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BANKRUPTCY TRUSTEE COMPENSATION 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

COMMERCIAL AND ADMINISTRATIVE LAW 

OF THE

COMMITTEE ON THE JUDICIARY 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TENTH CONGRESS 

SECOND SESSION 

SEPTEMBER 16, 2008 

Serial No. 110–207 

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 

SEAN MCLAUGHLIN, Minority Chief of Staff and General 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 

SEPTEMBER 16, 2008 

Page 

OPENING STATEMENTS 

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 

Robert Furr, Esq., Furr and Cohen, P.A., Boca Raton, FL 

Oral Testimony ..................................................................................................... 5 

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

Eugene Crane, Esq., Crane, Heyman, Simon, Welch & Clar, Chicago, IL 

Oral Testimony ..................................................................................................... 10 

Prepared Statement ............................................................................................. 13 

The Honorable Margaret Dee McGarity, United States Bankruptcy Court, 

Eastern District of Wisconsin, Milwaukee, WI 

Oral Testimony ..................................................................................................... 18 

Prepared Statement ............................................................................................. 20 

Jack F. Williams, Esq., Professor, American Bankruptcy Institute, Alexandria, VA 

Oral Testimony ..................................................................................................... 23 

Prepared Statement ............................................................................................. 25 

LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING 

Prepared Statement of the Honorable John Conyers, Jr., a Representative 

in Congress from the State of Michigan, Chairman, Committee on the 

Judiciary, and Member, Subcommittee on Commercial and Administrative 

Law ........................................................................................................................ 3 

APPENDIX 

MATERIAL SUBMITTED FOR THE HEARING RECORD

Response to Post-Hearing Questions from Robert Furr, Esq., Furr and Cohen, 

P.A., Boca Raton, FL ............................................................................................ 40 

Response to Post-Hearing Questions from Jack F. Williams, Professor, American Bankruptcy Institute, Alexandria, VA ....................................................... 42 

(1) 

BANKRUPTCY TRUSTEE COMPENSATION 

TUESDAY, SEPTEMBER 16, 2008 

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON COMMERCIAL

AND ADMINISTRATIVE LAW, 

COMMITTEE ON THE JUDICIARY, 

Washington, DC. 

The Subcommittee met, pursuant to notice, at 2:07 p.m., in Room 

2141, Rayburn House Office Building, the Honorable Linda T. 

Sa ́nchez (Chairwoman of the Subcommittee) presiding. 

Present: Representatives Sa ́nchez, Johnson, Delahunt, Cohen, 

and Cannon. 

Staff present: Matthew Wiener, Majority Counsel; Zachary 

Somers, Minority Counsel; 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. 

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

I will now recognize myself for a short statement. 

The thousand-plus private trustees who administer Chapter 7 

bankruptcy cases are indispensible to the effective functioning of 

our bankruptcy system. They do much of the heavy lifting required 

in Chapter 7 cases, including reviewing the debtor’s filings with the 

court, investigating the debtor’s financial affairs and filing reports 

with the court. 

These skillful women and men make what is often an emotionfilled and daunting process run smoothly. 

Despite the importance of Chapter 7 trustees, they are paid only 

$60 for their services. That $60 per case fee provided for in the 

Bankruptcy Code has not been increased since 1994. While trustees 

are also entitled under the code to recover commissions on the assets they distribute to creditors, they receive commissions in less 

than 10 percent of the cases they administer. That is because in 

over 90 percent of Chapter 7 bankruptcy cases, there are no assets 

to distribute. And when the bankruptcy filing fee is waived because 

the debtor cannot afford it, the trustee does not even receive the 

$60 fee. 

Today’s hearing will address whether trustee compensation 

should be increased and what the consequences will be for the 

bankruptcy system if it is not. We will also hear testimony about 

2 

specific proposals our witnesses may have to increase trustee compensation. 

I would like to point out in this regard that earlier this year the 

Senate Committee on the Judiciary favorably reported a bill that 

provides for a $60 increase in the per-case trustee fee. I wholeheartedly support this increase and am encouraged by the fact that 

the increase was approved without increasing the already significant bankruptcy filing fee of the debtor. 

To help us address the issues surrounding bankruptcy trustee 

compensation, we have invited four witnesses to testify today. We 

are pleased to welcome Robert Furr, the current president of the 

National Association of Bankruptcy Trustees and himself a bankruptcy trustee; Eugene Crane, a bankruptcy trustee and the former 

president of the National Association of Bankruptcy Trustees; Margaret Dee McGarity, a judge on the U.S. Bankruptcy Court for the 

Eastern District of Wisconsin; and Jack Williams, professor of law 

at Georgia State University College of Law and scholar in residence at the American Bankruptcy Institute. 

