The USTP published drafts of the guidelines on its 

public website for public comment in November 2011 and November 

2012, and received more than 30 comment letters in response.30 The 

USTP also held a public meeting on June 4, 2012, on the draft guidelines.

Two of the newly proposed provisions—the comparable billing rate 

provision and the budgeting and staffing plan provision—were frequently 

discussed in the comment letters and during the public meeting. 

According to an EOUST official, the comparable billing rate provision 

received the most commentary during the public comment period and 

meeting and was therefore revised more extensively than other 

provisions. For example, the comment letters from the National 

Bankruptcy Conference (NBC) and a letter signed by 119 bankruptcy law 

firms identified several concerns with the draft guidelines’ proposal 

requesting the “highest, lowest, and average hourly rates” charged by 

firms for all activities. Among these was the concern that such detailed 

information about the highest and lowest rates billed does not accurately 

compare with a firm’s “customary compensation charged,” which is the 

standard identified by the Bankruptcy Code.31 The NBC also submitted a 

separate comment letter proposing multiple alternatives for the USTP to 

consider. Similarly, comment letters from both the NBC and the 119 law 

firms expressed concerns regarding the draft budgeting provision, 

particularly with regard to the public disclosure of budgets. After 

incorporating changes and clarifying provisions based on the public 

30The guidelines are not subject to the notice and comment provisions of the 

Administrative Procedure Act (5 U.S.C. § 553), but the agency chose to develop the 

guidelines through a similar process because of their importance to the bankruptcy 

system. 

31For instance, the letter from the 119 law firms argues that a firm’s highest and lowest 

rates cannot be considered “customary” compensation, as they are charged specifically in 

situations that are not customary. These situations could include negotiated premiums for 

results obtained (resulting in high rates) or special discounts provided for certain types of 

work (resulting in low rates).

Page 12 GAO-15-839 Corporate Bankruptcy

 
comments, including allowing redaction of sensitive budgetary information 

and removing the requirement to disclose the highest and lowest rates 

billed, the USTP published the final guidelines in the Federal Register in 

June 2013 and they went into effect in November 2013.32

Our analysis of USTP data and interviews with bankruptcy stakeholders 

(AUSTs, judges, and attorneys) indicate that attorneys’ fee applications 

for guidelines cases have generally contained the information requested 

by the 2013 guidelines. Bankruptcy stakeholders we interviewed had 

mixed perspectives on the overall value of the guidelines and on their 

potential effect on the efficiency and transparency of the Chapter 11 

bankruptcy process, or the fees awarded. Similarly, opinions regarding 

the effect of specific provisions of the 2013 guidelines—including 

provisions on electronic billing, budgeting and staffing plans, and 

comparable billing rates—also varied by group.

Analysis of USTP data and interviews with bankruptcy stakeholders 

indicate that attorneys’ fee applications for guidelines cases (those cases 

with assets and liabilities each of $50 million or more) have generally 

contained the information requested by the 2013 guidelines.33 For the 94 

guidelines cases filed from November 2013 through March 2015, our 

analysis of USTP data found that the USTP did not make any inquiries or 

objections related to the guidelines for fee applications in half (47) of the 

cases. For the other 47 cases, the USTP identified issues in submitted 

fee applications that were associated with the guidelines, almost all of 

which were related to three provisions: (1) budgeting and staffing plans, 

32Appendix B Guidelines for Reviewing Applications for Compensation and 

Reimbursement of Expenses Filed Under United States Code by Attorneys in Larger 

Chapter 11 Cases, 78 Fed. Reg. 36248 (June 17, 2013).

33One provision of the 2013 guidelines—the requirement that applicants provide 

statements about customary billing rates, fees, or terms of service—also applies to 

retention applications. According to EOUST officials, as a result of the guidelines, 

attorneys have disclosed “bankruptcy premiums” or the removal of pre-existing client 

discounts after the client filed for bankruptcy. In 1 case, officials stated that following a 

USTP inquiry based on the guidelines, attorneys reinstated the pre-bankruptcy discount 

for the debtor, thereby saving the estate approximately $1.3 million. EOUST officials 

stated that they have not quantified the results of the disclosure provision across all 

guidelines cases. We did not review inquiry and objection data regarding retention 

applications.

Attorneys Generally 

Observed the 2013 

Guidelines; Opinions 

Regarding Their 

Effects Vary by 

Stakeholder Group

Attorneys Generally 

Observed the 2013 

Guidelines

Page 13 GAO-15-839 Corporate Bankruptcy

 
(2) comparable billing data, and (3) electronic billing records. Specifically, 

in 36 guidelines cases, the USTP made 98 inquiries and objections, 90 of 

which were related to one or more of these three provisions in the 2013 

guidelines.34 For example, in one fee application, a firm requested an 

hourly rate that was higher than the comparable rate it charged in 

nonbankruptcy activities and exceeded its budget in certain project 

categories. Because the firm did not provide any explanation in its original 

fee application, the USTP informally raised the issues with the firm, which 

then provided an explanation in supplementary information filed with the 

USTP and the court. In total, attorneys were able to resolve 92 of the 98 

inquiries and objections to the satisfaction of the USTP. Almost all were 

resolved by the attorney providing an oral or written explanation or by 

filing supplementary information.35 An internal spreadsheet maintained by 

the EOUST to provide additional oversight of the 2013 guidelines’

implementation noted compliance issues in 11 other guidelines cases. 

Attorneys in 10 of these 11 cases also addressed the USTP’s concerns 

by providing supplemental information or agreeing to do so in future 

cases.36

Bankruptcy stakeholders we interviewed who had participated in at least 

1 guidelines case also reported that fee applications filed by attorneys in 

those cases generally contained information requested by the 2013 

guidelines. Of the 57 bankruptcy stakeholders we interviewed, 38 had 

participated in at least 1 guidelines case.37 Of these 38, 29 reported that 

34Ninety-five inquiries related to the guidelines were made in 35 cases, while 3 objections 

related to the guidelines were made in 1 case. The USTP made these inquiries and 

objections in part because the submitted fee applications did not contain all of the 

information requested by the 2013 guidelines.

35As of March 2015, 6 inquiries had not yet been resolved. Although reducing attorneys’

fees is not a stated goal of the 2013 guidelines, 15 inquiries that contained issues 

associated with the guidelines resulted in fee reductions of approximately $113,000. 

36According to EOUST officials, the guidelines-related issues identified in these 11 cases 

were not captured in the USTP’s formal case data because the spreadsheet is an informal 

tool the EOUST uses to identify emerging issues and compliance patterns in the 

implementation phase of the 2013 guidelines. As a result, certain issues of oversight 

interest to the EOUST may not qualify or otherwise be significant enough to warrant a 

formal entry in the USTP data system. Additionally, selected provisions associated with 

the guidelines, such as a client’s process for managing legal fees, may be captured under 

categories other than professional compensation in the formal data system.

37All 14 attorneys, 13 of 18 AUSTs, and 11 of 25 judges had participated in at least 1 

guidelines case.

Page 14 GAO-15-839 Corporate Bankruptcy

 
fee applications filed by attorneys in the case or cases they were involved 

in had at least partially observed the 2013 guidelines. Two judges we 

interviewed stated that in the fee applications they reviewed for guidelines 

cases they presided over, attorneys did not observe the guidelines’

provisions. Seven stakeholders could not comment on whether fee 

applications in the guidelines cases they participated in had observed the 

guidelines.38 As discussed earlier in this report, the 2013 guidelines are 

not law, and accordingly, are not binding on courts, debtors, or attorneys. 

Of the 25 judges we interviewed, 6 noted they were likely to use some, 

but not all, of the 2013 guidelines’ provisions when reviewing fee 

applications. For example, 1 judge stated that she would not require 

attorneys to provide budgets or staffing plans in their fee applications, but 

does expect that other provisions of the guidelines, such as electronic 

billing data, will make her review of fee applications easier. Another 9 

judges said they did not intend to use the guidelines when reviewing fee 

applications. Specifically, 6 of these judges noted that their fee reviews 

would instead be guided by their courts’ local rules. As 1 judge explained, 

his court’s local rules already require all the information he needs to 

review fee applications.

