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UNITED STATES TRUSTEE PROGRAM: 

WATCHDOG OR ATTACK DOG? 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

COMMERCIAL AND ADMINISTRATIVE LAW 

OF THE

COMMITTEE ON THE JUDICIARY 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TENTH CONGRESS 

FIRST SESSION 

OCTOBER 2, 2007 

Serial No. 110–161 

Printed for the use of the Committee on the Judiciary 

( 

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

(II) 

COMMITTEE ON THE JUDICIARY 

JOHN CONYERS, JR., Michigan, Chairman 

HOWARD L. BERMAN, California 

RICK BOUCHER, Virginia 

JERROLD NADLER, New York 

ROBERT C. ‘‘BOBBY’’ SCOTT, Virginia 

MELVIN L. WATT, North Carolina 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

MAXINE WATERS, California 

WILLIAM D. DELAHUNT, Massachusetts 

ROBERT WEXLER, Florida 

LINDA T. SA ́ NCHEZ, California 

STEVE COHEN, Tennessee 

HANK JOHNSON, Georgia 

BETTY SUTTON, Ohio 

LUIS V. GUTIERREZ, Illinois 

BRAD SHERMAN, California 

TAMMY BALDWIN, Wisconsin 

ANTHONY D. WEINER, New York 

ADAM B. SCHIFF, California 

ARTUR DAVIS, Alabama 

DEBBIE WASSERMAN SCHULTZ, Florida 

KEITH ELLISON, Minnesota 

LAMAR SMITH, Texas 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

HOWARD COBLE, North Carolina 

ELTON GALLEGLY, California 

BOB GOODLATTE, Virginia 

STEVE CHABOT, Ohio 

DANIEL E. LUNGREN, California 

CHRIS CANNON, Utah 

RIC KELLER, Florida 

DARRELL ISSA, California 

MIKE PENCE, Indiana 

J. RANDY FORBES, Virginia 

STEVE KING, Iowa 

TOM FEENEY, Florida 

TRENT FRANKS, Arizona 

LOUIE GOHMERT, Texas 

JIM JORDAN, Ohio 

PERRY APELBAUM, Staff Director and Chief Counsel 

JOSEPH GIBSON, Minority Chief Counsel 

SUBCOMMITTEE ON COMMERCIAL AND ADMINISTRATIVE LAW

LINDA T. SA ́ NCHEZ, California, Chairwoman 

JOHN CONYERS, JR., Michigan 

HANK JOHNSON, Georgia 

ZOE LOFGREN, California 

WILLIAM D. DELAHUNT, Massachusetts 

MELVIN L. WATT, North Carolina 

STEVE COHEN, Tennessee 

CHRIS CANNON, Utah 

JIM JORDAN, Ohio 

RIC KELLER, Florida 

TOM FEENEY, Florida 

TRENT FRANKS, Arizona 

MICHONE JOHNSON, Chief Counsel 

DANIEL FLORES, Minority Counsel 

(III) 

C O N T E N T S 

OCTOBER 2, 2007 

Page 

OPENING STATEMENT 

The Honorable Linda T. Sa ́nchez, a Representative in Congress from the 

State of California, and Chairwoman, Subcommittee on Commercial and 

Administrative Law ............................................................................................. 1 

The Honorable Chris Cannon, a Representative in Congress from the State 

of Utah, and Ranking Member, Subcommittee on Commercial and Administrative Law ........................................................................................................... 2 

WITNESSES 

Mr. Clifford J. White, III, Director, Executive Office for United States Trustees, United States Department of Justice, Washington, DC 

Oral Testimony ..................................................................................................... 4 

Prepared Statement ............................................................................................. 6 

The Honorable A. Jay Cristol, Judge, United States Bankruptcy Court, Southern District of Florida, Miami, FL 

Oral Testimony ..................................................................................................... 15 

Prepared Statement ............................................................................................. 17 

Mary Powers, Esquire, former United States Trustee Program Trial Attorney, 

Amherst, NY 

Oral Testimony ..................................................................................................... 93 

Prepared Statement ............................................................................................. 94 

The Honorable Eugene R. Wedoff, Judge, United States Bankruptcy Court, 

Northern District of Illinois, Chicago, IL 

Oral Testimony ..................................................................................................... 96 

Prepared Statement ............................................................................................. 99 

Paul M. Uyehara, Esquire, Community Legal Services Language Access 

Project, Philadelphia, PA 

Oral Testimony ..................................................................................................... 104 

Prepared Statement ............................................................................................. 106 

APPENDIX 

MATERIAL SUBMITTED FOR THE HEARING RECORD

Response to Questions submitted by the Honorable Linda T. Sa ́nchez, Chairperson, Subcommittee on Commercial and Adminsitrative Law to Clifford 

J. White, III, Director, Executive Office for United States Trustees, United 

States Department of Justice .............................................................................. 186 

(1) 

UNITED STATES TRUSTEE PROGRAM: 

WATCHDOG OR ATTACK DOG? 

TUESDAY, OCTOBER 2, 2007 

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON COMMERCIAL

AND ADMINISTRATIVE LAW, 

COMMITTEE ON THE JUDICIARY, 

Washington, DC. 

The Subcommittee met, pursuant to notice, at 1:06 p.m., in room 

2237, Rayburn House Office Building, the Honorable Linda 

Sa ́nchez (Chairwoman of the Subcommittee) presiding. 

Present: Representatives Sa ́nchez, Johnson, and Cannon. 

Staff present: Susan Jensen, Majority Counsel; Stewart Jeffries, 

Minority Counsel; and Adam Russell, Majority Professional Staff 

Member. 

Ms. SA ́ NCHEZ. This hearing of the Committee on the Judiciary, 

Subcommittee on Commercial and Administrative Law, will now 

come to order. 

I will recognize myself for a short statement. 

This past May, the Subcommittee conducted an oversight hearing 

focusing on the implementation of the 2005 amendments to the 

bankruptcy code. Critics noted that these so-called reforms were 

particularly problematic with respect to how they impacted consumer debtors. 

Bankruptcy, which once served as a safety net for the honest, but 

unfortunate, debtor is now a minefield, as exemplified by the 2005 

amendment’s new means testing and credit counseling requirement. 

To satisfy the means test, a chapter 7 debtor must now complete 

official Form 22, consisting of 57 sections. This complex form requires the debtor to supply extensive financial information and 

supporting documentation. 

And even the GAO found that while credit counseling was generally a useful tool, there were several shortcomings regarding the 

implementation of the credit or counseling requirement. 

We are putting people through a bureaucratic maze while they 

are trying desperately to regain their financial footing. This is why 

Congressman Brad Miller and I, as part of our legislation to address the subprime mortgage crisis, included provisions alleviating 

some of these barriers to the bankruptcy process. 

As highlighted at our hearing in May and subsequently underscored at a hearing in the Subcommittee held last month, recent 

2 

developments in the subprime mortgage industry have brought to 

light additional problems. 

After being lured into easy mortgage refinancing arrangements 

with teaser interest rates, more and more American homeowners 

find that they are unable to make their monthly mortgage payments. As a result, many attempt to enter into bankruptcy to avoid 

losing their homes to foreclosure. 

However, the new rules prevent many of them from doing so because of the difficulty in navigating the bankruptcy process. 

According to a recent survey of bankruptcy attorneys by the National Association of Consumer Bankruptcy Attorneys, 81 percent 

agreed that it is more difficult for people facing foreclosure to obtain bankruptcy relief since the 2005 amendments were enacted. 

There may yet be another contributing factor to the problems 

presented by the 2005 amendments. Earlier this year, the Appropriations Committee expressed concern that the United States 

Trustee Program is expending excessive resources to dismiss consumer bankruptcy cases for insignificant filing defects and that as 

a result of these efforts, the program was imposing additional burdens on the judicial system and debtors. 

The Committee also asserted that the program was making burdensome requests for debtors to provide documentation that has no 

material effect on the outcome of bankruptcy cases. Such actions, 

according to the Appropriations Committee, are making the bankruptcy process more costly and, therefore, less available for those 

who truly need it. 

More importantly, the Committee recommended reducing the 

program’s appropriations by approximately $30 million. These are 

very serious allegations by the Appropriations Committee, particularly in light of the fact that it plays a primary role in controlling 

the program’s purse strings. 

In an effort to help us get to the bottom of these allegations, I 

sent a series of questions to the Executive Office for United States 

Trustee last August. Copies of those questions and the answers, 

which were received yesterday evening, are included in your hearing materials. 

It is my hope that today’s hearing provides an opportunity for us 

to get to the bottom of these allegations. As you know, the Commercial and Administrative Law Subcommittee has primary jurisdiction for the program. 

Accordingly, if there are any legislative reforms that we conclude 

are necessary as a result of today’s hearing, I intend to recommend 

them to the full Judiciary Committee for consideration. 

I very much look forward to today’s hearing and to receiving testimony from all of our witnesses. 

At this time, I would now like to recognize my colleague, Mr. 

Cannon, the distinguished Ranking Member of the Subcommittee, 

for his opening remarks. 

Mr. CANNON. Thank you, Madam Chair. I would like to submit 

my full written statement for the record, but make a couple of comments at the outset. 

In the first place, we have talked in many of these hearings 

about how bankruptcy is complex, the fact that it is a maze, or can 

3 

be characterized as a maze, for a debtor is not inappropriate, given 

the benefits that come out of the process. 

The question of our Committee is are we making reasonable requirements and how is that being implemented. It was my policy, 

as Chairman of this Committee, and it continues to be my policy 

in support of the Chair of this Committee, to assert our jurisdiction 

directly, and I think the nature of the Appropriations Committee 

and their actions, whatever they may be, are not well founded, because they don’t have the understanding of the program that this 

Committee has. 

So I find their conclusions remarkably unpersuasive and, to the 

degree they have drawn conclusions and wielded the political bat 

of an appropriation process, is not very meaningful to me and, in 

fact, I hope that what we do here is push back with clarity. 

And that doesn’t mean that I am taking any side on this issue, 

and we have worked very hard to come to a balance in the Reform 

Act, and I want to know if those things work. 

We had questions on both sides of the aisle, bipartisan, and it 

is complex. And so I think the point is what is working and what 

is not working and how do we make it better. And to the degree 

that the appropriators disagree, let’s help them get educated on the 

issue. 

Thank you, Madam Chair. I yield back. 

Ms. SA ́ NCHEZ. I thank the gentleman for his opening statement. 

Without objection, other Members’ opening statements will be included in the record. 

Without objection, the Chair will be authorized to declare a recess of the hearing at any point. 

I am now pleased to introduce the witnesses for today’s hearing. 

Our first witness is Clifford White, III. Mr. White is the director 

of the Executive Office for United States Trustees. He has served 

in the Federal Government for 27 years, including previous service 

as an assistant United States Trustee and a deputy assistant attorney general within the Department of Justice, and as assistant 

general counsel at the U.S. Office of Personnel Management. 

Mr. White was recognized with a Presidential Rank Award for 

Meritorious Executive in 2006 and the Attorney General’s Award 

for Distinguished Service in 2003. 

Welcome, Mr. White. 

Our second witness is the Honorable Jay Cristol. In 1985, after 

25 years of law practice, Judge Cristol left his position as senior 

partner in a firm he founded to accept an appointment to the Federal bench. He serves as chief judge emeritus in the southern district of Florida. 

Prior to his appointment, he served as Special Assistant Attorney 

General of Florida during the 1959, 1961, 1963 and 1965 sessions 

of the Florida legislature. Judge Cristol is an adjunct professor, 

teaching at the University of Miami School of Law. 

Welcome to you. 

Our third witness is the Honorable Eugene Wedoff. Judge Wedoff 

was appointed for a 14-year term of office and continues to serve 

the bankruptcy court of the northern district of Illinois. He is the 

co-chair of the American Bankruptcy Institute’s Consumer BankVerDate Aug 31 2005 11:53 Feb 27, 2009 Jkt 000000 PO 00000 Frm 00007 Fmt 6633 Sfmt 6601 H:\WORK\COMM\100207\38113.000 HJUD1 PsN: 38113
4 

ruptcy Committee and the associate editor of the American Bankruptcy Law Journal. 

We want to welcome you. 

Our fourth witness is Paul Uyehara. Mr. Uyehara is a senior 

staff attorney in the Language Access Project of Community Legal 

Services, Incorporated of Philadelphia, where he focused on language rights advocacy, improving program accessibility for language minority clients and representing limited English proficient 

clients with consumer problems, particularly mortgage foreclosure 

and bankruptcies. 

Mr. Uyehara has over 25 years of experience at Philadelphia 

Legal Assistance, CLS and Delaware County Legal Assistance, 

both as a paralegal and a lawyer. Mr. Uyehara also worked as an 

assistant city solicitor for the city of Philadelphia and a law clerk 

in the Federal district court. 

Thank you for being here. 

Our final witness is Mary Powers, the rose among our panel. Ms. 

Powers is a former trial attorney for the Department of Justice, Office of the United States Trustee. In that capacity, she reviewed 

cases for bankruptcy fraud and abuse, drafted motions, pleas and 

briefs in connection with presentation and litigation of cases under 

the bankruptcy code and conducted hearings and trials. 

Prior to that position, Ms. Powers was in private practice, representing debtors, creditors and credit committees in all aspects of 

bankruptcy proceedings. 

Thank you all for your willingness to participate in today’s hearing. Without objection, your written statements will be included in 

their entirety into the record. So we are going to ask that you limit 

your oral statements to 5 minutes. 

You will note that we have a lighting system. When your time 

begins, the light will turn green. When you are 4 minutes into your 

testimony, the light will turn yellow as a warning that you have 

a minute to wrap up your testimony and, at the end of the 5 minutes, the light will turn red, warning you that your time has expired. 

If you are mid-sentence when your light turns red, please feel 

free to complete your final thought, so that we may move on to our 

next witness. 