Accordingly, I will look forward to the testimony of our witnesses. 

I will now recognize my colleague, Mr. Cannon, the distinguished 

Ranking Member of the Subcommittee, for his opening remarks. 

Mr. CANNON. Madam Chairwoman, thank you for holding this 

hearing on the compensation of bankruptcy trustees. 

The fee paid to trustees in non-asset bankruptcies has not increased since 1994, yet the work required of the trustees has become more complicated and time consuming since that last increase. Hopefully this hearing can highlight the need for an increase in the fee and provide some answers as to how much of an 

increase is needed and how we should pay for the increase. 

In the last Congress, the House passed a $55 fee increase for 

trustees in Chapter 7 cases by voice vote as part of the Financial 

Netting Improvements Act. Unfortunately, that fee was taken out 

of the bill when it reached the Senate. The Senate dropped the increase provision because, although there seems to be a consensus 

that the trustee’s fee should increased, that consensus breaks down 

over the source of the funding. 

The approach taken in the Financial Netting Improvements Act 

was to fund the increase in Chapter 7 trustee fees by increasing 

the filing fee for Chapter 7 bankruptcy. Some object to this approach, even though the act provided an exception for the cases in 

which the Chapter 7 debtor could not afford the fee. 

In the Senate, Senator Kyl has proposed increasing the trustee 

fee as part of the Senate’s version of the Judicial Compensation 

Bill. The proposal would have the courts fund the increase through 

the fees the Judicial Conference of the United States already collects. The Judicial Conference objects to this approach because it 

may strain its budget. 

In short, everyone seems to recognize the Chapter 7 trustee fees 

must be increased, but the difficulty arises when it comes to how 

we provide the funding. Bankruptcy trustees play an important 

role in the bankruptcy system. Among their responsibilities are 

identifying fraud abuse and error in personal bankruptcy filings. 

3 

For this important work, we need to ensure that they are adequately compensated. 

I look forward to the witness’ testimony and I hope that they can 

help us address how much of an increase is needed and how we 

should fund such an increase. 

Thank you, Madam Chair, and I yield back the balance of my 

time. 

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

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

[The prepared statement of Mr. Conyers follows:] 

PREPARED STATEMENT OF THE HONORABLE JOHN CONYERS, JR., A REPRESENTATIVE

IN CONGRESS FROM THE STATE OF MICHIGAN, CHAIRMAN, COMMITTEE ON THE JUDICIARY, AND MEMBER, SUBCOMMITTEE ON COMMERCIAL AND ADMINISTRATIVE LAW

Let me just make three brief introductory points before we hear from today’s witnesses. 

First, as Chairwoman Sa ́nchez has reminded us, private trustees perform a critical—and, I would add, often underappreciated—role in administering chapter 7 

bankruptcy cases. They are fiduciaries who must ensure that all assets are properly 

administered and that the debtor warrants a discharge. 

Second, our bankruptcy system should ensure that it continues to attract and retain competent, experienced, and qualified private trustees in light of the critical 

role they play in the system. To that end, trustees should be properly compensated 

like other professionals in bankruptcy cases. 

Serious questions have been raised as to whether the bankruptcy system can continue to attract competent and experienced trustees when they currently receive 

only $60 per case in so-called ‘‘no asset cases.’’ In fact, in those cases where the filing fee has been waived, trustees receive no compensation at all. 

And, third, I do not believe debtors should be forced to shoulder this additional 

expense. As many of you know, the bankruptcy filing fee has substantially increased 

in the last few years. 

In addition, debtors must pay for mandatory pre-bankruptcy counseling and for 

post-bankruptcy financial management training. 

Bankruptcy debtors are among the poorest of the poor. So it just seems blatantly 

unfair that they should have to pay so much for bankruptcy relief. 

Accordingly, I look very much forward to hearing our witnesses’ views on the 

issue of trustee compensation and their suggestions as to how Congress should proceed. 

This is a very important challenge and I commend Chairwoman Sa ́nchez for holding this hearing. 

Ms. SA ́ NCHEZ. I am now pleased to introduce the witnesses on 

our panel for today’s hearing. Our first witness is Mr. Robert Furr. 

Mr. Furr has represented creditors, debtors and trustees in bankruptcy proceedings for over 30 years. He serves as a panel trustee 

for the United States Department of Justice in the Southern District of Florida and is appointed as trustee in approximately 2,000 

cases per year. 