Our analysis of the local rules for the 15 jurisdictions in our scope shows 

that 1 jurisdiction, the District of Nevada, generally incorporates USTP fee 

guidelines, while 14 jurisdictions do not.39 EOUST officials reported that 

as of December 2014, another 14 bankruptcy courts outside the scope of 

our report have at least partially adopted the 2013 guidelines.40 However, 

whether or not a jurisdiction has adopted the guidelines or a judge has 

chosen to use them to inform his or her own fee review does not preclude 

38Specifically, 1 judge said he could not comment on the observation of the guidelines 

because he does not use them. Another 3 stakeholders noted that fee applications had 

not yet been submitted in their respective cases, and 1 AUST explained that while his 

office was responsible for a guidelines case, he had recently been appointed and had not 

participated in the fee application review. One AUST and 1 judge noted that the guidelines 

case they participated in was not properly identified initially by the USTP as a guidelines 

case and consequently, the guidelines were not applied.

39The District of Nevada incorporates USTP fee guidelines in their local rules without 

specifically referencing either the 1996 or 2013 guidelines. A list of the jurisdictions in our 

scope can be found in app. I.

40According to EOUST officials, 3 courts have specifically adopted the 2013 guidelines as 

of December 31, 2014. As of that date, 12 other courts had existing local rules that 

adopted USTP fee guidelines generally and did not limit the applicability of the local rule to 

the 1996 guidelines.

Page 15 GAO-15-839 Corporate Bankruptcy

 
the USTP from implementing the guidelines’ provisions and commenting 

or objecting to fee applications, as the USTP deems appropriate. As the 

EOUST Director explained, the 2013 guidelines communicate to 

professionals and the general public the criteria used by the USTP in the 

review of fee applications and the USTP’s expectations of professionals. 

According to the USTP’s implementing guidance provided to staff, in most 

cases, the agency should not object to an attorney’s fee application 

based on noncompliance with the 2013 guidelines, and should instead 

reference the relevant provision in the Bankruptcy Code. However, the 

USTP can reference the provisions of the guidelines when reaching out to 

attorneys through an informal inquiry. Further, despite the reluctance of 

some judges to use the 2013 guidelines in their own review of fee 

applications, all 14 attorneys said that they included the information 

requested by the guidelines in relevant fee applications they submitted. 

Specifically, 5 of the attorneys noted that they try to maintain a good 

relationship with the USTP, and there is no reason not to comply with the 

2013 guidelines.

Bankruptcy stakeholders’ perspectives on the overall value of the 2013 

guidelines varied according to stakeholder group. Fourteen of 18 AUSTs, 

who oversee day-to-day activities associated with implementing the 2013 

guidelines, viewed the guidelines positively, noting, for example, that the 

additional information requested by the guidelines will allow them to more 

easily determine whether fees are reasonable. The remaining 4 AUSTs 

stated it was too early for them to have an opinion about the guidelines 

overall.

In contrast, of the 14 attorneys we interviewed, 6 held negative, 6 held 

neutral opinions of the guidelines, and 2 expressed a positive opinion of 

the guidelines. The six attorneys with negative opinions of the guidelines 

commented that the 2013 guidelines impose significant additional work 

for them to prepare fee applications without providing a commensurate 

benefit to the bankruptcy process. One attorney with a neutral opinion 

explained that while he was not sure whether the guidelines would be 

able to accomplish their objectives, complying with them had not required 

much additional work. One attorney with a positive opinion said the 2013 

guidelines are generally straightforward and easy to follow.

Opinions Regarding the 

2013 Guidelines Vary by 

Stakeholder Group

Overall Opinion of 

the 2013 Guidelines

Page 16 GAO-15-839 Corporate Bankruptcy
Judges’ opinions regarding the overall value of the guidelines were also 

mixed.41 Of the 25 judges we interviewed, 12 stated that their overall 

opinion of the guidelines was positive, 7 stated that their overall opinion 

was negative, 3 stated it was neutral, and 3 stated that it was too early to 

have an opinion.42 Of the 12 judges who expressed a positive opinion of 

the guidelines, 4 noted that the guidelines will be useful in reviewing fee 

applications. In contrast, 5 of the 7 judges who had a negative opinion of 

the guidelines commented that they believed the guidelines were 

unnecessary. As one of these judge said, the new provisions do not 

address the issues that create problems with professional fees. 

Specifically, he explained that the guidelines do not prevent cases from 

“going off the rails,” or experiencing unexpected setbacks, which is when 

problems with professional fees can arise. Figure 2 shows the opinions of 

each stakeholder group.

Figure 2: Bankruptcy Stakeholders’ Opinions of the U.S. Trustee Program’s 2013 

Guidelines

41Eleven judges had presided over 1 or more guidelines case, and 14 judges had not yet 

been assigned a guidelines case. 

42Two of the 12 judges who had a positive opinion of the guidelines also noted that it was 

too early to tell whether specific aspects of the guidelines would have a positive effect. 

Page 17 GAO-15-839 Corporate Bankruptcy

 
Bankruptcy stakeholders also had mixed opinions, which varied by 

stakeholder group, regarding the effect of the guidelines on transparency, 

efficiency, or fees.43 Specifically, 15 of 18 AUSTs reported that they 

thought the guidelines were likely to have a positive effect on 

transparency, efficiency, or fees.44 In contrast, 9 of the 14 attorneys we 

interviewed said the guidelines were unlikely to have an effect on 

transparency, efficiency, or fees, in part because they believed the 

process that existed before the 2013 guidelines was already very 

transparent. Four of 14 attorneys stated that they believed the guidelines 

would increase transparency, but 3 of the 4 noted that the guidelines 

would not improve the efficiency of cases or reduce the fees awarded. 

For example, 1 attorney explained that the best way to reduce fees in

bankruptcy is to improve efficiency to reduce the overall time a case takes 

to complete, and he was not sure whether the 2013 guidelines would be 

able to do so. The judges were split in their opinions—11 of 25 responded 

that the guidelines were likely to have a positive effect on transparency, 

efficiency, or fees, and 10 of 25 responded that they were not likely to 

have an effect.45 For example, 1 judge said the 2013 guidelines would 

improve efficiency and transparency, making it easier for her to review 

and analyze fee applications. In contrast, another judge said she did not 

believe the guidelines would have an effect on the status quo, because 

attorneys already bill at market rates.

The effects or potential effects of three provisions of the 2013 

guidelines—(1) electronic billing records, (2) comparable billing rate 

information, and (3) budgeting and staffing plans—were discussed most 

frequently by bankruptcy stakeholders during our interviews.46 Similar to 

43Not all stakeholders commented on the effects of the guidelines on all three aspects. We 

focused on these three aspects because two of the stated goals of the 2013 guidelines 

are to increase the transparency and efficiency of the fee review process, and, as 

discussed earlier in this report, EOUST officials reported that concerns about professional 

fees in large cases such as Lehman Brothers provided the impetus for developing the new 

guidelines.

44The 3 remaining AUSTs noted it was too early for them to have an opinion.

45In addition, 1 judge responded that the guidelines could have a positive effect on fees, 

but noted that they would not have an effect on transparency. Three of 25 judges 

responded that it was too early to tell what effect, if any, the guidelines might have. 

46We did not specifically ask stakeholders about their opinion on each provision in the 

2013 guidelines; therefore, not all stakeholders commented on specific provisions.

Overall Effect of the 2013 

Guidelines on Transparency, 

Efficiency, or Fees

Effect of Selected Provisions 

of the 2013 Guidelines

Page 18 GAO-15-839 Corporate Bankruptcy

 
the overall opinions of the guidelines, perspectives on the effects of these 

three provisions varied by stakeholder group.