After each witness has had an opportunity to present his or her 

testimony, Members of the Subcommittee will be permitted to ask 

questions, subject to the 5-minute limit. 

So with the ground rules underway, I am going to invite Mr. 

White to begin. 

TESTIMONY OF CLIFFORD J. WHITE, III, DIRECTOR, EXECUTIVE OFFICE FOR UNITED STATES TRUSTEES, UNITED 

STATES DEPARTMENT OF JUSTICE, WASHINGTON, DC 

Mr. WHITE. Thank you, Madam Chairwoman, Ranking Member 

Cannon, Members of the Subcommittee. I thank you for the opportunity to discuss the activities of the U.S. Trustee Program. 

We are the component of the Justice Department with the responsibility, with the mission, of both the integrity and the efficiency of the bankruptcy system. Over the past 2 years, our focus 

has been on implementing substantial new responsibilities given to 

5 

the program by the Congress under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. 

In performing our duties, we are guided by a simple principle— 

to faithfully carry out the law, as written by the Congress, and to 

do so with prudence, with discretion and with sound legal judgment. 

We balance many factors in every case. We vigorously enforce the 

law, but we recognize that not every technical violation merits an 

enforcement action. We work to combat fraud and abuse committed 

by debtors, as well as violations committed against debtors who are 

vulnerable to exploitation because of their financial situation. 

One of our major challenges is the litigation of issues of first impression. It is our duty to clarify the many new and sometimes 

complex provisions of BAPCPA by bringing issues before the bankruptcy and the appellate courts to promote the coherent, the uniform and the prompt development of case law. 

Another important and continuing part of our strategy that 

makes the new law work effectively has been an enormous outreach effort with other constituencies in the bankruptcy system. 

We have regularly consulted with Government agencies, consumer 

advocates and debtor bar, creditor organizations, private trustees, 

the courts and others to gain a broader perspective on our new duties. 

Objective evidence demonstrates that we are achieving our mission and this is due to the extraordinary efforts of the staff of the 

U.S. Trustee Programs around the country. 

My testimony outlines our activity in a number of areas. Let me 

now, if I may, highlight just three here. 

First, means testing. BAPCPA requires means testing to determine if debtors with incomes above their State median have sufficient disposable income to repay all or part of their debt. Chapter 

7 cases of those who have the ability to repay are deemed or presumed abusive. 

The U.S. Trustee is required to file a statement indicating if a 

case is presumed abusive and, if it is, then we must file a motion 

to dismiss or an explanation of why we are not filing a motion. 

Data compiled thus far show that only about 9 percent of chapter 

7 debtors are subject to the complete means test. Of those, only 

about one out of ten is presumed abusive under the statutory formula. 

Significantly, the U.S. Trustee declines to file a motion to dismiss 

in about 30 percent of all presumed abuse cases that don’t voluntarily convert or dismiss. Reasons for declination include loss of 

employment or continuing high medical expenses, among other reasons, and we prevail in 97 percent of the cases in which we seek 

dismissal. 

Thus, the U.S. Trustee Program, I would suggest, has successfully enforced the new means testing law, but has done so with discretion and with restraint. 

Second, the new law requires the U.S. Trustees to approve qualified credit counselors who are authorized to issue certificates that 

debtors must obtain prior to filing for bankruptcy. 

As confirmed in a report issued last April by the Government Accountability Office, the U.S. Trustee Program has put into place an 

6 

1The USTP has jurisdiction in all judicial districts except those in Alabama and North Carolina. In addition to specific statutory duties and responsibilities, United States Trustees ‘‘may 

raise and may appear and be heard on any issue in any case or proceeding under this title but 

may not file a plan pursuant to section 1121(c) of this title.’’ 11 U.S.C. § 307. 

effective mechanism to screen applicants to ensure that only qualified counseling agencies are approved. Those agencies have adequate capacity to serve debtors in a timely fashion, and they waive 

or they reduce the standard $50 fee in about one out of every three 

cases. 

In addition, we are making much progress in serving limited 

English proficient debtors. Credit counseling services are available 

in about 150 languages by telephone and in many languages at 

more than 350 in-person locations. 

Third, in chapter 11 cases, we also have new responsibilities in 

many areas that are designed to enhance the accountability of 

management of bankrupt companies. Among other things, we enforce the new section 503(c), which restricts the ability of companies to pay bonuses to senior executives through key employee retention plans. 

Through the beginning of August, we filed approximately 40 objections to executive bonus plans and have prevailed in almost 70 

percent of these cases. In addition, we have successfully negotiated 

with debtors and modified compensation schemes to avoid an objection even before the bonus plan is filed. 

The U.S. Trustee Program, we suggest, has compiled a substantial record of accomplishment. Compliance with the new law has 

presented significant challenges to the U.S. Trustees, to debtors, to 

creditors, attorneys and others. 

The entire bankruptcy system is in a time of transition. The program will continue its efforts to work cooperatively with all components of the system to satisfy our obligations to enforce and implement the law with fairness, with efficiency and effectiveness, for 

the benefit of all stakeholders. 

I would be happy to answer any questions you may have. 

[The prepared statement of Mr. White follows:] 

PREPARED STATEMENT OF CLIFFORD J. WHITE, III 

Madam Chairman, Ranking Member Cannon, and Members of the Subcommittee: 

Thank you for the opportunity to appear before you today to discuss the activities 

of the United States Trustee Program (USTP or Program). We are the component 

of the United States Department of Justice whose mission it is to promote the integrity and efficiency of the bankruptcy system.1 Our duties, which are set out primarily in titles 11 and 28 of the United States Code, range from consumer bankruptcy cases to large corporate reorganizations. 

Over the past two years, our focus necessarily has been on implementing the substantial new responsibilities given to the Program by the Congress in the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA). We are 

now responsible, for example, for conducting a more transparent and objective test 

to determine a consumer debtor’s eligibility for chapter 7 relief, scrutinizing applications by credit counselors and debtor educators to ensure that only qualified providers are approved to offer these services to debtors, supervising audits of chapters 

7 and 13 cases, and enforcing new provisions to hold corporate managers more accountable after their companies file for bankruptcy relief. These have been daunting 

tasks, but objective evidence suggests that we are meeting the challenges. We understand that our work to effectuate the BAPCPA is far from over, and every day 

we strive to refine our efforts and to improve upon our performance for the benefit 

of all stakeholders in the bankruptcy system. 

7 

In carrying out the BAPCPA and other statutory mandates, the Program is guided by a simple principle: to faithfully carry out the law as written by Congress, and 

to do so with prudence, discretion, and sound legal judgment. We balance many factors in every case and, while we vigorously enforce the law, we recognize that not 

every technical violation merits an enforcement action. Further, we work to combat 

both fraud and abuse committed by debtors, as well as violations committed against 

debtors who are vulnerable to exploitation because of their financial situation. 

One of the major challenges we have faced has been the litigation of numerous 

cases on issues of first impression. It is our duty to help clarify the many new and 

complex provisions of the BAPCPA by bringing issues before the bankruptcy and appellate courts to promote the coherent, uniform, and prompt development of case 

law. 

The Program’s success in fulfilling the broad responsibilities assigned to it in the 

BAPCPA is a result of the extraordinary efforts of staff in the Executive Office and 

in our field offices. Prior to the effective date of the BAPCPA, teams of employees 

from around the country were assembled to develop policies and procedures to ensure the effective and efficient implementation of the new law. These teams also 

conducted comprehensive training for all employees in the Program, as well as for 

the private trustees and members of the bar. As we retooled our internal operations, 

we engaged in an enormous outreach effort with other constituencies in the bankruptcy system. We have regularly consulted with government agencies, the consumer bar, consumer advocates, creditor organizations, the courts, and others to 

gain a broader perspective on our new duties. Both internal analyses and external 

outreach are a continuing part of our strategy to enhance our ability to make the 

BAPCPA work for all stakeholders in the bankruptcy system. 

The following highlights some of the most significant activities of the Program 

over the past year. 

CIVIL ENFORCEMENT, MEANS TESTING, AND CONSUMER PROTECTION

Civil Enforcement 

One of the core functions of the USTP is to combat bankruptcy fraud and abuse. 

This is reflected both in our statutory mandate and in our track record over the past 

20 years. In launching a Civil Enforcement Initiative in 2002, the Program adopted 

a balanced approach to address wrongdoing both by debtors and by those who exploit debtors. The Program combats fraud and abuse by debtors by seeking denial 

of discharge for the concealment of assets and other violations, by seeking case dismissal if a debtor has an ability to repay debts, and by taking other enforcement 

actions. We protect consumer debtors from wrongdoing by attorneys, bankruptcy petition preparers, creditors, and others by pursuing a variety of remedies, including 

disgorgement of fees, fines, and injunctive relief. 

In the first three quarters of Fiscal Year (FY) 2007, the Program took more than 

55,000 civil enforcement and related actions, including actions not requiring court 

resolution, with a monetary impact of more than $651 million in debts not discharged, fines, penalties, and other relief. Since we began tracking our results in 

2003, we have taken more than 270,000 actions with a monetary impact in excess 

of $3.2 billion. 

Means Testing 

A major new aspect of our civil enforcement efforts is the implementation of the 

means test that was established under the bankruptcy reform law. The new section 

707(b) and other provisions replaced the former subjective ‘‘substantial abuse’’ 

standard with more transparent and objective criteria to determine whether a case 

is ‘‘presumed abusive’’ and potentially subject to dismissal. Under the means test, 

all individual debtors who have above median income are subject to a statutorily 

prescribed formula to determine disposable income. The formula is partially based 

on allowable expense standards issued by the Internal Revenue Service for its use 

in tax collection. The primary purpose of the means test is to help determine eligibility for chapter 7 bankruptcy relief. 

The Judicial Conference of the United States promulgated the official means test 

forms that debtors are required to complete. It is important to note that the means 

test calculation of disposable income applies only to debtors with income above their 

state median level. For more than 90 percent of chapter 7 debtors and nearly threequarters of chapter 13 debtors, the means test is abbreviated to an income calculation without consideration of expenses. 

The BAPCPA requires the United States Trustee to file a statement with the 

court within 10 days after the section 341 meeting of creditors indicating if the case 

is ‘‘presumed abusive’’ under the statutory formula. Within 30 days thereafter in 

8 

‘‘presumed abusive’’ cases, the United States Trustee is required to file either a motion to dismiss or a statement explaining why filing such a motion would not be appropriate. We have endeavored to implement these mandates in a manner that allows us to identify cases of abuse and also to exercise our discretion to ensure that 

dismissal is sought only in meritorious cases. 

Between October 1, 2006, and June 30, 2007, approximately nine percent of chapter 7 debtors had income above their state median. Of those cases filed by above 

median income debtors, approximately 10 percent were ‘‘presumed abusive.’’ However, after consideration of special circumstances, such as a job loss, reduction in 

income, or medical condition, we exercised our statutory discretion to decline to file 

motions in about 30 percent of the ‘‘presumed abusive’’ cases that did not voluntarily convert or dismiss. 

Despite the high rate of declinations, we are filing motions to dismiss at nearly 

three times the rate prior to enactment of the BAPCPA. Notably, the United States 

Trustee has prevailed in nearly 97 percent of the cases that were either adjudicated 

by the bankruptcy court or voluntarily dismissed or converted under the ‘‘presumed 

abuse’’ standard contained in 11 U.S.C. § 707(b)(2). For example, in a recent case 

in the Northern District of Texas, an investigation by the United States Trustee’s 

office revealed that a married couple had under-reported their income by more than 

$5,000 per month and had over-reported their mortgage expense. When the means 

test was adjusted to align with the facts, it reflected that the debtors had over 

$1,000 per month in disposable income, as opposed to the minus $18 they had initially claimed. In response to the United States Trustee’s motion to dismiss, the 

debtors converted their case to chapter 13 and will repay nearly $62,000 to unsecured creditors. 

It is important to note that even if a case is determined not to be ‘‘presumed abusive’’ under the means test calculation, the reform law does not preclude the USTP 

from taking action when it finds it to be abusive under a ‘‘totality of the circumstances’’ or bad faith analysis. The following examples illustrate this point. 

• Despite annual income exceeding $125,000, a debtor in the Western District 

of Washington attempted to discharge $642,181 in unsecured debt in order to 

retain what he described as his $810,000 ‘‘dream home’’ with a $7,200 monthly mortgage payment. Although the case was not ‘‘presumed abusive’’ under 

the means test because his large monthly payments to secured creditors reduced his current monthly income, the United States Trustee successfully argued for dismissal under the totality of the circumstances of the debtor’s financial situation. 

• The United States Trustee obtained case dismissal for bad faith against debtors in the District of Massachusetts who earned nearly $10,000 per month; 

owned real estate valued at almost $1 million; and owned or leased a Jaguar, 

a Mercedes Benz, and a vintage 1965 Mustang. They incurred significant debt 

on numerous credit cards to purchase luxury goods and withdrew large cash 

advances against the cards within one year before filing bankruptcy. The dismissal prevented the chapter 7 discharge of $300,775 in unsecured debt. 

Congress mandated that the Director of the Executive Office report on the impact 

of the use of the IRS standards in the means test calculation. The Program contracted with the RAND Corporation to collect data and to perform related research. 

Based on that research, in July of this year, the Program issued its report to the 

Congress. The most significant finding was that the IRS standards generally allow 

chapter 13 debtors to deduct expenses in an amount above their actual expenses, 

with the greatest advantage realized by above median chapter 13 debtors with lower 

income. The IRS standards allow above median debtors, on average, $490 in expenses above the amount that debtors report they actually spend. As income rises, 

the differential becomes smaller. This means that the IRS standards have a progressive impact on above median debtors, such that those with lower income are treated 

more favorably than those with higher income. Further research using a larger sample size is necessary to determine any long-term trends. Unfortunately, the inability 

to extract data electronically from court forms necessitates the use of manual data 

entry, which makes further research cumbersome and expensive. 