Mr. Furr is regularly appointed as a Chapter 11 trustee and has 

been designated as a Chapter 12 trustee in the Southern District. 

Mr. Furr has represented numerous businesses in Chapter 7 liquidation and in Chapter 11 reorganization and individuals in complex Chapter 7 and Chapter 11 proceedings. He lectures frequently 

on issues of bankruptcy, creditors’ rights and remedies before national organizations. 

He has been on the board of NABT since 2000 and is currently 

serving as president. Mr. Furr has also been president of the Bankruptcy Trustees Association for the Southern District of Florida for 

15 years. 

4 

I want to welcome you to our panel today, Mr. Furr. 

Our second witness is Mr. Eugene Crane. Mr. Crane is a former 

president of the National Association of Bankruptcy Trustees. He 

has spent his career trying to even the odds, if only a little, by 

helping the have-nots take on the haves of the world. Heeding a 

call from the National Lawyers Guild, Mr. Crane volunteered for 

the 1964 Mississippi Summer Project of the Committee for Legal 

Assistance and represented improperly arrested civil rights workers. 

He became a partner in Savage, Frazin, Crane & Spencer and 

developed a bankruptcy law practice in which he could help individuals in small business, debtors, improve their lives and livelihood. He is currently a partner at Crane, Heyman, Simon, Welch 

& Clar in Chicago. 

We want to welcome you, Mr. Crane. 

Our third witness is Judge Margaret Dee McGarity. Judge 

McGarity has been a United States bankruptcy judge for the Eastern District of Wisconsin since 1987, having been appointed for a 

second 14-year term in 2001. She was appointed chief judge in 

2003. Judge McGarity was in private practice before her appointment, concentrating primarily in the areas of bankruptcy, family 

law and marital property. And she serves on the Panel of Chapter 

7 Trustees. 

Judge McGarity is a frequent lecturer on various marital property and bankruptcy-related topics. She is a member of the National Association of Bankruptcy Judges, American Bankruptcy Institute, National Association of Women Judges and the American 

College of Bankruptcy. 

I want to welcome you, Ms. McGarity. 

Our final witness is Professor Jack Williams. Professor Williams 

is a professor at Georgia State University College of Law and in 

the Middle East Institute in Atlanta, Georgia, where he teaches 

and conducts research in the areas of bankruptcy and business reorganizations, mergers and acquisitions, corporate finance, taxation, Islamic commercial law and law and terrorism. 

Professor Williams has served as the inaugural Robert M. 

Zinman American Bankruptcy Institute ABI scholar in residence 

for 2001 and has returned to the post a second time for 2008. 

Since 2004, he has also been the Association of Insolvency and 

Restructuring Advisors’ scholar in residence. Professor Williams is 

also managing director at BDO Consulting, a division of BDO 

Seidman in the New York and Atlanta offices. His areas of focus 

include restructuring and financial advisory services, financial 

fraud and fraudulent transfers, distressed business valuations, restructuring and insolvency taxation, forensic accounting, commercial damages modeling, investigation, litigation, consulting and the 

Foreign Corrupt Practices Act. 

Professor Williams has served as a tax advisor to the National 

Bankruptcy Review Commission and as chair of the Tax Advisory 

Committee to the NBRC. He has taught bankruptcy taxation to attorneys in the Office of Chief Counsel, Internal Revenue Service, as 

part of the New York University School of Law IRS Continuing 

Professional Educational Program; to attorneys in the United 

States Department of Justice; attorneys and other professionals in 

5 

the Office of the United States Trustee; and to bankruptcy judges 

as part of the U.S. Federal Judicial Center Education Programming. 

I want to thank you for being here today. 

Without objection, all of your written statements will be placed 

into the record in their entirety, and we are going to ask that today 

you limit your oral remarks to 5 minutes. We have a light system 

which I am sure you may be familiar with, but I will just review 

that quickly. When your time starts, you will see a green light. 

When you have 1 minute of testimony remaining, you will get the 

yellow right warning you that you have a minute remaining. And 

of course, when your time expires you will see the red light come 

on. 

If you are caught in mid-sentence or mid-thought, we will of 

course allow you to complete that sentence or final thought before 

we move on to the next witness. 

After each witness has presented her or his testimony, Subcommittee Members will be permitted to ask questions subject to 

the 5-minute limit. 

So with that understanding, I am going to invite Mr. Furr to 

please begin his oral testimony. 