1. Electronic billing records: This provision was developed to bring the 

USTP’s procedures into line with modern nonbankruptcy billing 

technology and practice.47 The electronic billing records provision was 

cited by 22 of 43 AUSTs and judges as a provision likely to have a 

positive effect on the fee review process, in part because it will make 

the fee review process easier or more efficient. Only 2 attorneys 

mentioned the electronic billing record provision, and they noted that it 

was unlikely to have an effect.48

2. Comparable billing rate information: This provision was developed to 

provide specific information about rates, in an effort to increase 

transparency and improve comparability between rates charged for 

bankruptcy and nonbankruptcy activities. The comparable billing rate 

information was cited by 20 of 57 bankruptcy stakeholders we 

interviewed as a provision likely to have an effect on the fee review 

process, with 8 of these stakeholders noting that this provision was 

likely to have a positive effect by increasing transparency. In contrast, 

19 of 39 attorneys and judges reported that the comparable billing 

rate provision was unlikely to have an effect on the fee review 

process. For example, 5 judges and attorneys explained that the 

comparable billing information is unnecessary because rates charged 

in bankruptcy are already comparable to rates charged for 

nonbankruptcy activities, while another 6 said that trying to compare 

rates charged in bankruptcy with nonbankruptcy rates is “comparing 

apples to oranges” and is not a meaningful way to determine 

reasonable fees. See figure 3 for a breakdown of responses by 

stakeholder group.

47Prior to the 2013 guidelines, attorneys were not required to provide billing data in a 

searchable electronic format, such as an Excel file. 

48One attorney explained that his firm had already provided these data to clients before 

the 2013 guidelines. Another said he felt the new requirement allowed the USTP to further 

analyze billing data, but that in his opinion, the billing information provided under the 1996 

guidelines was sufficient. 

Page 19 GAO-15-839 Corporate Bankruptcy

 
Figure 3: Bankruptcy Stakeholders’ Opinions of the Comparable Billing Rate 

Provision of the U.S. Trustee Program’s 2013 Guidelines

3. Budgeting and staffing plans: This provision was developed to 

encourage firms to apply standard management and planning tools to 

bankruptcy cases, as is done in other types of cases, in an effort to 

increase transparency. The budget and staffing plan provision of the 

2013 guidelines was cited by 26 of the 57 bankruptcy stakeholders we 

interviewed as a provision likely to have a positive effect on the fee 

review process.49 For example, stakeholders noted that the primary 

benefit of the budgeting and staffing provision is that it encourages 

attorneys to communicate, early in the case, information about the 

potential costs. In contrast, 16 of the 20 attorneys and judges who 

noted that the budgeting provision is unlikely to have an effect 

explained that bankruptcy cases are unpredictable, a fact that limits 

the value of a budget. See figure 4 for a breakdown of responses by 

stakeholder group.

49This provision requests information about agreed-upon budgets and staffing plans for 

the period covered by the fee application. The guidelines allow attorneys to change 

budgets as necessary, but ask for an explanation when billed fees exceed the budgets by 

10 percent.

Page 20 GAO-15-839 Corporate Bankruptcy

 
Figure 4: Bankruptcy Stakeholders’ Opinions of the Budget and Staffing Plan 

Provision of the U.S. Trustee Program’s 2013 Guidelines

Bankruptcy attorneys and judges we interviewed, and academic research 

we reviewed, identified several factors that contribute to venue 

selection.50 The most frequently cited factors—including prior court 

rulings, the preferences of lenders, and judge experience—all contribute 

to overall predictability in a case and can provide some insights into what 

to expect from a court as a case proceeds through the bankruptcy 

process.51 Bankruptcy attorneys and judges we interviewed and 

academic research we reviewed also identified both positive and negative 

effects of the concentration of cases in the SDNY and Delaware.

50We did not ask AUSTs questions related to venue selection and its effects as they do 

not have a role in that process.

51We asked the 14 attorneys and 25 judges we interviewed their opinions on four factors 

that we previously identified as potentially contributing to venue selection in large Chapter 

11 bankruptcies: judge experience, prior court rulings, court administrative capacity, and 

perceived court attitudes related to professional fees. Interviewees also cited two 

additional factors that they perceived as contributing to venue selection.

Bankruptcy Attorneys, 

Judges, and 

Academic Research 

Identify Contributing 

Factors and Effects of 

Venue Selection

Page 21 GAO-15-839 Corporate Bankruptcy

 
Bankruptcy attorneys and judges identified several factors that contribute 

to venue selection, or why a case may be filed in one court versus 

another. As discussed previously, companies filing for bankruptcy have 

several options available to them when determining the court, or venue, in 

which to file their case, including their place of incorporation, principal 

place of business or assets, or where an affiliate has filed a Chapter 11 

bankruptcy case. The factors cited most frequently by the 39 attorneys 

and judges we interviewed as significant to venue selection include prior 

court rulings, the preferences of lenders, and judge experience.52 While 

no two cases are exactly alike, these factors were frequently discussed 

as important because of how they contribute to predictability in a case.53

For example, knowing a judge’s level of experience with large cases and 

how a court has ruled on certain matters can help an attorney advise a 

client about how a court is likely to respond to issues in a specific case. 

Attorneys and judges also mentioned other factors that can contribute to 

venue selection, such as perceived court attitudes on professional fees, 

convenience or proximity of the parties involved in a case to the court, 

and court administrative capacity, though the majority said that 

professional fees and court administrative capacity were either minor 

factors or not a factor in venue selection. See figure 5 for the frequency 

with which the various factors were cited.

52Both stakeholder groups identified the same top three factors that contribute to venue 

selection. The preferences of lenders refers particularly to the preferences of secured 

lenders. Secured lenders are lenders or creditors who have a mortgage or lien against a 

company and are the first to be repaid by the debtor. Secured lenders are often banks or 

other lenders, such as hedge funds, that provide liquidity to companies in financial 

distress.

53Thirty-six of 39 attorneys and judges cited at least one of the three key factors discussed 

above. Of those, 24 noted that these factors were important in venue selection because of 

their contribution to predictability. Two judges also discussed the importance of 

predictability in general, without specifying the factors that contribute to predictability. 

Overall, 26 attorneys and judges discussed the importance of predictability in venue 

selection.

Bankruptcy Attorneys and 

Judges Identified Several 

Factors that Contribute to 

Venue Selection

Page 22 GAO-15-839 Corporate Bankruptcy

 
Figure 5: Factors Identified as Significant or Most Important in Selecting Venue by 

the 39 Bankruptcy Attorneys and Judges Interviewed

Thirty-three of the 39 attorneys and judges we interviewed cited prior 

local or circuit court rulings as a significant factor when selecting the 

venue in which to file a large Chapter 11 bankruptcy case, in part 

because understanding prior court rulings allows attorneys to better 

predict and advise clients on the possible outcomes of a case.54 For 

example, 1 attorney explained the importance of prior court rulings, noting 

that attorneys look at district and circuit court opinions to determine what 

is favorable for their particular client and what will matter for the particular 

case. Specifically, 6 of the 33 attorneys and judges stated that it is the 

attorney’s responsibility to act in the best interest of his or her client, and 

understanding prior court rulings and how they relate to venue selection is 

part of that. Two of these attorneys further commented that filing in a 

court without taking into account prior rulings could harm a company’s 

ability to successfully emerge from bankruptcy and could be considered 

malpractice.55

54Nine of the 33 attorneys and judges specifically noted that prior court rulings were 

primarily important in terms of the predictability they offered.

55For example, companies with intellectual property licenses may be affected by a Ninth 

Circuit ruling that says a company cannot assume its patent license upon emerging from 

bankruptcy without the consent of the licensor. According to 1 attorney we interviewed, 

this raises concerns that the licensor could increase the cost of the license or reject it 

outright, which could negatively affect the company’s operations.

Prior Court Rulings

Page 23 GAO-15-839 Corporate Bankruptcy

 
Twenty of the 39 attorneys and judges cited the preferences of lenders as 

a significant factor. As 3 attorneys we interviewed explained, lenders who 

provide financing to a company in distress may incorporate clauses in 

their financing agreements requiring the company to file in a certain 

jurisdiction. Nine of the 20 attorneys and judges noted that lenders 

incorporate such clauses because they prefer the predictability offered by 

certain courts. For example, 1 attorney stated that lenders may prefer the 

certainty of providing debtor financing in courts that have done hundreds 

of similar financing arrangements so that they know what motions are 

likely to be approved. According to 4 attorneys and judges we 

interviewed, other reasons that lenders may prefer certain jurisdictions 

can include the proximity of the court to their business operations.