Consumer Protection 

An important component of the Program’s civil enforcement efforts has been to 

protect consumer debtors. These enforcement efforts often involve actions against 

debtors’ counsel, non-attorney bankruptcy petition preparers (BPPs), or other third 

parties. In the first nine months of FY 2007, the Program took 394 formal actions 

against debtors’ counsel and 184 actions against petition preparers. 

9 

Among the most egregious schemes are those perpetrated upon consumers facing 

foreclosure on their homes. In a recent case in the Western District of Pennsylvania, 

the bankruptcy court entered a default judgment against a BPP following an adversary proceeding filed by the Office of the United States Trustee. The out-of-state 

BPP contacted several Pittsburgh area residents faced with foreclosure by mailing 

a postcard which guaranteed the BPP could help them keep their homes. In exchange for fees ranging from $250 to $2,100, the BPP provided the homeowners 

with skeletal chapter 13 petitions to file to stay foreclosure. The debtors’ bankruptcy 

cases were ultimately dismissed. The court fined the BPP $72,000, ordered the 

disgorgement of fees in the amount of $8,200, and permanently enjoined it from acting as a BPP and offering legal advice or otherwise engaging in the unauthorized 

practice of law in the district. 

Regrettably, debtors sometimes are also exploited by their bankruptcy lawyers. In 

a recent case in the District of Rhode Island, the bankruptcy court approved an 

order in which a debtor’s attorney consented to a 36-month suspension from the 

practice of bankruptcy law and agreed to disgorge $2,726 in fees to three former clients. The order resulted from an investigation by the United States Trustee’s Providence office into numerous complaints that the attorney engaged in professional 

malfeasance when handling consumer bankruptcy cases. 

The Program also has a duty to redress violations by creditors, particularly when 

the abuse is systemic or multi-jurisdictional. In many cases, creditor abuse is best 

addressed by the private case trustees we appoint who object to claims, or by debtors’ lawyers who dispute loan agreement terms. But sometimes, the integrity of the 

system as a whole is at stake, and it is important for the Program to take direct 

enforcement action. 

In one ongoing case in the Southern District of Texas involving the conduct of a 

large national mortgage servicer and its counsel, the Program has invested substantial resources. USTP attorneys deposed more than 20 witnesses, reviewed nearly 

10,000 pages of documents, and completed five full days of trial. In another case, 

the bankruptcy court sanctioned the law firm of that same national mortgage 

servicer for making inaccurate representations to the court. In his opinion, the 

bankruptcy judge noted that creditor’s counsel ‘‘complained bitterly about the participation of the U.S. Trustee in this matter.’’ The court concluded, however, that 

the United States Trustee’s participation ‘‘assured presentation of a complete factual 

and legal case’’ and ‘‘provided an invaluable benefit to the case and to the process 

by his professional participation.’’ 

The Program also has been active in enforcing 11 U.S.C. § 363(o), which is a less 

publicized consumer protection measure added under the BAPCPA. Section 363(o) 

prohibits bankrupt lenders from selling loan portfolios or other interests ‘‘free and 

clear’’ of the rights of their customers to assert claims or defenses provided under 

the Truth in Lending Act or other consumer protection laws. The United States 

Trustee’s role to enforce section 363(o) is paramount because consumer borrowers 

may not receive notice of the intended sale of their loans. Even if they receive notice, they may not have the financial means to object to the sale or request the sale 

provisions contain section 363(o) safeguards to preserve their rights. To date, United 

States Trustees have filed pleadings to enforce section 363(o) in at least a dozen 

cases in which bankruptcy sales by lenders did not provide the required and appropriate consumer protection. 

The BAPCPA created 11 U.S.C. §§ 526–528 to protect consumer debtors by regulating the conduct of debt relief agencies (DRA), as defined in the Bankruptcy Code, 

that provide bankruptcy-related services. Approximately 20 cases have raised statutory challenges to the DRA provisions, including challenges to the application of the 

provisions to attorneys, to the requirement that a DRA provide certain written disclosures to consumer debtors, to the constitutionality of the prohibition on advising 

debtors to incur additional debt in contemplation of filing bankruptcy, and to the 

constitutionality of the required disclosure in advertisements touting bankruptcy assistance. 

The Program has worked closely with the Department’s Civil Division, which has 

taken the lead in defending the DRA provisions in cases brought in United States 

bankruptcy and district courts. The majority of these cases have been resolved, with 

several cases being dismissed. Appeals are pending in the Second, Fifth, Eighth, and 

Ninth Circuits, all of which involve constitutional challenges. In addition, arguments on similar issues have been fully briefed in two district court cases. 

CRIMINAL ENFORCEMENT

Criminal enforcement is another key component of the Program’s efforts to uphold 

the integrity of the bankruptcy system. We recently issued our first annual report 

10 

to the Congress on criminal referrals by the Program. We reported that in FY 2006, 

the Program made 925 bankruptcy and bankruptcy-related criminal referrals. We 

are on track to exceed that number for FY 2007. 

Under the leadership of our Criminal Enforcement Unit (CrEU), consisting primarily of career federal prosecutors, we have enhanced the Program’s work in this 

critical area. The CrEU has conducted extensive training for federal prosecutors and 

law enforcement personnel, USTP staff, private trustees, and others; published internal resource documents and a training video for use by Program personnel involved in the criminal referral process; and established a bankruptcy fraud Internet 

‘‘hotline’’ that became operational at the beginning of FY 2007. In addition, approximately 25 of the Program’s attorneys have been cross-designated as Special Assistant United States Attorneys to assist in the prosecution of bankruptcy fraud. 

The following examples demonstrate the wide array of bankruptcy fraud prosecutions that address both debtor fraud and criminal violations by those who exploit 

debtors: 

• On April 13, 2007, in the District of Minnesota, husband and wife debtors 

were convicted on eight counts and nine counts, respectively, including false 

declaration in bankruptcy, concealment of assets, and money laundering. In 

their bankruptcy case, the couple did not disclose their interests in an Individual Retirement Account (IRA) and substantially understated the value of 

their house. When the chapter 7 trustee discovered the IRA, valued at approximately $208,000, the debtors liquidated the asset, cashed the check, and 

concealed the cash from the trustee. After the trustee learned of the true 

value of the debtors’ interest in their house, the house burned down and the 

couple received a check for the insurance proceeds from the loss. The debtors 

cashed the check, which was property of their bankruptcy estate, and carried 

$244,535 in currency from the bank. The insurance proceeds have not been 

recovered by the trustee. The United States Trustee’s Minneapolis office referred the case and assisted in the investigation, and a member of CrEU assisted in the preparation of the indictment. 

• A ‘‘foreclosure rescue’’ operator was sentenced on August 8, 2007, in the District of Arizona to 33 months in prison, fined $5,000, and ordered to pay 

$86,409 in restitution, based on his guilty plea to two counts of false declaration in bankruptcy. The operator sought out individuals who were losing their 

homes to foreclosure and prevailed upon them to transfer their homes to him 

to avoid having a foreclosure on their credit reports. To stay foreclosure, he 

filed bankruptcy petitions in the homeowners’ names without their knowledge. While the cases were pending, he collected rental income on the properties. The United States Trustee’s Phoenix office referred the matter, conducted the investigation, and provided assistance to the United States Attorney’s office. 

CREDIT COUNSELING AND DEBTOR EDUCATION

One of the key elements of the bankruptcy reform law is financial education. Individual debtors must now receive credit counseling prior to filing and education on 

personal financial management prior to discharge. These new requirements are designed to ensure that debtors know what their options are before entering bankruptcy and have the tools to avoid future financial catastrophe when they exit bankruptcy. 

The primary responsibility of the United States Trustees is to approve providers 

who meet statutory qualifications to offer credit counseling and debtor education 

services to debtors. In light of the troubled history of the credit counseling industry, 

our priority was to design an application screening and approval process that would 

protect debtors from unscrupulous providers. We developed our approval and monitoring criteria with assistance from the Internal Revenue Service and the Federal 

Trade Commission. 

There are currently 161 approved credit counseling agencies and 297 approved 

debtor education providers. Approximately 41 percent of all initial credit counseling 

applications and 28 percent of initial debtor education applications were either rejected or withdrawn. In recent months, the Program launched a schedule of on-site 

Quality Service Reviews. This mechanism for post-approval monitoring will permit 

the Program to interview provider staff, review records on-site, and observe counseling sessions. These reviews will strengthen the Program’s efforts to ensure that 

debtors receive quality services from approved providers. 

Approximately 37 percent of debtors receive credit counseling by telephone, 52 

percent by Internet (which also may have a telephone component), and 11 percent 

in person. From October 1, 2006, to June 30, 2007, credit counseling agencies issued 

11 

801,024 counseling certificates. Interestingly, during the first nine months of FY 

2007, approximately 14 percent fewer bankruptcy cases were filed than credit counseling certificates were issued. We will need time series data to determine if this 

difference is probative of the question of whether credit counseling is assisting debtors in identifying alternatives to bankruptcy. 

Another ongoing concern of the Program is the provision of credit counseling and 

debtor education for limited English proficient debtors. The Program has approved 

two national providers that offer interpreter services without charge to their clients 

in more than 150 languages. In addition, other approved national and local providers offer Internet, telephonic, or in-person counseling in a total of 30 languages. 

Approved providers are required to report to the Program on their language capabilities, and the USTP Web site provides information on the language capability of 

all providers on a district-by-district basis. 

The USTP also monitors compliance with the Congressional mandate that approved providers offer services without regard to a debtor’s ability to pay. Available 

information suggests that fees charged for services appear to be reasonable and that 

providers are waiving or reducing fees in appropriate cases. Fees charged by credit 

counseling agencies and debtor education providers generally are about $50. Fees 

are waived by credit counseling agencies in 15 percent of all cases, and are offered 

at a reduced rate in about another 14 percent of the cases. Similarly, debtor education providers are waiving fees in 14 percent of cases and reducing fees in approximately 21 percent of cases. This means that about one out of every three debtors is receiving the required counseling and education services at no cost or at a 

reduced cost. 

In a report issued in April 2007, the Government Accountability Office (GAO) 

credited the Program with developing a comprehensive, timely, and effective process 

for the approval of eligible credit counselors and debtor educators. GAO found few 

issues with the competence, integrity, and performance of providers approved by the 

USTP. Additionally, GAO found that debtors receive services within a reasonable 

time frame and at a reasonable fee that is waived for inability to pay. GAO did 

make two recommendations for further action which the Program endorses. 

• The USTP should ‘‘develop a mechanism that would allow the Program or 

other parties to track outcomes of prefiling credit counseling, including the 

number of individuals issued counseling certificates who then file for bankruptcy.’’ In addition to refining efforts already made in comparing certificates 

with bankruptcy filings, we also will pursue recommendations made in a recent report prepared for the Program by the RAND Corporation. Among others things, RAND recommended that we develop outcome measures based 

upon results from the Quality Service Reviews of approved providers that we 

began to conduct this year. The scope and timeliness of our research may be 

determined, in part, by our level of appropriations in FY 2008. 

• The Program should ‘‘issue formal guidance on what constitutes ‘ability to 

pay’ . . . [and] examine the reasons behind the significant variation among 

providers in waiving fees.’’ We are preparing formal fee waiver guidance in 

a rulemaking which we hope to issue for public comment in the near future. 

We also will collect and analyze data from providers so that we can enhance 

our ability to compare the number of fee waivers granted by providers and 

the criteria they used in making their decisions. 

Section 105 of the BAPCPA requires the Program to develop and evaluate the effectiveness of a financial management training curriculum and materials. After consulting with a wide range of individuals who are experts in the field of debtor education, including chapter 13 trustees, a curriculum was developed and pilot tested. 

The study is nearing completion and a report will be submitted to Congress by the 

end of this calendar year. 

DEBTOR AUDITS

The BAPCPA mandated a new regimen of debtor audits for consumer cases filed 

on or after October 20, 2006. Audits must be conducted in at least one out of every 

250 consumer cases filed in a judicial district, and in cases where income or expenses deviate from a statistical norm. Each audit will verify the accuracy of the 

financial information provided in a debtor’s schedules and statement of financial affairs. The audits are designed to assist the Program in identifying cases of fraud, 

abuse, and error; to enhance deterrence; and to provide baseline data to gauge the 

magnitude of fraud, abuse, and errors in the bankruptcy system. 

In FY 2007, the USTP contracted with six accounting firms to perform the audits. 

By statute, debtors are required to cooperate with the auditors, and a debtor’s discharge may be revoked for failing to adequately explain either a lack of cooperation 

12 

with the auditor or a material misstatement reported by the auditor. Before an 

audit firm reports a material misstatement, it is required to offer the debtor an opportunity to provide a written explanation. The Program also is required to report 

annually to Congress on the results of the audits. 

As of August 31, 2007, 3,344 cases had been selected for audit and 2,575 audits 

had been concluded. There are three potential outcomes for a debtor audit: (1) no 

material misstatements reported, (2) at least one material misstatement reported, 

or (3) issuance of a report of no audit. About 27 percent of the audits concluded thus 

far have identified at least one material misstatement, and an additional 10 percent 

were closed without audit completion generally because the debtor did not respond 

to the audit notification letter, the debtor did not provide a sufficient response to 

the audit firm’s request for information, or the case was dismissed before a sufficient response was received. 

When a debtor audit identifies a material misstatement, the Program reviews the 

case to determine if enforcement action is appropriate. In a recent case in the Eastern District of California, an audit revealed that a debtor had under-reported several bank and financial accounts, and had failed to disclose pre-petition transfers 

to insiders and creditors. Based on these facts, the United States Trustee’s Sacramento office filed a complaint against the debtor, who agreed to forego the discharge of $4.2 million in unsecured debt rather than proceed to trial. 