TESTIMONY OF ROBERT FURR, ESQ., FURR AND COHEN, P.A., 

BOCA RATON, FL 

Mr. FURR. Thank you, Madam Chair Sa ́nchez, and thank you, 

Member Cannon, for your very kind remarks, and other distinguished Members of the Subcommittee. I appreciate you being here 

today and listening to our cause. Let me thank you for the opportunity to provide the views of the National Association of Bankruptcy Trustees, which we refer to as the NABT. 

By way of introduction, my name is Robert Furr and I am the 

current president of NABT. It is an organization of panel trustees 

who are independent fiduciaries appointed in every Chapter 7 

bankruptcy case. Of the approximately 1,100 trustees nationwide, 

the vast majority are members of our association. 

Chapter 7 bankruptcy cases typically include consumer cases 

where debtors discharge all their debts, but also include complex 

individual and business bankruptcy cases. Members of our organization carry out the major work involved in the bankruptcy system, 

handling 500 to 1,000 cases per year on average. Panel trustees 

carry out important public policy priorities as directed by Congress, 

such as ensuring that child support orders are enforced, safeguarding patient health care needs and records and protecting pension obligations. We even help Federal, State and local governments by being one of the largest collectors of unpaid taxes in the 

United States. 

In the vast majority of Chapter 7 cases, debtors never appear before a judge but are examined by trustees, beginning with a review 

of the bankruptcy petitions filed, and then a hearing conducted by 

the trustee, to which others creditors may appear and participate. 

The Bankruptcy Abuse and Consumer Protection Act passed in 

2005, added many new and different duties for trustees. The GAO 

studied the effect of that act, and in the report they issued in June 

2008 wrote, ‘‘The Bankruptcy Reform Act has affected the responVerDate Aug 31 2005 14:46 Apr 24, 2009 Jkt 000000 PO 00000 Frm 00009 Fmt 6633 Sfmt 6601 H:\WORK\COMM\091608\44493.000 HJUD1 PsN: 44493
6 

sibilities and caseloads of Chapter 7 private trustees. As a result 

of new provisions in the act, trustees must collect, track, store and 

safeguard additional documents, such as tax returns; notify appropriate parties of domestic support obligations; check calculations 

and review the accuracy of information in forms associated with 

the means test; and, once finalized, will be required to comply with 

new requirements for uniform final reports.’’ 

As trustees, we have an obligation to secure relief for honest but 

unfortunate debtors. And we also have an obligation to investigate 

bankruptcy filings for abuse, criminal activity, fraud, mortgage 

fraud and today fraudulent scams involving homeowners, which we 

are seeing more and more. 

In fiscal year 2007, the Office of the United States Trustee made 

1,163 criminal referrals, most resulting from information provided 

by Chapter 7 panel trustees. Chapter 7 trustees in 2007 distributed 

$2.86 billion to creditors, a lot of money. 

A major problem, however, has been our compensation. Trustees 

receive $60 for administering Chapter 7 cases in which no assets 

are liquidated. The last increase was in 1994. This is a flat fee per 

case. A case can take a long time or a short time, depending upon 

the case. We basically work on a contingency fee basis. 

It takes years for a new trustee to begin making a profit because 

the new trustee must build up a pipeline of cases. And most asset 

cases take more than a year to administer. Without an increase 

and a no asset fee as an income base, the new trustee will have 

to struggle to make his or her practice economically viable. We 

want new individuals to join the trustee program and stay with it. 

Otherwise, we won’t have seasoned trustees. 

Chapter 7 cases with significant assets are rare and trustees in 

small and rural areas are very much hurt by the current situation. 

In addition, we have in forma pauperis filings, which means we 

don’t get any no assets fees. In an in forma pauperis case, the debtor doesn’t have to pay a filing fee and we don’t get any fees in the 

case. We have to handle it for free. 

Congress has looked at our compensation but for one reason or 

another our raise has gotten entangled. We are asking the Committee, the Senate and the House to increase our no assets fee by 

$60. There is a bill pending in the Senate right now that does that. 

It is tied to the judge’s bill, Senate Judicial Committee Bill S1638. 

We are hopeful the Senate can pass this bill, but time may be running out. I have attached a copy of that bill to the papers that we 

have submitted. 

We urge the House of Representatives to take up our per case 

compensation increase in a freestanding bill based on the $60 increase. We hope that you can act on it quickly. 

Thank you again for the opportunity to testify and I am pleased 

to answer any questions. 