Sixteen of the 39 attorneys and judges cited judge experience as a 

significant factor in venue selection. Of these, 6 attorneys and judges 

stated that judge experience plays a key role in providing predictability in 

a case. As 1 judge explained, speaking from experience as a bankruptcy 

attorney, judge experience is very much a factor in venue selection and 

attorneys consider the competence and experience of judges on Chapter 

11 matters when advising their clients. However, 6 other attorneys and 

judges said that in their opinion, all bankruptcy court judges are capable 

of handling large cases.

Eight of the 39 attorneys and judges we interviewed identified perceived 

court attitudes on professional fees as a significant factor in venue 

selection. For example, 1 judge said that certain courts have a reputation 

for not approving fees over a certain amount and attorneys know which 

judges are “hard on fees.” In addition to the 1 attorney and 7 judges who 

identified fees as a significant factor, another 3 attorneys and 11 judges 

identified fees as a minor factor. In contrast, the majority of attorneys (10 

of 14) and 7 of 25 judges said that professional fees were not a factor in 

venue selection. One attorney noted that he has tried cases in venues 

around the country and has not seen a difference in fees awarded. Five 

Lender Preference

Judge Experience

Professional Fees

Page 24 GAO-15-839 Corporate Bankruptcy
attorneys and judges said that professional fees may have played a 

bigger role in venue selection in the past.56

Twelve of 39 attorneys and judges cited convenience or proximity of the 

parties involved to the court as a factor in venue selection. Five attorneys 

and judges also discussed the administrative capacity of the court, or the 

court’s ability to process large cases, as a significant factor. However, the 

majority of respondents (29 of 39) said that administrative capacity was 

either a minor factor or not a factor.57

Academic studies we reviewed on venue selection used various 

methodological approaches to identify several of the factors raised by the 

stakeholders we interviewed, though the importance of these factors 

varied across the studies.58 For example, four studies, from 2002, 2004, 

and 2005, cited judge experience or the perceived expertise of the judge, 

or prevailing court rulings, as key factors in venue selection.59 According 

to one academic expert we interviewed, judge expertise was likely a 

consideration for General Motors and Chrysler in choosing to file for 

bankruptcy in New York because they were more likely to be assigned an 

experienced judge in New York than in Detroit, where their headquarters 

56Although the stakeholders we interviewed did not elaborate on why they thought this 

was the case, a new recommendation included in the 2013 guidelines could contribute to 

this perception. The 2013 guidelines state that the USTP will not object if attorneys 

request fees associated with the rate charged in the jurisdiction where their firm is located, 

regardless of the jurisdiction in which the case is filed. This helps provide assurance to 

attorneys that courts will consider their home rate in fee applications.

57We asked each attorney and judge if he or she thought court administrative capacity 

was a factor in venue selection. While some attorneys and judges also offered 

convenience as a factor during our interviews, we did not specifically ask them about this 

factor.

58The methodologies used by the different studies include interviews, questionnaires, 

summaries of group discussions, and statistical analyses of case data.

59(1) Marcus Cole. “Delaware Is Not a State: Are We Witnessing Jurisdictional 

Competition in Bankruptcy?” Vanderbilt Law Review, November 2002; 55, 6 (Cole 2002). 

(2) Federal Judicial Center. Conference on Large Chapter 11 Cases. 2004 (FJC 2004). (3) 

Kenneth M. Ayotte and David A. Skeel, Jr. “Why Do Distressed Companies Choose 

Delaware? An Empirical Analysis of Venue Choice in Bankruptcy.” University of 

Pennsylvania, Institute for Law & Economic Research Paper No. 03-29, October 2004 

(Ayotte and Skeel 2004). (4) Lynn M. LoPucki and Joseph W. Doherty. Courting Failure: 

How Competition for Big Cases Is Corrupting the Bankruptcy Courts. Ann Arbor: 

University of Michigan Press, 2005 (LoPucki 2005).

Other Factors

Academic Findings Reflect 

the Venue Selection 

Factors Reported by 

Stakeholders

Page 25 GAO-15-839 Corporate Bankruptcy

 
were located. The 2002 study also identified predictability and speed 

(how fast a case moves through the court) as the most prevalent factors, 

and lender preference as a less prevalent factor in venue selection.60 One 

study from 2004 suggested that firms with secured lenders exhibited a 

strong preference for filing in Delaware.61 Two studies from 2002 and 

2004 cited attitudes towards fees as a factor in venue selection; however, 

one noted that fees were not the most prevalent factor.62 In contrast to 

this finding and the results of our interviews, one study we reviewed 

identified the perceived scrutiny of professional fees as a key factor in 

venue selection.63 In this study and in subsequent work, the author 

contends that attorneys chose to file in venues where they believed their 

fee requests would be approved and theorized that some courts may 

have relaxed their scrutiny of fees in order to attract more large cases.64

60Cole 2002. This study identifies a total of 10 factors, listed in order of importance. 

Rankings are based on attorney interview responses about reasons they view Delaware 

as a superior venue. Three of the top four (1, 2 and 4) are referenced above. The full list 

of factors includes (1) predictability, (2) speed, (3) the absence of real law or legal 

precedent, (4) the sophistication and expertise of judges, (5) the responsiveness and 

availability of judges, (6) less scrutiny of attorney fee applications, (7) geographic 

convenience, (8) creditor pressure, (9) danger of a bad judge, and (10) the intrusiveness 

of the local UST. Cole’s data collection methods include a combination of interviews, 

questionnaires, and informal conversations with more than 50 attorneys and judges.

61Ayotte and Skeel 2004. This study used statistical analyses of case data from all firms 

filing for Chapter 11 between 1990 and 2000 with at least $50 million in reported assets. 

Analyses involving venue selection included only cases with companies incorporated in 

Delaware so that Delaware was an option in venue selection. This study also suggested 

that court characteristics are important factors in venue selection.

62Cole 2002; FJC 2004. The FJC study (2004) is a record of conversations among 30 

judges and attorneys assembled at a conference.

63LoPucki 2005. LoPucki’s 2005 book references interviews and data analyses conducted 

in prior studies.

64LoPucki 2005 and Lynn LoPucki and Joseph Doherty. Professional Fees in Corporate 

Bankruptcies: Data, Analysis, and Evaluation. New York: Oxford University Press, 2011 

(LoPucki 2011).

Page 26 GAO-15-839 Corporate Bankruptcy

 
Bankruptcy attorneys and judges we interviewed and academic research 

we reviewed identified both positive and negative effects of the 

concentration of cases in the SDNY and Delaware. Of the 94 guidelines 

cases filed from November 2013 through March 2015, 64 percent (60 of 

94) were filed in the SDNY or Delaware, with the majority filed in 

Delaware. Our analysis of data related to these cases found that in 5 of 

the 14 guidelines cases filed in the SDNY, and in all of the 46 guidelines 

cases filed in Delaware, the venue selected differed from the company’s 

headquarters address. See appendix III for a more detailed analysis of 

the venue rules used as the basis for selecting the filing location in 

guidelines cases.

Thirty-two of the 39 attorneys and judges we spoke with cited at least one 

effect of the concentration of cases in the SDNY and Delaware, with 24 

identifying positive effects and 29 identifying negative effects. The 

positive effect most commonly cited by attorneys (5 of 14) and judges (10 

of 25) we interviewed was the significant large case experience 

developed by judges in the SDNY and Delaware. For example, 1 judge 

noted that the concentration of cases in the SDNY and Delaware has 

resulted in experienced judges with vetted, expedited procedures and 

processes.65 Six stakeholders noted that the body of court rulings the 

SDNY and Delaware courts have developed is another positive effect. Of 

the 18 stakeholders who mentioned one of these two benefits of case 

concentration, 8 explained that as a result, the SDNY and Delaware 

courts offer a degree of certainty in terms of case outcomes that does not 

exist in other courts. For example, 1 attorney said that he always advises 

clients on potential case outcomes, and the precedents in the SDNY and 

Delaware allow him to provide more predictability for his clients.