CHAPTER 11 ISSUES

The Program carries out significant responsibilities in business reorganization 

cases. These responsibilities include such matters as the appointment of official 

committees of creditors and equity security holders, objections to the retention and 

compensation of professionals, the review of disclosure statements, and the appointment of trustees and examiners where warranted. The BAPCPA reformed chapter 

11 practice in many important respects, including the imposition of new deadlines 

for reorganization in small business cases; the USTP appointment of privacy and 

patient care ombudsmen to protect the rights of customers, patients, and other third 

parties affected by chapter 11 cases; and the addition of other requirements to enhance management accountability. Because business reorganization cases often 

raise highly complex questions of law and require sophisticated financial analysis, 

such cases can be time intensive for United States Trustee staff. 

In the first nine months of FY 2007, the Program filed 1,717 motions to convert 

or dismiss chapter 11 cases. The grounds for such motions often involved debtors’ 

failure to file financial reports or debtors’ dissipation of estate assets without a reasonable likelihood of rehabilitation. In addition, the Program filed objections to professional fees in 460 cases and obtained nearly $17 million in fee reductions. An additional $11 million in reductions in 578 cases were obtained through out-of-court 

resolution. It is not possible to calculate other reductions voluntarily taken by professionals on account of USTP scrutiny of compensation applications. 

One recent case illustrates the USTP’s role in the review of professional compensation. In the case of Northwest Airlines in the Southern District of New York, 

debtor’s counsel was paid $35.5 million and requested an additional bonus of $3.5 

million due to ‘‘exceptional results achieved, the quality of work performed and the 

efficiency with which the services were rendered’’ in the case. The Program, along 

with the flight attendants’ union and a former member of the Ad Hoc Committee 

of Certain Claims Holders, objected to the success fee. The United States Trustee 

argued that debtor’s counsel was well compensated at market rates and provided 

no specific evidence of exceptional results that were not adequately compensated by 

such rates. The court ruled that the requirements for a fee enhancement were not 

met and denied the success fee. 

The Program also reviews applications for the retention of professionals to ensure 

compliance with section 327 conflict of interest prohibitions. During FY 2007, three 

courts of appeals upheld objections by the USTP to the proposed retention of professionals who had interests adverse to the estate, were not disinterested, or failed to 

disclose connections that created potential and actual conflicts of interest. 

Another recent case demonstrates the important role of the United States Trustee 

when management does not properly exercise its fiduciary obligations to the estate 

and comply with the law. The United States Trustee’s Brooklyn office sought dismissal of a chapter 11 case due to the debtor’s failure to provide proof of insurance, 

cooperate with the United States Trustee, meet disclosure and financial reporting 

obligations, and otherwise demonstrate an ability to reorganize. On the date the 

debtor filed its bankruptcy petition, it owned an apartment building that had more 

than 1,400 uncorrected housing code violations and was about to be sold through 

a HUD regulatory foreclosure. The United States Trustee’s motion to dismiss the 

13 

case was supported by HUD, the City of New York, and an informal committee of 

tenants. The Bankruptcy Court for the Eastern District of New York dismissed the 

case on September 6, 2007, with a six-month bar to refiling a bankruptcy petition. 

The bar to refiling will allow HUD to proceed with the foreclosure and transfer the 

property to a responsible owner who will cure the housing code violations. 

As noted, the BAPCPA added numerous provisions designed to enhance management accountability and to provide greater protections to creditors, shareholders, 

and the public. For example, Congress added section 1104(e) to the Bankruptcy 

Code, which requires the United States Trustee to seek to oust management if there 

are ‘‘reasonable grounds to suspect’’ that current management participated in fraud, 

dishonesty, or other criminal acts in the debtor’s management or public financial reporting. In addition, corporate debtors are under stricter time deadlines to confirm 

a plan of reorganization. Under new 11 U.S.C. § 503(c), companies are also restricted 

in their ability to pay bonuses to senior executives through Key Employee Retention 

Plans (KERPs). Since enactment of section 503(c) through the beginning of August 

2007, United States Trustees have filed approximately 40 objections to executive 

bonus plans and have been successful in almost 70 percent of these cases. This number does not include additional instances where the United States Trustee persuaded the debtor to modify its compensation scheme to avoid an objection. Moreover, 11 U.S.C. § 1112(b) was amended to lessen the court’s discretion to refuse to 

order conversion of a case to chapter 7 if the debtor is not expeditiously reorganizing 

in accordance with the commands of chapter 11. 

Two cases illustrate our actions to carry out the new chapter 11 provisions: 

• In the New Century TRS Holdings, Inc., subprime mortgage lending case, the 

United States Trustee invoked section 1104(e) and filed a motion for the appointment of a trustee. As grounds, the motion cited New Century’s admitted 

inability to stand behind its SEC financial filings and substantial issues 

about its internal financial controls. While the court acknowledged that the 

United States Trustee had raised serious concerns, the court granted alternative relief by ordering the United States Trustee to appoint an examiner 

to investigate the circumstances surrounding New Century’s inaccurate public 

financial filings. When New Century later acknowledged that it could not 

stand behind its filings for a prior year, the court, at the United States Trustee’s request, expanded the investigation to encompass that year as well. 

• In the case of Malden Mills, the debtor, having failed to rehabilitate its business in a previous chapter 11 case, filed a new petition and immediately 

sought court approval of substantial bonuses for top management and others. 

The bonuses were payable upon the consummation by the debtor of a pre-negotiated sale of assets. Unsecured creditors were to receive nothing in the 

case, and most employees lost their jobs. The United States Trustee objected 

to the excessive bonuses, and the debtor withdrew the bonus proposal. 

PRIVATE TRUSTEE OVERSIGHT

One of the core functions of the United States Trustees is to appoint and supervise the private trustees who administer consumer bankruptcy estates and distribute dividends to creditors. The Program also trains trustees, evaluates their 

overall performance, reviews their financial accounting, and ensures their prompt 

administration of estate assets. 

In the first nine months of FY 2007, approximately 530,000 consumer and other 

non-business reorganization cases were filed under chapters 7, 12, and 13 of the 

Bankruptcy Code in the 88 judicial districts covered by the Program. The United 

States Trustees oversee the activities of the approximately 1,400 private trustees 

appointed by them to handle the day-to-day activities in these cases. With distributions by these trustees of about $7.9 billion last fiscal year, the Program’s effectiveness in this area is critical. The Program has continued to strengthen its partnership with the private trustee organizations to address areas of mutual concern and 

enhance the operation of the bankruptcy system. 

In implementing bankruptcy reform, the Program worked closely with the trustees and provided extensive training, with a particular focus on their new responsibilities with regard to serving as employee benefit plan administrators and the 

handling of debtor tax returns. We also have initiated the rulemaking process to 

issue uniform trustee final reports, which will enhance consumer bankruptcy case 

administration by improving access to case data and allowing for greater analysis 

of the bankruptcy system. 

14 

INFORMATION TECHNOLOGY EFFORTS

To the maximum extent possible, the USTP has leveraged its resources by utilizing information technology. In addition to enhancing existing automated systems 

that help manage caseloads and measure Program activity (e.g., the Automated 

Case Management System, Significant Accomplishments Reporting System, Criminal Enforcement Tracking System, and Professional Timekeeping System), the 

USTP has developed a number of new systems. These include a Means Test Review 

Management System, a Credit Counseling/Debtor Education Tracking System, a 

Credit Counseling/Debtor Education Certificate Issuance System, and a Debtor 

Audit Management System. 

Notwithstanding the addition of these systems, the Program’s ability to achieve 

efficiencies and maximize data collection has been hampered by an inability to electronically extract data from bankruptcy petitions and schedules. As suggested in 

Congressional Appropriations Committee Reports, we have been working with the 

Administrative Office of the U.S. Courts (AOUSC) for more than two years to have 

a data-enabled form standard made mandatory, subject to appropriate privacy and 

access concerns. ‘‘Data tags’’ in a data-enabled form permit the computer system to 

automatically extract and aggregate financial and other information from bankruptcy filings. Such forms would make the USTP’s implementation of the new bankruptcy law vastly more time and cost efficient in several key areas such as calculating the means test to determine eligibility for chapter 7 relief and identifying 

cases for audit under statutory case selection standards. They would also save case 

trustees significant time and expense in the filing of final reports in hundreds of 

thousands of no-asset consumer cases where considerable new information is required under the BAPCPA. In addition, data tags could aid the courts in performing 

administrative functions and would assist policymakers and researchers in analyzing the effectiveness of the bankruptcy system (by, for example, providing better 

data on the relationship between medical expenses and bankruptcy filings). Discussions with the courts on this critical issue are continuing. 

FISCAL YEAR 2008 APPROPRIATIONS REQUEST

The USTP is entirely self-funded through user fees paid by bankruptcy debtors. 

All revenues are deposited into the United States Trustee System Fund. The Program may expend funds as appropriated by Congress. In FY 2007, approximately 

50 percent of the funding was derived from quarterly fees in chapter 11 reorganization cases. The balance of the funds was derived from filing fees paid in chapters 

7, 11, 12, and 13, as well as interest earnings and miscellaneous revenues. 

For FY 2007, Congress appropriated $223.1 million for the USTP. This amount 

provided funding for operations, including the Executive Office and 21 regions consisting of 95 field offices. The Program employs approximately 1,300 attorneys, financial analysts, and support staff. The USTP covers more than 300 sites where 

bankruptcy judges conduct proceedings and more than 450 administrative hearing 

sites (i.e., section 341 meeting rooms). 

For FY 2008, the President requested appropriations of $231.9 million for the 

USTP. This amount would provide a current services budget. The Senate Appropriations Committee approved the President’s budget. The House of Representatives 

passed legislation that would satisfy the President’s request, subject to collections. 

The Program and the Department have re-estimated the level of receipts that are 

expected to be collected in 2008. The Attorney General has addressed the issue of 

the USTP funding in his appeal to the Appropriations Subcommittee, pointing out 

that the U.S. Trustee System Fund has a sufficient surplus to fully fund the FY 

2008 request. 

CONCLUSION

The United States Trustee Program has assembled a substantial record of accomplishment since enactment of the BAPCPA. Compliance with the comprehensive 

changes to the Bankruptcy Code has presented significant challenges to the United 

States Trustees, the courts, debtors, creditors, attorneys, and others. The bankruptcy system is in a period of transition. The USTP will continue its efforts to work 

cooperatively with all components of the system to satisfy our obligations to implement the law with fairness, efficiency, and effectiveness for the benefit of all stakeholders. 

Ms. SA ́ NCHEZ. Thank you. Judge Cristol? 

15 

TESTIMONY OF THE HONORABLE A. JAY CRISTOL, JUDGE, 

UNITED STATES BANKRUPTCY COURT, SOUTHERN DISTRICT 

OF FLORIDA, MIAMI, FL 

Judge CRISTOL. I am proud of the bankruptcy system of the 

United States and believe it is the most compassionate and, at the 

same time, most effective system in the world, because it goes beyond the archaic concept of looking only to the distribution of assets to creditors and offers an honest debtor a fresh start. 

In answer to the question, ‘‘Watch dog or attack dog,’’ the answer 

is the U.S. Trustee is not one dog. It is a pack of dogs. In the area 

of chapter 11 reorganization, the U.S. Trustee staff at local levels 

provide extremely valuable assistance to the courts. 

In this area, the U.S. Trustee is a beloved Lassie or a Rin Tin 

Tin. Sadly, in the area of consumers, the U.S. Trustee is a pit bull. 

The problem comes from the top. Over the tenure of the past two 

directors, Lawrence Friedman and Clifford White, the policies sent 

from Washington to the soldiers in the field have made the U.S. 

Trustee program in the consumer area a pit bull. 

I do not mean to make ad hominem attacks on Mr. Friedman or 

Mr. White. I respect them both as to integrity and professional talents. The problem is their perspective. 

Mr. White’s distinguished career has been served in the office of 

the Federal prosecutor. These gentlemen seem to view all debtors 

with a suspicion through prosecutorial eyes as dishonest crooks trying to beat the system and perceive debtors’ lawyers as disreputable and untrustworthy. 

Nothing is further from the truth. In my more than two decades 

on the bench, I have observed that almost all consumer debtors 

seeking relief in bankruptcy are honest, decent, hardworking citizens who suffered a catastrophic financial tragedy, seldom of their 

own making, such as a medical disaster and no health insurance, 

loss of employment, dissolution of a marriage or other financial 

misfortune. 

Consumer lawyers who represent them are generally competent 

and well meaning, without blemish on their character. 

The U.S. Trustee’s most recent annual report boasts of the national civil enforcement initiative yielding millions in debts not discharged. There is a substantial difference between debts not discharged and debts collected. They offer no figures on debts collected. 

The old adage, ‘‘You cannot get blood from a stone,’’ is especially 

applicable here. Very little of the nondischarged debts are collected. 

So what has been accomplished? 

The report also claims that they have a better than 99 percent 

success rate in complaints filed against debtors. It fails to mention 

how many cases are won by default. 

Think about it. A destitute, honest debtor that has appropriately 

turned over all of his or her property to the panel trustee, except 

for exempt property, which, in many States, is meager, is served 

with a lawsuit filed by the United States of America, represented 

by highly-skilled, well-paid lawyers. 

In these circumstances, most debtors have neither the money nor 

the will to fight. In many instances, their remaining exempt property will not even cover the amount of a retainer to a competent 

16 

counsel. It is not Goliath against David. It is more like Goliath 

against an ant. 

And what is the benefit to society of most of these undischarged 

debts or denials of discharge? Without discharge and the fresh 

start it provides, these victims of the initiative find it difficult to 

get a job, get credit, or climb out of the financial pit in which they 

are trapped. 

They are denied a fresh start and the opportunity to re-enter society as productive citizens. The mean-spirited streak in the new 

law provides draconian penalties for the most minor and insignificant compliance failures of even unimportant matters. The U.S. 

Trustee seems to be enamored with these harsh penalties. 

The new law makes it harder for consumers to save a home from 

foreclosure or a car from repossession, and the U.S. Trustee’s policy 

seeks the harshest implementation of these provisions. 

As a result, honest people, homeless or unable to drive to work. 

If a debtor’s papers contain minor discrepancies that have no effect 

on the results of the case, there is no valid reason to persecute 

them. 

The problems of consumer debtors are only exacerbated by the 

aggressive anti-consumer stance of the U.S. Trustee Program. The 

independent decisions of career personnel in local offices have been 

subordinated to central directives from a politicized central office. 

While spending enormous resources pursuing minor document 

defects in papers filed by consumer debtors, the U.S. Trustee 

spends little or no time on creditor wrongdoing. The U.S. Trustee 

was supposed to be a neutral monitor of the system and, for many 

years, it was. That neutrality has been maintained in North Carolina and Alabama under the bankruptcy administration system. 

A final sad example is my case In re Jean Raul Petit-Louis, a 

pauper. He did not own real estate. He did not own a car. He had 

no money and little more than the clothes on his back. 

He lost his job and could not pay his rent in public housing. 

Upon getting back to work, he was in danger of eviction because 

of a few dollars of unpaid rent. He could only keep a roof over his 

head if the debt was paid, which he could not do, or if he was discharged. 

Petit-Louis, Little Louis, could not speak English and could not 

obtain credit counseling in Creole, the language he understood. Of 

ten U.S. Trustee approved credit counselors in southern Florida, 

not one had a Creole-speaking counselor. 

The U.S. Trustee had not carried out its statutory obligation to 

provide credit counseling in a meaningful way. 

Nevertheless, the U.S. Trustee sought to bar Little Louis from 

bankruptcy release, and when I granted a waiver, which is allowed 

by the statute, the U.S. Trustee filed a lengthy motion to reconsider, followed by an appeal and a threat to Little Louis that the 

U.S. Trustee would appeal all the way to the Supreme Court. 

So Little Louis gave up and voluntarily dismissed his case—another ant smashed by the unlimited resources of the pit bull doing 

good as it sees doing good. 

I close with the words of Cicero, ‘‘We are not those who do evil 

in the name of evil, but heaven protect us from those who do evil 

in the name of good.’’ 

17 

[The prepared statement of Judge Cristol follows:] 

PREPARED STATEMENT OF THE HONORABLE A. JAY CRISTOL


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Ms. SA ́ NCHEZ. Thank you for your testimony. 

Ms. Powers? 

TESTIMONY OF MARY POWERS, ESQUIRE, FORMER UNITED 

STATES TRUSTEE PROGRAM TRIAL ATTORNEY, AMHERST, NY 

Ms. POWERS. Thank you for the opportunity to speak today. 

Quite frankly, it was a difficult decision for me to come here 

today. On the one hand, I believe the United States Trustee’s offices are filled with intelligent, hardworking individuals who care 

about the mission of the United States Trustee, working to promote 

the integrity and efficiency of the bankruptcy system. Many of 

these people are sittin here today. 

On the other hand, it was my distinct feeling, based on my over 

4 years employment there, that the policies and the practices of the 

United States Trustee were moving farther away from its mission 

to the integrity of the system. I felt that it was going to be less and 

less about justice, and, at some levels, actually served as an impediment. 

It is that experience that brings me here to testify today. My 

written testimony speaks for itself. Buffalo, in western New York, 

is a community where economic hardship is a reality and has been 

so for a number of years, most of my life, actually. 

Buffalo was recently cited as the second poorest city in America. 

Clearly, abusive bankruptcy filings were not prevalent. The majority of cases where inquiries had been made on our part, in an effort 

to stem any tide of abuse, there would be notable mitigating factors. 

The United States Trustee Program had implemented a reporting system. They called Significant Accomplishment Systems. They 

called it SARS. It was sort of like a report card, a quarterly report 

card. And once I started to do that report card every quarter, it became even more apparent, because it confirmed the obvious, that 

western New Yorkers were down on their luck. Entry after entry 

noted job loss, loss of medical benefits and often marital dissolution. But, unfortunately, that reality didn’t seem acceptable in the 

climate of the current office of the United States Trustee. 

The belief was that you must not be looking hard enough if you 

don’t find cases of abuse, and I recount two personal examples in 

my testimony, ones that, in my career, may seem minor, but they 

did really strike home. 

The first is when then director Larry Friedman came to town 

and he pulled one of our inquiry files. It was that of a retired 

teacher and his wife, and Mr. Friedman immediately asked where 

the boat was. We weren’t sure what he meant. He said, ‘‘Well, all 

retired teachers have boats.’’ 

I stated I wasn’t personally aware of the connection between retired teachers and boats, but at his direction, we did a detailed document request for his review. And we conducted a review, and he 

flew back into town to conduct an examination of the debtors. 

Mr. Friedman found no intentional ommission of assets. The case 

was eventually converted to a 13, which would have happened anyway. That is what we had targeted it for. 

94 

Now, Buffalo is a small community. Lawyers cooperate with one 

another and results can be achieved without putting all parties 

through these rigorous hoops. 

We understood that, sadly, the view from the top was that the 

debtors and their attorneys were to be looked at as the opposition, 

and that simply was not the case, at lease not in Buffalo, New 

York. And, unfortunately, the emphasis on the numbers only became worse after the passage of the new law. 

I left when I realized that independent judgment was not valued 

or sought after in the program. 

I recount the example of the United States Trustee in Region 2 

inquiring about a garden variety case, one that wasn’t abusive in 

any way. I immediately thought we must have missed something— 

but it reinforced my belief that it was all about the numbers, and 

about micromanaging and bureaucracy was only getting worse. 

It was hard for me to believe that someone at that level would 

not have something more important on her plate than that. 

And I felt, when I realized my personal credibility and my integrity was at risk and one well-respected attorney told me that the 

U.S. Trustee had become a known as the ‘‘useless Trustee’s office.’’ 

On a personal level, I also couldn’t imagine spending the rest of 

my career looking at telephone bills and determining if ‘‘grandma’’ 

was part of the household, especially when those endeavors meant 

very little in terms of monetary returns to individual creditors. 

It just seems to me, and the reason I am here today, is that the 

talent and dedication of the staff that I was lucky enough to work 

with in Buffalo, and that the people that I met from all around the 

country could be used to serve the system of justice in a much more 

effective manner. 

[The prepared statement of Ms. Powers follows:] 

PREPARED STATEMENT OF MARY POWERS

My name is Mary Powers and I am an attorney who for the majority of my twenty 

year legal career practiced bankruptcy law. I was fortunate to begin my career as 

confidential law clerk to the Honorable Beryl E. McGuire, Chief Judge for the 

United States Bankruptcy Court for the Western District of New York. After that 

I worked for two well respected Buffalo law firms, representing debtors, creditors 

and creditor committees in a variety of bankruptcy matters. In 2002, I applied for 

the position of Trial Attorney in the Buffalo office of the United States Trustee 

(‘‘UST’’). At that time, I was very happy at my law firm, received challenging work, 

was well compensated and, above all, was respected by my colleagues just as I respected them for their integrity and dedication to their clients. There was only one 

legal position which would have prompted me to leave this wonderful working environment and that was a position with the Department of Justice’s United States 

Trustee’s Office. I felt my background was ideal, but more importantly, I felt that 

it would be an honor and a privilege to serve the Department of Justice in its mission to promote the integrity and efficiency of the bankruptcy system. It was a 

chance, for the lack of a better phrase to ‘‘wear the white hat’’. I felt very fortunate 

to have been offered the position. Over time, it became clear to me however, that 

what I was doing had very little to do with ‘‘justice’’ and, as such, my personal passion and enthusiasm slowly eroded. In February 2007, not wanting to spend the remainder of my career doing something that I had trouble believing in, I resigned. 

I have never once regretted that decision. 

Upon my arrival, I came to understand more clearly what was meant by ‘‘civil 

enforcement ‘‘and that the UST was now considered a litigating component of the 

Department of Justice. I had enough experience at that time to realize that the Buffalo office did not have the resources to be a true ‘‘litigating force’’, but I was optimistic that I could still make a difference, elevating the level of practice and protecting both debtors and creditors. During my years, little focus or training emphasized creditor abuse. I quickly came to understand that ferreting out abuse by debtVerDate Aug 31 2005 11:53 Feb 27, 2009 Jkt 000000 PO 00000 Frm 00098 Fmt 6633 Sfmt 6621 H:\WORK\COMM\100207\38113.000 HJUD1 PsN: 38113
95 

ors was of primary importance. I screened numerous filings. Through inquiries of 

debtors and their attorneys, I confirmed what I could have intuitively guessed from 

being a Buffalo and Western New York native. The majority of filings were not abusive. Buffalo’s poor economy caused loss of jobs, loss of medical benefits and often 

marital dissolution, due in large part to financial setbacks. These factors were at 

the heart of the vast majority of filings. This became very apparent when the UST 

implemented a reporting system (one of many) known as SARS (‘‘Significant Accomplishments Reporting System’’). Every action taken by staff was to be documented 

in this system. Every entry where no action was taken referred to a ‘‘mitigating factor’’ which obviated the need for any action. ‘‘Cancer’’, ‘‘job loss’’, ‘‘divorce’’ were 

noted frequently, demonstrating what I knew to be the case: that Western New 

Yorkers were down on their luck. When an abusive filing was found, dismissal or 

conversion to Chapter 13, was pursued with vigor, but always understanding that 

the judges in the Buffalo Bankruptcy Court were very aware of the harsh economic 

realities in Western New York and gave debtors every consideration. Initially it 

never occurred to me that those in Washington and New York would not trust the 

assessments of seasoned lawyers, those hired by them for their expertise and experience. I thought it was common sense and easily understood that regions and individual districts differed significantly in their bankruptcy demographics. I learned 

later that I was quite naı ̈ve in that belief. 

I became aware that the debtor abuse ‘‘numbers’’ for the Buffalo office were low 

and that offices that had low numbers were perceived as not looking hard enough 

to find abuse. This became very apparent when then Director Lawrence Friedman 

on a visit to the Buffalo office pulled one of our ‘‘inquiry’’ files and concluded on its 

face that a debtor examination should take place and he would ‘‘show us how it was 

done’’. He told us that as the debtor was a retired teacher it was likely he had a 

boat, although none was listed. I was not familiar with the link between retiring 

teachers and boats, but I assured him I would investigate and do a detailed document request for his review prior to his return to conduct the examination of the 

debtors. Our independent investigation revealed no intentional omission of assets on 

the debtors’ schedules. The examination done by Mr. Friedman also revealed nothing. The debtors were sincere and honest and nothing warranted the dismissal of 

their case. The case was flagged by our office for one more appropriately in Chapter 

13 which is my recollection of what ultimately happened in the case. I feel certain 

that this result, as had occurred with other similar cases, would have occurred without the burdensome document requests and a lengthy examination of the debtors. 

Buffalo is a small community of bankruptcy practitioners and my experience led me 

to know that for many cases aggressive pursuit was unnecessary to achieve the 

same result. Unfortunately, as we did not conduct as many unnecessary examinations as other districts , we appeared less aggressive. Again, I felt that we understood the practice in our district best and there was no need to put the debtors and 

their attorneys through unnecessarily burdensome ‘‘hoops’’ if the same result could 

be achieved in a more timely and cost efficient manner for all involved. I felt that 

treatment of attorneys and debtors in that manner raised our credibility with the 

bench and bar, fostered cooperation and promoted a much more efficacious system. 

Unfortunately, the opinions of those in the ‘‘trenches’’ in the individual offices 

seemed to matter very little. Although, the same information could be easily obtained at a meeting of creditors, we would have gotten more ‘‘credit’’ from the powers that be had we engaged in costly examinations and document requests. Our 

‘‘SARS’’ report, a seeming ‘‘report card’’, certainly wasn’t impressive to those who 

measured success in terms of dismissals and conversions only. Unfortunately, we 

could not manufacture ‘‘abuse’’ where little existed. Even when we did obtain a conversion to Chapter 13 and the total amount of unsecured debt deemed nondischargeable was entered as the result, in truth, most of that debt would be ultimately discharged because the majority of Chapter 13 payment plans were of a very low percentage. If the case was dismissed, it was likely very little of that debt was collectible either. We understood however, that it was partially these numbers that the 

Office of the United States Trustee relied upon to justify its existence and demonstrate success. Feeding the SARs machine at times seemed as important as practicing meaningful law. 

The lack of autonomy and inability to exercise discretion as well as the pressures 

to produce ‘‘numbers’’ was exacerbated after the passage of BAPCPA in October of 

2005. Admittedly, the UST was forced to comply with a new law everyone was 

struggling to understand and certainly there would and should be uniformity in 

policies regarding application, but again the same pressures to produce presumed 

abuse under the ‘‘means test’’ was paramount. I remember one pivotal moment for 

me after the passage of the new bill. I, through the Assistant UST in the office, 

learned that the US Trustee in the region asked about a specific case. My first 

96 

thought was that despite a multi-level screening process, something big must have 

been missed. When I reviewed the filing, I realized that the case wasn’t flagged because the debtor was only slightly over the median and had a blended family with 

six children and all the legitimate expenses that accompany a family of that size. 