Twenty-nine attorneys and judges identified negative effects of case 

concentration in the SDNY and Delaware, but they differed in their 

opinions of the most significant negative effects. The negative effects 

most commonly cited by attorneys (9 of 14) were the difficulty local 

bankruptcy firms face in maintaining a bankruptcy practice outside of the 

SDNY and Delaware and the lack of opportunity for courts to develop 

precedent and expertise outside of these jurisdictions.66 For example, 1 

65Other attorneys and judges we interviewed said that, in their experience, there are 

experienced and capable judges in bankruptcy courts across the country–not just in the 

SDNY and Delaware.

66Four judges also cited the negative effect on local bankruptcy bars.

Bankruptcy Attorneys, 

Judges, and Academic 

Research Identify Positive 

and Negative Effects of 

Venue Selection 

Outcomes

Page 27 GAO-15-839 Corporate Bankruptcy

 
attorney noted that firms in other parts of the country lose bankruptcy 

clients to SDNY and Delaware firms. The negative effect most commonly 

cited by judges (12 of 25) was the challenges small creditors face when a 

case is filed far from a company’s headquarters location.67 Four judges 

said that moving a case from the company’s home jurisdiction can 

disenfranchise small businesses and individuals who may want to 

participate in a case but are unable to do so because of the expense of 

travelling to a court in another jurisdiction.68 Additionally, 4 judges and 1 

attorney said that the concentration of cases has a negative effect on the 

bankruptcy system as a whole. For example, 1 judge noted that when 

money is spent hiring local counsel and traveling to distant courts instead 

of filing where a company’s assets and employees are located, people 

view the system as corrupt.

Similarly, the academic studies we reviewed identified both positive and 

negative effects of case concentration in the SDNY and Delaware. As one 

academic expert we spoke with noted, there is a divergence in the 

academic findings and opinions related to venue. For example, two 

empirical studies from 1997 and 2004 suggested that cases filed in 

Delaware moved through the bankruptcy system faster than those filed in 

other courts.69 Other studies suggested that cases filed in the SDNY and 

Delaware had a higher refiling rate than cases filed in other courts and 

that cases filed in a venue outside the company’s headquarters, such as 

the SDNY or Delaware, cost more than cases filed in home jurisdictions.70

In contrast, one academic expert argued that some cases in Delaware did 

not have a higher refiling rate than other courts with a similar caseload, 

and more recent work by another academic suggests that cases in the 

67Four attorneys also commented on the negative effect of case concentration on small 

creditors. A creditor is someone to whom the debtor owes money, or who claims to be 

owed money by the debtor. Small creditors may include individual employees or small 

businesses affected by a company’s bankruptcy.

68Judges in the SDNY said that their courts take steps to accommodate small creditors in 

a case. For example, the SDNY will simulcast hearings to local courts so local parties can 

view the proceedings without travel.

69Federal Judicial Center. Chapter 11 Venue Choice by Large Public Companies: Report 

to the Judicial Conference Committee on the Administration of the Bankruptcy System. 

1997 (FJC 1997), Ayotte and Skeel 2004.

70LoPucki 2005, 2011. Findings suggesting higher refiling rates were based on analysis of 

cases filed between 1983 and 2000.

Page 28 GAO-15-839 Corporate Bankruptcy

 
SDNY and Delaware do not cost more.71 Additionally, a 2015 study found 

that having a case assigned to an experienced judge is a key factor in the 

success of a bankruptcy filing and that there is a high correlation between 

judge experience and jurisdiction, with highly experienced judges 

presiding over most SDNY and Delaware cases.72 However, as one 

expert we interviewed noted, because fewer cases are filed in venues 

other than the SDNY and Delaware, it is difficult for judges outside of 

those districts to gain experience with large Chapter 11 cases.

We provided a draft of this report to the Executive Office for U.S. Trustees 

(EOUST) and the Administrative Office of the U.S. Courts (AOUSC) on 

August 21, 2015, for review and comment. In its written comments, 

reproduced in appendix IV, the EOUST generally agreed with our 

findings. We also received technical comments from EOUST and 

AOUSC, which we incorporated as appropriate.

We are sending copies of this report to the Senate Committee on the 

Judiciary, the Director of the Executive Office for U.S. Trustees, the 

Director of the Administrative Office of the U.S. Courts, and other 

interested parties. In addition, the report is available at no charge on the 

GAO website at http://www.gao.gov.

71Robert K. Rasmussen, “Empirically Bankrupt.” Colum. Bus. L. Rev. 179 2007 

(Rasmussen 2007). Stephen J. Lubben “Corporate Reorganization & Professional Fees.”

The American Bankruptcy Law Journal 82, no. 1 (Winter 2008, 2008): 77-139 (Lubben 

2008); and “What we “Know” about Chapter 11 Cost is Wrong.” Fordham Journal of 

Corporate & Financial Law 17, no. 1 (2012): 141-188 (Lubben 2012). Rasmussen’s 

findings suggest that Delaware’s refiling rate for traditional cases, which made up the 

majority of the cases during the time period studied, was similar to that of two other busy 

bankruptcy courts – SDNY and Central California. However, he noted that the refiling rate 

for prepackaged cases—where a company and creditors agree on a reorganization plan 

before filing—did appear to be higher.

72Lynn M. LoPucki and Joseph W. Doherty. “Bankruptcy Survival.” 62 UCLA L. Rev. 970 

(2015).

Agency Comments

Page 29 GAO-15-839 Corporate Bankruptcy

 
If you or your staff have any questions about this report, please contact 

me at (202) 512-9627 or maurerd@gao.gov. Contact points for our 

Offices of Congressional Relations and Public Affairs may be found on 

the last page of this report. GAO staff who made key contributions to this 

report are listed in appendix V.

Sincerely yours,

David C. Maurer

Director

Homeland Security and Justice

Page 30 GAO-15-839 Corporate Bankruptcy
Appendix I: Objectives, Scope, and 

Methodology

This report addresses the following questions:

1. To what extent have bankruptcy attorneys observed the 2013 

guidelines in fee applications, and what are the opinions of bankruptcy 

stakeholders, including attorneys, judges, and U.S. Trustee Program 

(USTP) officials, regarding the guidelines’ key provisions and their 

effects?

2. What do bankruptcy attorneys, judges, and available research identify 

as factors that contribute to venue selection and the effects, if any, of 

venue selection in large Chapter 11 cases?

To obtain background information and answer both questions, we 

reviewed the Bankruptcy Code and relevant bankruptcy filings related to 

professional fees in Chapter 11 bankruptcy cases.1 We also reviewed the 

1996 USTP guidelines and the 2013 USTP guidelines on the 

compensation of attorneys in large Chapter 11 cases, or those with 

assets and liabilities each of $50 million or more.2 We analyzed USTP 

data related to Chapter 11 cases filed from October 2009 through March 

2015 to identify the number of large cases filed during this time period in 

each USTP office. We selected this time period because it enabled us to 

identify case activity in the years both before and after the 2013 

guidelines went into effect. According to USTP data, 765 cases with 

assets and liabilities each of $50 million or more were filed from October 

2009 through March 2015. Of these cases, 94 were filed after the 2013 

guidelines went into effect (guidelines cases).3 To assess the reliability of 

these data, we interviewed USTP officials responsible for collecting and 

reviewing the information and cross-checked the names of the guidelines 

1

E.g., 11 U.S.C. § 330(a).

2

28 C.F.R. pt. 58, App. A (Guidelines for Reviewing Applications for Compensation and 

Reimbursement of Expenses Filed Under 11 U.S.C. 330); Appendix B Guidelines for 

Reviewing Applications for Compensation and Reimbursement of Expenses Filed Under 

United States Code by Attorneys in Larger Chapter 11 Cases, 78 Fed. Reg. 36248 (June 

17, 2013).

3

For those cases filed before the 2013 guidelines went into effect, the USTP identified 

relevant cases by the self-reported asset and liability amounts reported on a case’s 

bankruptcy petition. As a result, for fiscal year 2010 through fiscal year 2012, the number 

of cases meeting the 2013 guidelines’ asset and liability thresholds may be undercounted 

because jointly administered cases where none of the cases individually met the asset 

and liability thresholds would not necessarily have been captured in the search. 

Additionally, according to USTP officials, approximately 1 percent of the total cases did 

not contain either asset or liability information. 

Appendix I: Objectives, Scope, and 

Methodology

Page 31 GAO-15-839 Corporate Bankruptcy

 
Appendix I: Objectives, Scope, and 

Methodology

cases against lists of the 20 largest cases filed in 2014 as identified by 

the bankruptcy research website New Generations 

(BankruptcyData.com).4 We determined that the data were sufficiently 

reliable for our purposes. As discussed in detail later in this appendix, we 

used the case information to inform our selection of a nongeneralizable 

sample of bankruptcy stakeholders for semistructured interviews. While 

the views expressed in these interviews do not represent those of all 

bankruptcy stakeholders, they provide valuable insights from 

stakeholders who have experience with large Chapter 11 bankruptcy 

cases and the 2013 USTP guidelines. We also conducted interviews with 

Executive Office for U.S. Trustees (EOUST) officials, U.S. Trustees 

(UST), academics, and industry stakeholders.5 Finally, we reviewed 

relevant academic literature on professional fees and venue selection in 

Chapter 11 bankruptcy cases. Because fee reduction is not a stated goal 

of the 2013 guidelines, we did not attempt to determine whether or not the 

guidelines have led to an actual reduction in professional fees awarded in 

large Chapter 11 cases.

To further address question 1, we reviewed data from the USTP’s 

Significant Accomplishments Reporting System (SARS) on objection and 

inquiry activities related to professional fees in guidelines cases filed from 

November 2013 through March 2015. We analyzed the objections and 

inquiry data, including narrative descriptions, to identify USTP actions 

related to the 2013 guidelines provisions. To assess the reliability of these 

data, we interviewed officials responsible for entering and maintaining the 

data and reviewed internal documentation and guidance associated with 

data entry and internal review processes. We determined that the data 

were sufficiently reliable for our purposes. We also reviewed information 

collected by the EOUST on whether the provisions of the 2013 guidelines 

were observed in cases filed from November 2013 through March 2015 to 

determine the extent to which attorneys filing fee applications included 

information related to the 2013 guidelines’ provisions. To determine 

whether selected local court rules incorporated the key provisions of the 

2013 guidelines, we reviewed local court rules and guidelines on fee 

4

This site was identified by bankruptcy experts as a reliable source of information on large 

bankruptcy cases. 

5

We identified relevant academics and industry stakeholders through referrals from 

agency officials and a literature search on professional fees and venue selection in 

Chapter 11 bankruptcy cases.

Page 32 GAO-15-839 Corporate Bankruptcy

 
Appendix I: Objectives, Scope, and 

Methodology

applications and the compensation of professionals in bankruptcy cases 

for the 15 bankruptcy courts in our scope. These courts were selected 

because they had 5 or more large Chapter 11 cases filed from fiscal year 

2010 through fiscal year 2014. Additional information regarding the 

jurisdictions in the scope of this report is provided later in this appendix.

To further address question 2, we reviewed relevant academic literature 

on the factors that contribute to venue selection and the effects of the 

concentration of cases in the Southern District of New York (SDNY) and 

the District of Delaware (Delaware). We also interviewed six academic 

experts in the Chapter 11 bankruptcy field to better understand their 

research findings. We conducted a literature search of various databases, 

such as ProQuest and Academic OneFile, and asked the academic 

experts we interviewed to recommend additional studies. From these 

sources, we identified 10 studies published between 1997 and 2015 that 

were relevant to our question on venue selection. We reviewed the 

methodologies of these studies to ensure they were sound and 

determined they were sufficiently reliable to identify factors related to 

venue selection and the effects of case concentration. To identify the 

basis for venue selection companies used when filing cases, we reviewed 

bankruptcy filing documents for each of the 94 guidelines cases filed from 

November 2013 through March 2015.6 We also reviewed the first day 

declarations for these cases to identify each company’s place of 

incorporation and headquarters location. In cases where we were not 

able to identify this information, we reviewed Securities and Exchange 

Commission filings or filings with state secretary of state offices, as 

necessary.

Semistructured Interviews:

To obtain perspectives from bankruptcy stakeholders on the 2013 

guidelines and issues related to venue selection, we conducted 57 

semistructured interviews with a nongeneralizable sample of 18 Assistant 

U.S. Trustees (AUST), 25 U.S. Bankruptcy Court judges, and bankruptcy 

6

Companies disclose the basis for their venue choice by checking one or more of three 

boxes listed on the filing petition. The first box covers domicile, which includes place of 

incorporation and principal place of residence or assets. The second box is checked if the 

company has an affiliate or partner that has filed for bankruptcy in the jurisdiction. Finally, 

the third box involves foreign proceedings.

Page 33 GAO-15-839 Corporate Bankruptcy

 
Appendix I: Objectives, Scope, and 

Methodology

attorneys from 14 law firms. Our process for selecting each group of 

stakeholders in our sample is discussed below:

AUSTs: We chose to interview AUSTs because they are responsible for 

the day-to-day oversight of federal bankruptcy cases and for reviewing 

fee applications. There are 21 UST regions with 93 field offices. Each 

field office is managed by an AUST. To determine the scope from which 

to select our sample of AUSTs for interviews, we reviewed USTP data on 

large Chapter 11 cases (cases with assets and liabilities each of $50 

million or more) filed from fiscal year 2010 through fiscal year 2014. From 

this, we identified 18 USTP offices that had a total of five or more large 

cases during this time period. Of these offices, 12 offices had been 

assigned a guidelines case as of October 2014, while 6 offices had not.7

We interviewed 18 AUSTs assigned to each of the 18 offices (see table 

2). At the time our interviews were conducted, 13 of the 18 AUSTs had 

participated in at least one guidelines case.

Judges: Bankruptcy judges have the final authority to award professional 

fees and to determine whether or not they are reasonable and necessary, 

under the Bankruptcy Code.8 To select our sample of bankruptcy judges 

to interview, we relied on the same selection criteria we used to select 

AUSTs. We matched each UST office/city with 5 or more large Chapter 

11 cases from fiscal year 2010 through fiscal year 2014 to the 

corresponding judicial district for the U.S. Bankruptcy Courts. We 

identified 15 judicial districts covering the 18 cities in our AUST sample.9

To select individual judges for our interviews, we contacted the Chief 

Judge of each of the 15 bankruptcy courts and asked him or her to 

identify judges in those courts with experience in our topic areas who 

were available to be interviewed. To ensure that we spoke with judges 

with a range of experience in guidelines cases, we initially selected two 

judges in the each of the courts with 15 or more large Chapter 11 cases 

7

One office in our sample was assigned a guidelines case in January 2015. Therefore, by 

the time we conducted our interviews, 13 USTP offices and their corresponding AUSTs 

had participated in at least one guidelines case.

8

11 U.S.C. § 330(a).

9

There are a total of 90 U.S. Bankruptcy Courts and 369 bankruptcy judges, including 328 

active and 41 recalled judges.

Page 34 GAO-15-839 Corporate Bankruptcy

 
Appendix I: Objectives, Scope, and 

Methodology

and one judge in each of the remaining courts (see table 2).10 We 

interviewed a total of 25 judges. Of these, 11 judges presided over one or 

more cases subject to the guidelines, while 14 judges had not yet been 

involved with a guidelines case. With the exception of one judge who had 

been appointed to the bench in 2013, all judges interviewed had presided 

over at least one case between October 2009 and October 2013 that met 

the guidelines thresholds of assets and liabilities each of $50 million or 

more.

Table 2: U.S. Trustee Program Offices, U.S. Bankruptcy Court Judicial Districts, and Associated Large Chapter 11 Cases with 

Number of Assistant U.S. Trustees and Number of Judges Included in Interview Sample

U.S. Trustee 

Office

U.S. Bankruptcy Court 

judicial district

Number of large 

Chapter 11 cases 

fiscal years 2010-

2014

Number of Assistant 

U.S. Trustees 

interviewed

Number of judges 

interviewed

1. New York Southern District of New York 273 1 3

2. Wilmington Delaware 177 1 2

3. Dallas Texas Northern 36 1 2

4. Santa Ana California Central 18 1 2

5. Los Angeles California Central 10 1 1

6. Newark New Jersey 16 1 2

7. Phoenix Arizona 15 1 1

8. Chicago Illinois Northern 15 1 2

9. Las Vegas Nevada 12 1 1

10. Reno Nevada 5 1 1

11. Miami Florida Southern 10 1 1

12. Seattle Washington Western 9 1 1

13. Houston Texas Southern 9 1 1

14. Tampa Florida Middle 7 1 1

15. Orlando Florida Middle 5 1 1

16. Boston Massachusetts 6 1 1

10While we initially requested interviews with two judges in the Southern District of New 

York, three judges responded. Additionally, we interviewed one judge in Phoenix. We also 

interviewed two judges from districts outside of the scope of our review as part of our 

background research. Their responses were not included in our final results. 