You didn’t need the means test to figure that out. Common sense and living in the 

real world would have sufficed. More importantly, I was incredulous that someone 

at the level of a UST would not have something more important on her plate than 

this insignificant case from Buffalo. It was clear that ‘‘babysitting’’ was the order 

of the day and that the most important focus of the UST was accounting for ‘‘debtor 

abuse’’ and raising the numbers for statistical purposes. It was that day when I 

knew I could not spend the rest of my career in a micromanaging bureaucracy. I 

also knew that the satisfaction that would arise from pouring over cell phone bills 

and determining if ‘‘grandma’’ was part of the household would be nonexistent, especially when ultimately it would make very little monetary difference to creditors. As 

one well respected Buffalo attorney told me, the UST had come to be known as the 

‘‘useless Trustee’s office’’, not a flattering nickname, but one I sadly understood. 

The most unfortunate aspect of this to me was that the Office of the United States 

Trustee employed many intelligent, hard working individuals all over the country, 

many of whom I was fortunate to work with and to meet. Those individuals produced many wonderful initiatives over the years. Many of them expressed frustrations similar to those I have expressed, but obviously only one who left government 

employment would feel free to speak. In closing, it is my belief that the mission of 

the Office of the United States Trustee is admirable however, the current execution 

of the mission is flawed, an impediment to the functioning of the system and does 

very little to promote the integrity of the system. 

Ms. SA ́ NCHEZ. Thank you, Ms. Powers, for your testimony. 

At this time, I would invite Judge Wedoff. 

TESTIMONY OF THE HONORABLE EUGENE R. WEDOFF, JUDGE, 

UNITED STATES BANKRUPTCY COURT, NORTHERN DISTRICT OF ILLINOIS, CHICAGO, IL 

Judge WEDOFF. I appreciate the opportunity to be here for the 

purpose of offering a different perspective on the U.S. Trustee Program. 

I understand the question the Committee wants to ask is whether the program has been administering the bankruptcy system in 

an over-aggressive manner, like an attack dog, or whether it has 

been safeguarding the integrity of the bankruptcy system, like a 

watch dog. 

I have been a bankruptcy judge for 20 years. I have been on a 

number of organizations actively that work to support the bankruptcy system and I have presided over big cases, like the United 

Airlines case. But the reason that I want to talk to the Committee 

today is because of the experience I have had from my appointment 

to the Advisory Committee on Bankruptcy Rules. 

When, what I will call BAPCPA, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, was enacted, there were 

6 months—180 days to enact a whole host of new rules and forms 

to implement BAPCPA, and one of the most difficult tasks was to 

implement the new means tests that were created to establish 

abuse in chapter 7 cases. 

I was appointed, as a new Member of the Committee, to a threemember working group to devise a means test form, to draft one 

for the Committee. The other members of that working group were 

Eric Frank, who is now a bankruptcy judge in Philadelphia, but he 

was then a longstanding consumer debtor attorney, and Mark 

Redmiles, who was then the enforcement coordinator for the U.S. 

Trustee Program. 

97 

The three of us, over that 6-month period, spent literally hundreds of hours drafting, debating, revising means test forms, not 

just for chapter 7, but for chapter 13 and chapter 11, as well. The 

work was necessarily complex, because the statute is complex. 

Our chapter 7 means test form, as you mentioned, Madam Chairwoman, has 57 different lines over six pages, not because we wanted to make it complex, but because the law required that. 

Obviously, over that period of time, Mark, Eric and I got to know 

one another really well, and what I want to convey to the Subcommittee today is the very firm impression I have that Mark 

Redmiles and the U.S. Trustee Program, throughout this process, 

not just with the means test, all of the considerations of the rules 

committee, were not out to attack debtors. 

To the contrary, the impression I had throughout this process 

was that they were working with integrity and fairness, to read the 

statute properly and come up with a workable result. 

Now, in my written testimony, I focused on two concrete examples that I thought would illustrate the approach of the U.S. Trustee Program in the rulemaking process. Both of them involve the 

implementation of the needs test and the needs test form, and they 

both have the potential to impose significantly greater burdens on 

debtors than the ones that we actually adopted. 

The first of these has to do with the safe harbor of section 

707(b)(7) of the bankruptcy code. This makes it impossible for any 

means test presumption to be asserted against a debtor who has 

below median income and the impact of that is that the debtor’s 

income alone immunizes the debtor from the means test. 

However, there is statutory language suggesting that a debtor 

might have to complete all of the calculations of the means test in 

order to comply with the reporting requirement and, in fact, some 

of the creditor organizations that promoted BAPCPA argued to the 

rules committee that regardless of income level, a debtor had to 

complete the entire form. 

It would make a huge difference if the debtor can complete only 

the income portion, 14 lines, less than a page and a half. If they 

have to complete the entire form, six pages, 57 lines. 

The U.S. Trustee Program from the beginning rejected the viewpoint of the creditor industry and asserted that the proper reading 

allowed only partial completion of the form by low income debtors. 

The second point that I brought out has to do with the local 

housing standards, local standards of the IRS. These are used to 

determine debtors’ deductions in the mean test for housing and 

transportation. 

There is a number given by the IRS. The statute directs that the 

debtor’s deduction for housing and transportation shall be the number set forth in the IRS local standards. Again, the creditor industry read the statute differently. They said that the numbers that 

the IRS published were only half. 

Under that view, the debtor would have to list mortgage, rent, 

utilities, insurance, all of those items separately on the form and 

then compare them to the IRS numbers. Again, the U.S. Trustee 

Program took the position that the shorter version, the IRS number, would be appropriate. 

98 

What is the bottom line? In all of these—in most of these and 

other instances, the U.S. Trustee Program had the opportunity, 

had it chosen, to essentially attack debtors—the title of this hearing. They declined to—Instead they acted with integrity, with fairness, and they helped us produce a workable result. 

I was grateful to Mark, grateful to the U.S. Trustee Program, 

and, I have to say, heartened to learn in August that Mark 

Redmiles was named deputy director of the U.S. Trustee Program. 

I think he is taking that position in a very positive direction. 

[The prepared statement of Judge Wedoff follows:] 

99 

PREPARED STATEMENT OF THE HONORABLE EUGENE R. WEDOFF


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Ms. SA ́ NCHEZ. Thank you very much for your testimony. 

The bell is ringing to vote. In the absence of anybody telling me 

that we have votes shortly, we will proceed to Mr. Uyehara. 

TESTIMONY OF PAUL M. UYEHARA, ESQUIRE, COMMUNITY 

LEGAL SERVICES LANGUAGE ACCESS PROJECT, PHILADELPHIA, PA 

Mr. UYEHARA. Chairman Sa ́nchez, Ranking Member Cannon, 

Members of the Subcommittee, thank you for the opportunity to 

testify today. 

I would like to clarify for the record, as indicated in my written 

testimony, that I am also testifying this afternoon as a member of 

the National Association of Consumer Bankruptcy Attorneys, 

whose members probably represent the bulk of the attorneys filing 

consumer bankruptcy cases. 

My written testimony details seven problems with U.S. Trustee 

policies and practices, but really those problems, those seven problems, could be summarized by the failure of the Executive Office 

for U.S. Trustees UST programs to act in a way that is fair, rational and reasonable. In fact, it is doing things in an unfair, irrational 

and unreasonable manner. 

As a component of the justice department, the public has a right 

to expect the executive office for U.S. Trustees to be fair. They are 

opposed to bankruptcy fraud, no one will argue. 

Rather than opposing fraud from debtors and creditors alike, 

UST programs focus almost exclusively on looking for alleged debtor abuse, while making little effort to root out abuse by creditors 

and their attorneys. 

On a daily basis across the country, attorneys are filing bogus 

claims on behalf of creditors. They are filing motions falsely claiming homeowners are behind a mortgage payment, backed up, in 

some cases, by pre-signed affidavits. Debtors are losing sleep, 

money for attorney’s fees and their homes from fraud like this, but 

the EOUST acts as if only debtor fraud is worth fighting. 

We think fraud is fraud and fair is fair. We also think it unfair 

for EOUST to have engaged in discrimination based on debtors’ 

ability to speak English, in violation of Executive Order 13166 and 

DOJ policy. They are refusing to provide interpreters for debtors to 

participate in mandatory meetings of creditors, telling debtors to 

hire their own professional interpreters or do without, while facing 

walls covered with FBI posters, warning of felony prosecutions for 

misstatements. 

EOUST has failed miserably for years in implementing reform. 

The case just mentioned by Judge Cristol is one of the most egregious examples, with EOUST attorneys having been dispatched 

from Washington to Miami, vowing to fight for as long as it took 

to have a Creole speaking debtor denied bankruptcy protection because EOUST created and manages a credit counseling system that 

is poorly equipped to assist debtors that don’t speak English well. 

EOUST practices have made filing bankruptcy more expensive, 

more difficult and more traumatic than it already was for consumers. They have to manage documents from debtors that exceed 

requirements set by law and the rules, with no consideration of the 

105 

costs and benefits and ignoring the relevancy of the documents in 

a particular case. 

One example of many in my written testimony, a single mother, 

domestic violence survivor, with two kids, two little kids, no child 

support, below median income, received a demand to produce proof 

within 11 days of all of her credit card purchases, without any restriction in time for how far back the documents had to go. 

Many routine demands by USTs are nothing more than antidebtor harassment. Pay stubs have been demanded of debtors who 

filed papers saying that they were unemployed. One UST faulted 

a debtor for listing herself as single, rather than divorced, when 

asked her marital status and demanded that she amend her paperwork. 

A U.S. Trustee moved to dismiss a case after the debtor erroneously took a debtor education course instead of a credit counseling course, even though she later took the credit counseling 

course a day later than she was required to. 

UST personnel are now being sent to routine meetings of creditors run by panel trustees, apparently, to protect creditors’ interests, even though the creditors themselves generally do not waste 

their time attending these meetings. 

A UST attorney in Pennsylvania so harshly questioned an elderly 

African-American debtor about her circumstances leading to bankruptcy that she actually wet herself at the meeting. 

Auditors are filing documents alleging material misstatements, 

which neither will have no bearing on the case, other than cause 

trouble for the debtor. 

We brought these issues to the attention of the executive office 

of the U.S. Trustees for years, with no results apparent beyond 

delay and silence. Today, it is our hope that the U.S. Trustee Program can be urged to move toward policies that are fair, reasonable 

and rational. 

Thank you. 

[The prepared statement of Mr. Uyehara follows:] 

106 

PREPARED STATEMENT OF PAUL M. UYEHARA


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173 

Ms. SA ́ NCHEZ. Thank you, all of you, for your testimony. 

We will now begin our questioning, and I will begin by recognizing myself for 5 minutes. 

Judge Cristol, you cite numerous examples in which the program 

focuses on debtor abuses while ignoring creditor abuses. On the 

other hand, you note in your written testimony that neutrality has 

actually been maintained in North Carolina and Alabama. 

Can you explain the probable causes of that? 

Judge CRISTOL [continuing]. Those that have been excluded from 

the U.S. Trustee Program or the Department of Justice, they are 

operated by the judiciary, and they seem to operate very well and 

impartially, without what I regretfully say appears to be politicized 

input from Washington. 

Ms. SA ́ NCHEZ. Thank you. 

Ms. Powers, you stated in your testimony that during your time 

with the program, and I am quoting you here, ‘‘little focus or training emphasized creditor abuse’’ while you were employed there. 

Why do you think the program isn’t focused on creditor abuse? 

Ms. POWERS. Admittedly, it is a complex law and for the UST to 

get up to speed in terms of its oversight and its enforcement responsibilities, it was all encompassing. 

So in fairness to the U.S. Trustee, it would have been difficult 

during that particular time to do much else except to get acquainted with the new law. But even before the new law, it seemed 

as though the order of the day was debtor abuse that the training 

focused on. 

Ms. SA ́ NCHEZ. There is often a phrase that is used—and that 

could happen in a whole lot of ways—— 

I think, to use your own words from your testimony, that there 

was micromanaging and bureaucracy going on, but why? 

Ms. POWERS. I am not really certain. Again, in defense of the 

United States Trustee’s Office, I think there was a lot of attempts 

to get up to speed with the new law and to have some uniform policies. 

So I believe that the application and the mean test and so forth 

was an obviously important focus. 

Ms. SA ́ NCHEZ. In your opinion, do you think that maybe there 

was an overemphasis on that—other things that could have gone 

on? 

Ms. POWERS. Well, realistically, though, that was a major overhaul of the law. So maybe it would have been nice to focus on other 

things, but there really probably wasn’t simply enough time. 

What I thought was problematic with the micromanaging aspect 

was the fact that I really felt as though the judgment of the individuals in the field offices, the people that understood their communities, it didn’t seem as though that really mattered. I felt that that 

was my biggest problem with that. 

Ms. SA ́ NCHEZ. Mr. Uyehara, you stated in your testimony that 

the program used aggressive and wasteful questioning of debtors at 

creditors’ meetings and brought dismissal of consumer bankruptcy 

cases for minor alleged errors or defects. 

Let me ask you, why do you think the program is using those 

practices? 

174 

Mr. UYEHARA. Again, Madam Chairwoman, I think this goes 

back to the approach that is being taken—the problem that exists 

in the bankruptcy system investigating fraud on behalf of the debtors, when, in fact, that is not really a problem in the system today. 

There are lots of papers that have to be filled out. It is possible 

to make mistakes, but it is not mistakes that are only made on one 

side of the game. Mistakes are made on both sides of the game. 

I think the point is that the system needs to be policed in a neutral way for all the parties. 

Ms. SA ́ NCHEZ. Do you think that the sort of overzealousness with 

which they are scrutinizing paperwork, for minor errors, single 

versus divorced—I am divorced. I certainly consider myself single, 

because I have been divorced for a number of years, and if I were 

asked to check that off on a form, I am sure that I would put single. Do you think that that is a case of focusing on very miniscule 

problems—that should better focus on, perhaps, creditor abuses? 

Mr. UYEHARA. Yes. I know it is one of many examples listed in 

the written testimony gathered by the national membership. It 

does illustrate situations where questions are being asked that are 

insignificant. Money is being expended when a trustee requires a 

debtor or threatens a debtor that papers have to be re-filed to correct insignificant information, in some cases, that is entirely correct 

to begin with. 