Page 35 GAO-15-839 Corporate Bankruptcy

 
Appendix I: Objectives, Scope, and 

Methodology

U.S. Trustee 

Office

U.S. Bankruptcy Court 

judicial district

Number of large 

Chapter 11 cases 

fiscal years 2010-

2014

Number of Assistant 

U.S. Trustees 

interviewed

Number of judges 

interviewed

17. Atlanta Georgia Northern 5 1 1

18. Richmond Virginia Eastern 6 1 1

Total 634 18 25

Source: GAO analysis and U.S. Trustee Program data. | GAO 15-839

Bankruptcy attorneys: To select attorneys to interview, we reviewed the 

guidelines case data provided by the USTP for all cases subject to the 

2013 guidelines in fiscal year 2014. We identified selected guidelines 

cases filed in bankruptcy courts in 12 of the 18 cities listed in table 2 and 

reviewed the related bankruptcy filing petitions to identify law firms that 

represented the debtor in these cases. We selected cases to provide 

variation in geographic location and in case size. To ensure that we 

included attorneys from firms with substantial experience with large 

Chapter 11 cases, we cross-checked the list of firms with those identified 

as the top bankruptcy firms in the United States by two bankruptcy 

research websites, the University of California Los Angeles’ (UCLALoPucki) Bankruptcy Research Database and New Generations 

(BankrutpcyData.com).11 Firms were not excluded if they did not appear 

on these lists, but we added several major firms that did not appear on 

our original list. See table 3 for a list of the 14 firms from which we 

interviewed attorneys. Each of the firms represented companies in at 

least one 2013 guidelines case.12 In 4 of the 14 interviews we conducted, 

more than one attorney participated in the interview. However, because 

the opinions offered by attorneys in each of these individual interviews did 

not conflict or contradict one another, we counted each interview as one 

and refer to this group of stakeholders as 14 attorneys throughout this 

report.

11These sites were recommended to us by bankruptcy experts as reliable sources of 

information on large bankruptcy cases.

12Although we selected firms based on their role as debtor’s counsel in at least one 2013 

guidelines case, many firms also had experience representing debtors, creditors, or others 

in large Chapter 11 cases.

Page 36 GAO-15-839 Corporate Bankruptcy

 
Appendix I: Objectives, Scope, and 

Methodology

Table 3: Law Firms from Which Attorneys Were Selected for Interviews

Law firm

1 Akin, Gump, Strauss, Hauer & Feld 

2 Dechert 

3 DLA Piper

4 Gordon Silver

5 Hunton & Williams

6 K&L Gates

7 Kirkland & Ellis

8 Latham Watkins

9 Nixon Peabody

10 Norton Rose Fulbright 

11 Squire Patton Boggs

12 Proskauer Rose

13 Skadden, Arps, Slate, Meagher & Flom

14 Stroock & Stroock & Lavan

Source: GAO. | GAO 15-839

We asked all three groups about their general opinions of the 2013 

guidelines and their opinions regarding the effects or potential effects, if 

any, of the 2013 guidelines on efficiency, transparency, or the 

professional fees awarded in Chapter 11 cases. We focused on these 

three aspects because two of the goals of the 2013 guidelines are to 

increase the transparency and efficiency of the fee review process, and, 

as discussed earlier in this report, EOUST officials reported that concerns 

about professional fees in large cases such as Lehman Brothers provided 

the impetus for developing the new guidelines. While we did ask 

stakeholders to identify any provisions they believed were likely to have 

an effect or to have no effect, we did not specifically ask stakeholders 

about their opinions on each provision of the 2013 guidelines.13 We also 

asked all three groups about the extent to which the provisions of the 

guidelines were observed by attorneys in fee applications submitted for 

guidelines cases.

13Not all stakeholders commented on the guidelines’ effect on the three specific aspects 

we identified, and not all stakeholders commented on each provision of the guidelines. 

Page 37 GAO-15-839 Corporate Bankruptcy

 
Appendix I: Objectives, Scope, and 

Methodology

In addition, we asked judges and attorneys their opinions on the factors 

that contribute to venue selection and the effects, if any, of the 

concentration of cases in the SDNY and Delaware. Because the AUSTs 

do not have a role in venue selection, we did not ask them questions 

related to venue selection. We asked attorneys and judges for their 

opinion on specific venue selection factors. For example, we asked 

attorneys and judges about the degree to which the following factors to 

contribute to venue selection: (1) judge experience, (2) court 

administrative capacity, (3) prior court rulings, and (4) perceptions of court 

attitudes on professional fees. Because of the semistructured nature of 

the interviews, stakeholders responded to these factors and also 

independently offered additional factors. Additionally, responses may total 

more than 100 percent because stakeholders offered both positive and 

negative opinions in response to certain questions. The semistructured 

interviews were conducted by telephone from February 2015 through May 

2015. We then performed a qualitative content analysis of these 

interviews to identify common themes and the frequency with which 

certain issues were raised. To ensure intercoder reliability, three analysts 

jointly developed a coding structure that was then used to independently 

code the interviews. This process was reviewed by a GAO methodologist, 

and all coding was reviewed by another analyst. Any discrepancies were 

discussed and resolved jointly by the analysts responsible for coding the 

interviews.

We conducted this performance audit from November 2014 to September

2015 in accordance with generally accepted government auditing 

standards. Those standards require that we plan and perform the audit to 

obtain sufficient, appropriate evidence to provide a reasonable basis for 

our findings and conclusions based on our audit objectives. We believe 

that the evidence obtained provides a reasonable basis for our findings 

and conclusions based on our audit objectives.

Page 38 GAO-15-839 Corporate Bankruptcy
Appendix II: Executive Office for U.S. Trustees 

2013 Fee Guidelines for Attorneys in Larger 

Chapter 11 Cases: Summary of Material 

Differences From 1996 Guidelines

The following items represent provisions of the U.S. Trustee Program’s 

(USTP) 2013 fee guidelines that were not included in the USTP’s 1996 

fee guidelines. Each entry refers to a particular provision of the 2013 

guidelines, and includes a brief description of the provision’s primary 

purpose or criteria.

1. Customary and Comparable Compensation Disclosures

• Disclose firm’s nonbankruptcy blended hourly rates by category of 

timekeeper

• Limited “safe harbor” from USTP objection

2. Budgets and Staffing Plans

• By consent or court order

• Hours and fees per task code; no narrative or description

• Disclosed with fee application

• If fee application exceeds budget by 10 percent, explain why

3. Electronic Billing Data

• Provide billing data as maintained by firm to court, USTP, and 

major parties; other parties on request

• Virtually all firms and clients use LEDES (legal electronic data 

exchange standard) data (LEDES.org)

4. Client and Applicant Statements

• Applicant with retention application

• Client with retention application (verified)

• Applicant with fee application

5. Rate Increase Disclosures and Calculations

• Questions on disclosure and approval of rate increases in 

applicant statement (4 above)

• Disclose initial rate and current rate for each timekeeper

• Disclose number of rate increases since case inception for each 

timekeeper

• Calculate total compensation requested with and without rate 

increases

Appendix II: Executive Office for U.S. 

Trustees 2013 Fee Guidelines for Attorneys 

in Larger Chapter 11 Cases: Summary of 

Material Differences From 1996 Guidelines

Page 39 GAO-15-839 Corporate Bankruptcy
Appendix II: Executive Office for U.S. Trustees 

2013 Fee Guidelines for Attorneys in Larger 

Chapter 11 Cases: Summary of Material 

Differences From 1996 Guidelines

6. Efficiency Co-Counsel Retention and Billing Guidance

• Encouraged for routine work at lower cost

• Compare billing rates and terms with lead counsel; demonstrate 

projected savings to estate

• Avoid duplication

7. Fee Examiner and Fee Committee Models

• Three models

1. Fee examiner (not § 1104)

2. Fee committee with independent chair

3. Fee committee

• Experienced bankruptcy professional

1. Not a prohibited special master; court must still adjudicate 

issues and award fees

2. More than fee auditor focused solely on numbers

8. Five Model Forms (Portable Document Format [PDF]) fillable 

model forms will be available on USTP website)

• Exhibit A: Customary and Comparable Compensation Disclosures

• Exhibit B: Summary of Timekeepers Included in this Application

• Exhibit C: Budget and Staffing Plan

• Exhibit D: Summary of Compensation by Project Category

• Exhibit E: Summary Cover Sheet of Fee Application

Page 40 GAO-15-839 Corporate Bankruptcy
Appendix III: Basis for Venue Selection in 

Cases Subject to the U.S. Trustee Program’s 

2013 Guidelines

From November 2013 through March 2015, 94 Chapter 11 bankruptcy 

cases met the U.S. Trustee Program’s 2013 guidelines’ thresholds of 

assets and liabilities each of $50 million or more (guidelines cases). A 

company may choose the court, or venue, in which to file its case on the 

basis of where the company is domiciled, which has been interpreted as 

the company’s place of incorporation, or where it maintains its residence 

or principal place of business (headquarters) or assets.1 For example, 

one guidelines case involves a telecommunications holding company that 

is headquartered in Virginia and maintains its principal assets in three 

New York financial institutions. A company may also file in a court where 

an affiliate, such as a franchise or dealership related to the parent 

company, has already a Chapter 11 bankruptcy case pending (known as 

the affiliate filing rule). We reviewed 91 of the 94 guidelines cases and 

found that 63 percent (57 of 91) were filed in a venue that differed from 

their headquarters location (see table 4 below).2 To identify the provisions 

companies used as the basis for selecting the venue in which to file their 

case, we reviewed the initial bankruptcy filing petitions for each of the 91 

cases included in our analysis.3 We also reviewed first day declarations, 

and, as necessary, filings with the Securities and Exchange Commission 

or state secretary of state offices to identify the place of incorporation and 

headquarters location for each guidelines case.

1

In re Segno Communications, Inc., 264 B.R. 501, 506 (Bankr. N.D. Ill. 2001).

2

The remaining 3 cases were filed by individuals and were excluded from our analysis 

because individuals generally may not avail themselves of the same choices in venue as 

are available to companies.

3

Companies disclose the basis for their venue choice by checking one or more of three 

boxes listed on the filing petition. A company checks the first box if its venue choice is 

based on domicile, residence, principal place of business, or principal place of assets. A 

company may be domiciled in its place of incorporation. The second box is checked if the 

company has an affiliate or partner that has filed for bankruptcy in the jurisdiction. Finally, 

the third box involves foreign proceedings.

Appendix III: Basis for Venue Selection in 

Cases Subject to the U.S. Trustee Program’s 

2013 Guidelines

Page 41 GAO-15-839 Corporate Bankruptcy

 
Appendix III: Basis for Venue Selection in 

Cases Subject to the U.S. Trustee Program’s 

2013 Guidelines

Table 4: Guidelines Cases Filed by Companies Both within and outside Company 

Headquarters Location

Bankruptcy Court filing 

location

Number of 

guidelines cases 

filed by 

companies 

November 2013 -

March 2015

Cases with 

headquarters

address in filing 

location

Cases with 

headquarters 

address outside 

filing location

Central District of California 1 1 0

District of Arizona 1 1 0

District of Delaware 46 0 46

District of Massachusetts 1 1 0

District of Nevada 1 0 1

District of New Hampshire 1 1 0

District of New Jersey 3 2 1

District of Oregon 1 1 0

District of Utah 1 0 1

Eastern District of Kentucky 1 1 0

Eastern District of Virginia 2 2 0

Middle District of Florida 1 1 0

Northern District of Illinois 3 2 1

Northern District of Texas 2 2 0

Southern District of Florida 1 1 0

Southern District of Mississippi 2 2 0

Southern District of New York 14 9 5

Southern District of Texas 6 5 1

Western District of Michigan 1 1 0

Western District of Oklahoma 1 1 0

Western District of Texas 1 0 1

Total 91 34 57

37% 63%

Source: GAO analysis of 2013 guidelines cases. | GAO 15-839

Note: Chapter 11 cases filed by individuals were excluded from this analysis because individuals 

generally may not avail themselves of the same choices in venue as are available to companies.

As shown in table 4, 57 of the 91 cases that were filed by companies 

through March 2015 filed in venues outside the company’s stated 

headquarters location. Of the options available to them under the 

Page 42 GAO-15-839 Corporate Bankruptcy
Appendix III: Basis for Venue Selection in 

Cases Subject to the U.S. Trustee Program’s 

2013 Guidelines

Bankruptcy Code, companies in 31 of the 57 cases relied on place of 

incorporation as the primary basis to select their filing location (see fig. 6). 

All but 2 of these cases were filed in Delaware.4 Additionally, 8 relied on 

the affiliate filing rule, and 3 used principal place of assets as the basis for 

venue selection.5 In 12 cases filed outside of the headquarters location, 

data provided by the companies indicated that both place of incorporation 

and the affiliate filing rule were the bases for venue selection.

Figure 6: Basis for Venue Selection for Companies Filing Cases outside their

Headquarters Location

4

In 2 cases, a company filed for Chapter 11 bankruptcy in the state in which its 

headquarters was located, but in a different jurisdiction within that state. For example, a 

company headquartered in Saratoga County, New York, which is located in the Northern 

District of New York, filed for Chapter 11 bankruptcy in the SDNY.

5

Data indicate that in 1 case, both principal place of assets and affiliate filing were used as 

the bases for selecting a venue outside of the company’s headquarters location. We were 

unable to determine the basis for venue selection in 2 cases in which companies filed 

outside of their headquarters location. 

Page 43 GAO-15-839 Corporate Bankruptcy

 
Appendix III: Basis for Venue Selection in 

Cases Subject to the U.S. Trustee Program’s 

2013 Guidelines

As shown in table 4, 34 of the 91 guidelines cases filed by companies 

through March 2014 filed in the same venue as their stated headquarters 

location. Our analysis, as shown in figure 7, found that companies in 23 of 

the 34 cases relied on principal place of business or residence, and 

another 9 relied on both principal place of business or residence and the 

affiliate filing rule as the reason for selecting their headquarters venue.6

Figure 7: Basis for Venue Selection for Companies Filing Cases within their 

Headquarters Location

6

Two companies that filed for bankruptcy in courts within their headquarters location 

marked only the affiliate filing provision on the bankruptcy petition as their basis for venue 

selection. However, a review of the first day declarations for the companies found that, in 

both cases, the headquarters location was also within the filing venue.

Page 44 GAO-15-839 Corporate Bankruptcy

 
Appendix IV: Comments from the Department Appendix IV: Comments of Justice from the 

Department of Justice

Page 45 GAO-15-839 Corporate Bankruptcy
Appendix IV: Comments from the Department 

of Justice

Page 46 GAO-15-839 Corporate Bankruptcy
Appendix IV: Comments from the Department 

of Justice

Page 47 GAO-15-839 Corporate Bankruptcy
Appendix V: GAO Contact and Staff 

Acknowledgments

David C. Maurer, (202) 512-9627 or maurerd@gao.gov

In addition to the contact named above, Adam Hoffman (Assistant 

Director), Bethany Benitez, Michele Fejfar, Elizabeth Kowalewski, Monica 

Savoy, and Sarah Turpin made significant contributions to this report. 

Also contributing to this report were Dominick Dale, Eric Hauswirth, Jean 

Orland, Michelle Su, and Wade Tanner.

Appendix V: GAO Contact and Staff 

Acknowledgments

GAO Contact

Staff 

Acknowledgments

(441252) Page 48 GAO-15-839 Corporate Bankruptcy
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