That person is either going to stumble through it, if they are unrepresented, and if they do have an attorney, they are going to 

have to pay their attorney money that they can’t afford to pay, for 

no purpose. 

Ms. SA ́ NCHEZ. Thank you. My time has expired. 

So I will now recognize the Ranking Member for his questions. 

Mr. CANNON. Thank you, Madam Chair. 

I was a little surprised when Judge Cristol started talking about 

the dogs, and I realized that I hadn’t read the title of today’s hearing, which is whether we have a watch dog or an attack dog. 

I suppose that is a conclusion one has before one comes into a 

hearing like this. 

I wanted to thank Mr. Wedoff for his work on the rules. I think 

that we started with a difficult program. We have implemented 

rules. There have been a lot of changes. And the focus here ought 

to be have we gotten to the point where this is working, so that 

we don’t have these anecdotes like little old ladies wetting themselves because they were interrogated too aggressively. 

This is not about anecdotes. This is about how the whole system 

is working. And I will tell you that in the process, I was Chairman 

of this Committee for 4 years while we developed this program and 

trying to get it passed, and I was terrified of what it would do, 

until I found myself on an airplane with a trustee who was very 

interesting. 

He talked about how these things in the bill. So when I realized 

who he was, I asked him, ‘‘How do you think it will actually work 

in practice,’’ and we spent 4 hours talking about how it could be 

implemented. 

And I think, Mr. Wedoff, what you have done is the kind of implementation that he was talking about—and I suspect with as 

many trustees—— 

175 

But my question now is—I think the bill had the ability to be implemented. We have had 2 years after passage to implement it. 

And how are we doing? Not are there people that have problems 

or defects or maybe an individual here or there who overreached 

and who criticized or who required a re-filing of the documents because of a distinction between being single and being divorced. 

Those don’t seem to me to be very important to this Committee. 

What seems to me to be important to this Committee is how are 

these things actually working prospectively. 

And let me direct a question to Mr. White and Mr. Wedoff. In 

your experience, and recognizing I am not talking about those situations where maybe somebody got up off the wrong side of the bed, 

or had too strong a cup of coffee or not enough coffee and, therefore, was a little rough in his interrogation. Do we have systems 

that are implementing the intention of the act, which is to balance 

the problem of people who use their credit cards in anticipation of 

bankruptcy perhaps,as opposed to people who have bankruptcy because they have the kinds of problems that Judge Cristol talked 

about, who tend to be honest people who have a problem in their 

lives? 

Is the system—and I expect we are going to see it from a couple 

different perspectives, but, Mr. White and Mr. Wedoff, could you 

give us an idea of how the system has evolved and is it actually 

working? 

Mr. White? 

Mr. WHITE. Yes, Mr. Cannon. I think that the systems are in 

place to implement the statute in an effective way. Now, it is going 

to be some period of time before we have enough to data to know 

what ultimate impacts are, of course. 

But to turn to just a couple of the major areas where we do have 

some interim data—I am sorry, sir. 

Mr. CANNON. And what you are seeing is that it is an iterative 

process. You are going back and looking and looking and trying to 

improve it. I take it that is the essence of what you are saying. 

Mr. WHITE. We absolutely are doing that. So for example, in 

some data that I tried to reflect in the testimony, when we look at 

the means testing system, we look to see not only are we filing motions, but, also, how are we exercising discretion in the aggregate. 

The proof is in the pudding. I cannot answer anecdotes that I 

don’t have personal knowledge of that I am hearing about for the 

first time and it was a field operation of 1,300 people and 750,000 

cases. I can’t guarantee you that there was nothing done that 

shouldn’t have been done better. 

But I think we are doing a good job, and one indication is if you 

look at the fact that almost one out of every three cases that, under 

statutory formula, is presumed abusive, we stand down and don’t 

file a motion because we find that there were special circumstances. 

So we have tried to take the discretion Congress has given us so 

that we bring only meritorious cases. 

Credit counseling, which has received some attention, I recall at 

the last hearing where I appeared, at a general oversight for this 

Subcommittee, there was a lot of concern with regard to protecting 

176 

debtors and, in part, because we all knew that the credit counseling industry was a troubled industry. 

Congress, for example, conducted numerous hearings, finding 

abuses. So the last thing we wanted to do was to have the justice 

department give an imprimatur, an approval, of credit counselors 

who would then scam the very debtors they were designed to assist. 

So what have we found? The Government Accountability Office 

gave us a very favorable report last April with regard to the fact 

that we had an effective screening mechanism. It also helped identify a future research agenda so we can continue to look at outcomes and results. 

Also, though, in that report, it looked at limited English proficient debtors and are we making progress in addressing those 

needs and gave the U.S. Trustee Program very high marks. 

So virtually every indicator I can see now, we continue to need 

to reevaluate what we are doing at all times. We need to look at 

the data. We need to conduct oversight of what we are actually 

doing in the field on a day-to-day basis. 

But when you stand back and you look at the forest through the 

trees, you see that there are systems in place, there are reasonable 

mechanisms, and the horror stories with regard to means testing 

and the terrible effects, we have ameliorated, I think, those concerns a great deal and also with credit counseling. 

I could go down a number of other areas, as well. And I would 

also just mention, not to take up all of your time, but in chapter 

11, we have substantial responsibilities with business reorganization cases where we have enforced the law vigorously there, too, 

sought independent examiners, trustees, to oust management in 

cases where there is suspected wrongdoing and we have been very 

aggressive in enforcing those provisions, as well, all of which make 

demands on our resources. 

So I would suggest that the people of the U.S. Trustee Program 

deserve a pat on the back for the job that they have done particularly in the field to make the system work. It was a Herculean effort and we have had substantial success. 

Ms. SA ́ NCHEZ. The time of the gentleman has expired, but I will 

allow Judge Wedoff to respond. If you could do so briefly, I would 

appreciate it. 

Judge WEDOFF. I think I can, Madam Chairwoman. 

The question really has two parts. One is, are we implementing 

effectively the law that is in place right now and, secondly, is the 

law that is in place right now the best we can do in bankruptcy? 

I think, as a judge, my responsibility is primarily in the first 

area, and I am proud of the work that the rules committee did. 

With the help of the U.S. Trustee Program, I think we have a set 

of rules and forms to implement that really is true to the spirit of 

that legislation and what it was attempting to do, while still having a workable formula, a workable program. 

I think that bankruptcy is still a possibility for people who genuinely need it. Whether we can have a better system, Representative 

Cannon, I have to tell you, I came up, with Judge Tom Small, with 

a number of suggestions that might be able to be more effective—— 

177 

I still think there are ways it could be more effective, but, again, 

my role as a judge is to interpret the law and apply it as it is written, not as I wish it were. 

Mr. CANNON. May I just comment, Madam Chair, that the ability 

to create rules in an iterative process is much simpler than the 

ability to actually create legislation, with many different interests. 

Thank you and I yield back. 

Ms. SA ́ NCHEZ. Thank you. 

At this time, I would like to recognize the gentleman from Georgia, Mr. Johnson, for 5 minutes. 

Mr. JOHNSON. Thank you. 

Mr. CANNON. Would the gentleman yield? Because the gentleman 

is attacking the process that I was—— 

Mr. JOHNSON. I would yield. 

Mr. CANNON. I thank the gentleman. There are certainly credit 

card companies that have interests, but the purpose of—this is a 

bipartisan bill that was an attempt to solve problems. It was an attempt to create an environment where people who are poor could 

have access to credit at the lowest cost. 

Mr. JOHNSON. Reclaiming my time. It was a very punitive response to a problem that did not exist. There was no fraud. And 

consumers were already being protected by existing laws in effect 

at that time. 

So to the extent that it was bipartisan, I have to blame both parties—— 

But at any rate, I want to ask, Mr. White, according to your testimony, approximately what percent of consumer cases are ultimately dismissed for abuse under the new means testing criteria? 

Does this mean that, well, less than 1 percent of chapter 7 cases 

are dismissed for abuse, even though proponents of these reforms 

claim that that percent was going to be ten times higher? 

Please explain the differences. 

Mr. WHITE. Well, I don’t know that I can give you a definitive 

answer at this point, but based on the data that we do have, we 

have exercised restraint, as I said, with regard to declining 30 percent of all cases that are presumed abusive under the statutory formula, because there are special circumstances and Congress told us 

we could exercise that discretion. 

Nonetheless, we are filing motions to dismiss per 1,000 cases at 

a higher level than pre-BAPCPA, which would seem to suggest that 

the objective standard in the new statute does allow us to identify 

abusive cases, while, at the same time, giving us discretion to 

stand down when bringing a case to dismiss would not be the appropriate thing to do. 

Also, what is done in the statute here is that for the first time, 

you have, instead of the old objective standard of substantial abuse, 

you have a more objective standard. What we cannot get measured, 

Mr. Johnson, is to what extent having an objective transparent 

standard, everyone filing bankruptcy should know whether they 

will be presumed abusive and potential consequences of that objective finding, we don’t know how many then decide not to file bankruptcy versus selection of chapter 13 instead of 7. 

So there are a whole constellation of factors that are at play. It 

is interesting, too, at that the hearing 18 months ago or so, the 

178 

question was, ‘‘What draconian results are we going to have because of mean testing?’’ Now, the question I often receive at seminars or where I go is, ‘‘Does it make a difference?’’ There is not 

enough of a change. There aren’t enough percentage of debtors 

being dismissed. 

But it is just kind of interesting how the arguments go full circle. 

So what we try to do in the program is just look objectively at what 

the data suggest. 

Very important to us, Congress gave us discretion. We would respectfully suggest that we are exercising that discretion and continue to need to exercise the oversight and make sure we are exercising the proper discretion. 

More cases are being identified under the means test than before, but we are also standing down on one out of every three cases. 

Ms. SA ́ NCHEZ. The time of the gentleman has expired. And I 

think there is sufficient interest that we will move to a second 

round of questioning. 

So I will recognize myself for 5 minutes. 

I would just remind Mr. White, in the talk about statistics and 

numbers in the aggregate, those are made up of individual cases. 

So I would suggest that experiences that real debtors experience in 

going through the process do matter, and I just ask you to keep 

that in mind. 

But the question that I wanted to ask was to Judge Wedoff. My 

favorite professor in law school would teach us law through cases, 

and at the end of each piece that we would write, he used to ask 

us two questions, and I think you have identified at least one of 

those questions when you were answering Mr. Cannon’s question. 

He used to ask us, ‘‘Is this a good law,’’ and, I think, if I am 

hearing your testimony correctly, you think this law is good and 

that there could perhaps be some room for improvement prior to 

the enactment of the amendment. 

But the second follow-up question that he used to ask us, which 

I think was the more important question oftentimes, was, ‘‘Is this 

a fair law?’’ 

So the question I want to ask you is, approximately how many 

times has the United States Trustee, in the last 6 years, brought 

an action in your court for sanctions against an abusive action by 

a creditor or a creditor’s attorney? And you can give me ballpark 

figures. 

Judge WEDOFF. I can’t remember. 

Ms. SA ́ NCHEZ. You have no recollection, or you have no ballpark 

figure whatsoever? 

Judge WEDOFF. But I think it is important to keep in mind that 

the statute directors the U.S. Trustee Program to investigate debtors—— 

Ms. SA ́ NCHEZ. I understand and that is part of the point that I 

am trying to make here. 

Judge WEDOFF. I think that the—— 

Ms. SA ́ NCHEZ. I was going to say, conversely, approximately how 

many times, in the same period of time, has the United States 

Trustee brought an action in your court for sanctions against a 

debtor or counsel for a debtor? 

Judge WEDOFF. Not a huge number, but there have been some. 

179 

Ms. SA ́ NCHEZ. Okay. And that is precisely—you have helped me 

make my point. The point is if we are going to have a law, whether 

it is a good law, perhaps not the best law, but a good law, we need 

to implement it in a way that is fair and evenhanded. 

And I think what I am hearing in some of the experience that 

Judge Cristol is talking about and some of the examples that Mr. 

Uyehara gave in his testimony is that perhaps there has been this 

huge focus on debtor abuse and the opposite side of that question 

is not being asked, which is—or not being addressed—— 

Mr. CANNON. Would the Chair yield? 

Ms. SA ́ NCHEZ. In a moment, Mr. Cannon. I would like to finish 

my thought, which is are creditors being pursued as aggressively 

as debtors are. 

And I would suggest that one prime example is in the mortgage 

lending business and we have seen the meltdown that has occurred 

with these subprime loans and debtors trying to seek relief from 

having their homes foreclosed, but some of the changes to the law 

don’t allow families to be able to save their homes. 

And there are instances in which there was very little information or misleading information when they entered into these mortgages. And I am not blaming the mortgage crisis on the bankruptcy 

crisis. I am simply trying to say that if bankruptcy is, in theory, 

this process by which the honest debtor who has fallen on hard 

times or perhaps even been taken advantage by predatory lenders 

or unscrupulous creditors, are we building—have we built, with the 

amendments to bankruptcy, a system in which these honest debtors are not allowing their debts to be discharged and they are being 

put through a process that, if you will, traumatizes them again and 

again and perhaps in ways that don’t exactly inure to the public 

benefit or the public interest or to the idea of the fundamental 

principal of giving these debtors a fresh start. 

That was the conclusion of my thought. I do have one more question that I would like to ask Mr. Uyehara. 

Mr. Cannon? 

Mr. CANNON. Why don’t you go ahead? I will just raise the issue 

when I have the time. 

Ms. SA ́ NCHEZ. I appreciate that, Mr. Cannon. 

Mr. Uyehara, based on your extensive experience in dealing with 

language issues in courts, how hard would it be for the UST to provide translation services at creditor meetings? Because that seems 

to be a big problem. 

Mr. UYEHARA. Not hard at all. I filed a complaint against the 

U.S. Trustee in Philadelphia in 2003. I expected the problem to be 

resolved not only in Philadelphia, but across the country within a 

matter of months. 

It is now 2007 and I am hoping that Director White is going to 

be giving us some positive developments very soon. But the process 

that is involved in providing language services to debtors at 341 

meetings is really very straightforward. 

Ms. SA ́ NCHEZ. And do you think it is fundamentally fair that a 

debtor who may not have great control of the English language is 

forced to attend these meetings when they don’t have an idea of 

what is happening to them? 

180 

Mr. UYEHARA. I think it is clearly unfair to the debtor and also 

not fair to trustees who are concerned about getting accurate answers to questions that are posed. 

When you are encouraging debtors to proceed to testify without 

fully understanding the questions in a way in which they can’t 

fully answer the questions, or to rely on interpreters who are unprofessional and lack language skills of their own and have to be 

present in the meeting or relative to, what have you, is just a prescription for trouble. 

Ms. SA ́ NCHEZ. Thank you. With that, my time has expired. 

I will recognize Mr. Cannon for 5 minutes. 

Mr. CANNON. Thank you. I just want to pursue this issue that 

Mr. Johnson raised and try and get it clear. 

The Bankruptcy Act is about people getting discharged from 

their debts in various forms, and yet the question has come up 

about how creditors are censored, and there is a way, I think, to 

do that in bankruptcy, but it seems to me it is not even a primary 

responsibility of the trustee, and I think that is what Mr. Wedoff 

was suggesting. 

Perhaps you could help me, Madam Chair, in understanding 

what it is you would like the trustees to do or what the responsibility is in the law that they haven’t addressed or what we need 

to do to the law to give them a context for addressing—— 

Ms. SA ́ NCHEZ. If the gentleman would yield. 

I didn’t mean to suggest that I, for one, have the answer—the 

topic of today’s hearing, if debtors are being aggressively pursued, 

it seems to me that the flipside of that also needs to be addressed 

at some point, which is the abuses on the part of the creditors. 

Mr. CANNON. Reclaiming my time. 

I think this is a difficult issue with a balance in there. It is not 

a Democrat or Republican issue, it is not a Conservative or a Liberal issue. 

Ms. SA ́ NCHEZ. I would agree. 

Mr. CANNON. It is an issue where you have to balance and I 

think, in this regard, we have actually done a fairly good job, and 

I appreciate Mr. Wedoff’s response, also Mr. White’s response. 

On the other hand, there are issues here that we are dealing 

with, as you pointed out, in another environment, although we can 

deal with it in the bankruptcy context, where you have the 

subprime lending. I think it is fair to say, scams, people who are 

clearly not competent to make repayments on loans that were 

going to accelerate the way they have done, and that is an important issue, but I think separate from the purpose of what we are 

doing here. 

And without prolonging this hearing much, let me just point out 

that in a bankruptcy hearing, we have a tool that we make available to debtors to clean up their lives and get on. That is different 

from a criminal environment where a person could go to jail if he 

doesn’t have the right kind of interpreter. 

So while I am sensitive to the need for appropriate interpretation 

and, in fact, in the case of Mr. Petit-Louis, you had a person whose 

primary language is Creole, who lives in Florida, where you don’t 

have many Creole translators, is my guess. That is difficult and a 

181 

problem, I think Mr. Uyehara has made it clear that there is something that doesn’t work very well about that. 

But the obligation that we have here as Federal legislators I 

don’t think is to provide interpreters, but to hope that in the implementation of the act, reason and judgment are used so that people—so we get the best outcome. 

I don’t know that we want—in fact, I would suggest that we don’t 

want to make it a very burdensome responsibility on the trustees 

to have a requirement to interpret, when it is, in fact, as Mr. 

Uyehara just pointed out, sometimes difficult, if you have got a relative who is not adequate in language. What, are we going to require certified interpreters? 

And I think the gentlelady—— 

Ms. SA ́ NCHEZ. While it is true this is not the criminal context in 

which somebody’s liberty is at stake, somebody’s livelihood or all 

their earthly possessions or even what little property or anything 

that they may possess is at stake. 

And so I do think it is compelling when you have Government 

action that people who are caught up in the legal system—— 

Mr. CANNON. Reclaiming my time. 

Ms. SA ́ NCHEZ [continuing]. Have an understanding of what is 

happening to them. 

Mr. CANNON. Is the gentlelady suggesting that we should have 

the requirement that the Federal Government pay for interpreters 

in all cases of bankruptcy of people who don’t speak primarily 

English? 

Ms. SA ́ NCHEZ. I am not suggesting that. I am suggesting that it 

is a problem that Mr. Uyehara has identified and that clearly is 

a problem in search of a solution. And I am not going to be the one 

to suggest what the best solution is, but it is certainly a problem 

that he has raised and is awaiting some kind of response, because 

to date that hasn’t been addressed. 

Mr. CANNON. I agree with the gentlelady of the problem. I don’t 

think it is one that we resolve at our level. 

But I do have another question, so reclaiming my time. 

I wanted to ask this the first time, and I apologize for not getting 

to it. But in your opinion, the opinion of those of you here on the 

panel, are the trustees being paid enough or do we need to raise 

that rate? 

Mr. WHITE. Mr. Cannon, if you are referring to the private trustees, the chapter 7 trustees, they have not received an increase in 

what is called the no assets fee of $60 from those cases in a number of years and, in principal, we concur that it would be appropriate for them to receive an increase. 

The difficulty is how do you achieve that while not endorsing any 

specific proposal. But consistent with our position in the past, in 

principal, we concur it would be appropriate to raise their pay. 

Mr. CANNON. Thank you. And, Madam Chair, would you indulge 

the others of the panel who might have an opinion on that? 

Ms. SA ́ NCHEZ. If they can be brief. 

Judge WEDOFF. I served as a panel trustee when I only got $15. 

I enjoyed the work, but it was a charitable contribution. My partners thought I would maybe give it up. I understand the trustees 

182 

are asking for $80 instead of $60, which I think is very reasonable, 

but still not enough, and I would highly endorse the increase. 

Ms. SA ́ NCHEZ. Ms. Powers? 

Ms. POWERS. I would endorse it, as well. 

Ms. SA ́ NCHEZ. Thank you. 

Judge CRISTOL. I believe the trustees are very substantially underpaid for the amount of work that they are required to do under 

the law, but I also sympathize with the need not to increase the 

filing fees for debtors. 

Ms. SA ́ NCHEZ. Mr. Uyehara? 

Mr. UYEHARA. Madam Chair, unfortunately, I am afraid I am not 

prepared to answer that question. 

As a career legal services attorney, we could use a pay raise, too. 

Ms. SA ́ NCHEZ. Thank you. 

Mr. CANNON. Thank you for indulging me, Madam Chair, and I 

yield back. 

Ms. SA ́ NCHEZ. At this time, I will recognize the gentleman from 

Georgia, Mr. Johnson. 

Mr. JOHNSON [continuing]. And that amount has not been adjusted for several years, essentially. 

Mr. WHITE. That is correct. 

Mr. JOHNSON. And then with the passage of the 2005 act, it 

placed additional obligations and responsibilities upon the trustees 

for the same amount of compensation. Is that correct? 

Mr. WHITE. That is correct. 

Mr. JOHNSON. They have got to monitor the means testing, got 

to do all of that additional paperwork, and got to monitor audits, 

and got to approve the credit counseling agencies and oversee all 

of that. So it is definitely more responsibility on the trustees now. 

Since the 2005 Act—has there been an increased number of pro 

se filers or filers who are not paying the filing fee, in other words? 

Has it increased or has it decreased? 

Mr. WHITE. Most of the responsibilities that you outlined are carried out by the U.S. Trustees Program, the credit counseling oversight and so forth, and we are Federal employees. 

Some of the verification of income that goes into the means test, 

some of that is done by private trustees, but many of the core responsibilities under statute depend on the U.S. Trustee. 

Mr. JOHNSON. Most of it is done by those trustees that are hired 

by the—— 

Mr. WHITE. The private trustees do administer the cases, but if 

you are talking about the change in workload, BAPCPA, the new 

statute, in fact, did provide more responsibilities, and we have 

worked with them very closely to—— 

Mr. JOHNSON. But they haven’t received more money. 

Mr. WHITE. I absolutely agree with that point. That point is correct. I was just trying to clarify with regard to division of responsibility. 

Mr. JOHNSON. Has the number of pro se debtors that pay those 

fees, have those increased or decreased? 

Mr. WHITE. For the first time, Mr. Johnson, if your question is 

to what we refer to as IFP debtors, for the first time, what 

BAPCPA did is it allowed debtors without means to have the filing 

fee waived and to pay nothing. 

183 

So we don’t have comparative data, because before the bankruptcy reform law, everyone had to pay the filing fee. The data that 

I do have show that about 1.8 percent of all of the filers get IFP 

status, meaning the filing fee is waived, and there is a mechanism 

in the reform law so that if a debtor seeks to have the fee waived, 

then they need to establish certain facts, the inability to pay, before the bankruptcy judge. 

Mr. JOHNSON. Let me state this, also. In the northern district of 

Georgia, in the hearing rooms where they have the 341 meetings 

with the creditors, posters, prominently—you will be prosecuted, 

this, that and the other. 

And in light of threats of possible criminal prosecution, should 

the U.S. Trustee Program provide translation services at creditors 

meetings to debtors who can’t speak English? I know that this has 

already been answered, but I want it answered within that context. 

Mr. WHITE. We try to address that and continuing to in a phased 

way. 

Mr. JOHNSON. Yes or no? My time is running out. 

Mr. WHITE. We are addressing, and we are planning to do more 

to address it, and I could go into more detail. I am not willing to 

make a legal judgment with regard to the extent of the obligation, 

but we have a lot of progress we have made that I would be happy 

to provide to you. 

Mr. JOHNSON. It sounds like you are saying yes—— 

Ms. SA ́ NCHEZ. I am sorry, but your time has expired. 

If there is no objection, I am going to move on. 

Judge CRISTOL. The U.S. Trustee has made major steps forward 

in the area of increasing availability of translators, interpreters, 

and I commend them for that and they are getting better in that 

area. And of course, in the Little Louis case and the other cases, 

my concern is the aggressiveness with which they pursue these uneven confrontations. And that is where I think they appeal to compassionate conservatives and bring some compassion or to apply 

justice tempered with mercy in the performance of their duties, because I think that they are too much caught up in the spirit of the 

bankruptcy abuse, which was the presumption before it was 

passed, and the misnomer of consumer protection, they meant consumer persecution. 

Ms. POWERS. My feeling is that the U.S. Trustee is attempting 

to make efforts to make sure that people are accommodated in that 

way. 

Judge WEDOFF. The system will work better. A more accurate 

answer, they will be better understood, but the problem is the one 

that Mr. Cannon pointed out of somebody paying for it. 

I think it would be ideal if you could make translator services 

available at every 341 meeting for every debtor who requested it. 

I don’t know if there is funding available to do that. 

I would be delighted if there were. 

Mr. UYEHARA. If I could just clarify, and partly in response to 

Representative Cannon’s comments earlier, the situation currently 

is that there is existing Federal policy in the form of Executive 

Order 13166, which requires Federal agencies, including the justice 

department, to ensure that people who don’t speak English well are 

able to obtain meaningful access to Federal Government programs. 

184 

The situation of the meeting of creditors and bankruptcy counseling classes are clearly within the scope of the executive order 

and really within the scope of guidance issued by the justice department. 

The EOUST itself, in response to a complaint filed, issued a plan 

on what they were going to do to attack this problem 3 years ago, 

for which they had made a commitment to provide interpreters nationally at all meetings of creditors to the extent reasonably possible. 

By this time, in other words, by last month, they should have 

been reporting on their progress on rolling this out nationally. 

So it is not so much a question of whether it is upheld by Federal 

statute, but it is a question that is required by executive order and 

in justice department policy, as well as policy in UST programs. 

So the other problem is that in the context of bankruptcy counseling and what Judge Cristol was referring to, people would understand there are counseling agencies out there. We don’t have 

the capacity in particular languages. We are not going to force you 

to go to a class that you cannot understand and cannot participate 

in. 

Instead, what they did is they said, ‘‘We don’t dispute that you 

cannot take counseling in Creole, but you didn’t do it, the law required it and you are not permitted to come into bankruptcy court 

unless you do that first.’’ 

That attitude and that overly aggressive posture violates their 

own policy. It is insulting and should be insulting not only to the 

debtor bar, but to everyone that is concerned about the fair administration of the law. 

Ms. SA ́ NCHEZ. Thank you. The time of the gentleman has expired. 

I would like to thank the witnesses for their testimony today. 

Without objection, Members will have 5 legislative days to submit 

any additional written questions, which we will forward to the witnesses, and we will ask that you complete them as promptly as 

possible so that they can be made a part of the record, as well. 

Without objection, the record will remain open for 5 legislative 

days for the submission of any other material. 

Again, I want to thank everybody for their time and their patience. 

This hearing of the Subcommittee on Commercial and Administrative Law is adjourned. 

[Whereupon, at 2:27 p.m., the Subcommittee was adjourned.] 

(185) 

A P P E N D I X 

MATERIAL SUBMITTED FOR THE HEARING RECORD

186 

RESPONSE TO QUESTIONS SUBMITTED BY THE HONORABLE LINDA T. SA ́ NCHEZ, CHAIRPERSON, SUBCOMMITTEE ON COMMERCIAL AND ADMINSITRATIVE LAW TO CLIFFORD

J. WHITE, III, DIRECTOR, EXECUTIVE OFFICE FOR UNITED STATES TRUSTEES, 

UNITED STATES DEPARTMENT OF JUSTICE


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Æ 


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