[The prepared statement of Mr. Furr follows:] 

PREPARED STATEMENT OF ROBERT FURR

Madam Chair Sa ́nchez, Ranking Member Cannon, and other distinguished Members of the Subcommittee, let me thank you for the opportunity to provide the views 

of the National Association of Bankruptcy Trustees to your Subcommittee on the important subject of compensation for bankruptcy Trustees. 

7 

By way of introduction, my name is Robert Furr and I am the current President 

of the National Association of Bankruptcy Trustees (NABT). NABT is an organization of panel trustees, independent fiduciaries, appointed in every Chapter 7 bankruptcy case. Of the approximate 1,100 such Trustees nationwide, the vast majority 

are members of our organization. 

Chapter 7 bankruptcy cases include typical consumer bankruptcy cases where 

debtors discharge all of their debts plus complex individual and business cases. Most 

bankruptcies are Chapter 7. In FY 2007, nearly 500,000 Chapter 7 cases were filed 

in the U.S. bankruptcy courts. Due to recent economic circumstances, this number 

is rising. Members of our organization carry out the major work involved in the 

bankruptcy system, handling 500 to 1,000 cases each year. In our work, as a trustee, we protect both debtors and creditors from abuse of the system. 

Importantly, we carry out important public policy priorities as directed by the 

Congress, such as insuring that child support orders are enforced, safeguarding patient health care needs and records, and protecting pension obligations. We even 

help federal, state and local governments by being one of the largest collectors of 

unpaid taxes in the U.S. 

The Honorable Joseph Patchan, a former Bankruptcy Judge and former Executive 

Director of the Office of the United States Trustee wrote in an article entitled ‘‘The 

Office of Bankruptcy Trustee’’ the following: 

Bankruptcy trustees in our nation today not only have the duty to address with 

fidelity the estates to which they are appointed, they also have a broad responsibility, as a vital and official part of our bankruptcy system, to sustain the quality 

and the public regard for that system, by the way they do their work, and by the 

way they professionally fulfill their role as trustees. That responsibility requires 

sensitivity to and support of the ongoing creditable working of an entire legal structure. That feeling of being part of and responsible to a national bankruptcy system, 

I submit, has to be part of the professional service provided by you as bankruptcy 

trustees, especially so in these times when our bankruptcy structure is so readily 

questioned, and our bankruptcy processes often so critically examined. 

Bankruptcy cases and bankruptcy processes are no longer (below the radar( either 

in Washington or in our hometowns. The number of cases, the amount of money involved, the number of debtors, creditors, parties, and others affected by the cases, 

the media attention often given to cases, all underscore a valid public concern in 

the bankruptcy process, how it looks, how it performs, what it cost, and what it produces. For bankruptcy law and its workings are now recognized as an important 

part of our economy and of the society in which we live. 

Most people probably do not know that in the vast majority of Chapter 7 cases, 

debtors never appear before a judge, but are examined by the Trustees beginning 

with a review of the petitions filed, and a hearing conducted by the Trustees to 

which creditors may appear and participate. Many functions and required performance duties are contained in the Bankruptcy Code and Bankruptcy Rules. The Office 

of the United States Trustee, which is part of the Department of Justice, oversees 

the carrying out of such duties. 

The particular activities that we carry out are mandated by the many provisions 

of the law, rules and regulations, and are necessary and crucial to the operation of 

bankruptcy. The Bankruptcy Abuse and Consumer Protection Act, passed in 2005, 

added many new and different duties for the Trustees. 

In June 2008, the GAO conducted a study of the bankruptcy system. In their report, they stated 

‘‘The Bankruptcy Reform Act has affected the responsibilities and caseloads of 

Chapter 7 and Chapter 13 private trustees. As a result of new provisions in the act, 

trustees must collect, track, store, and safeguard additional documents such as tax 

returns; notify appropriate parties of domestic support obligations; check calculations and review the accuracy of information in forms associated with the means 

test; and, once finalized, will be required to comply with new requirements for uniform final reports. Private trustees told us that these new responsibilities have significantly increased the time and resources required to administer a bankruptcy 

case.’’ 

As Trustees, we have an obligation to secure relief for honest but unfortunate 

debtors and to investigate filings for abuse, criminal activity, fraud, mortgage fraud, 

fraudulent scams involving homeowners, fraudulent foreclosure rescue operations, 

fraudulent schemes targeting homeowners, as well as protecting the interests of all 

parties. In fiscal year 2007, the Office of the United States Trustee made 1,163 

criminal referrals—most resulting from information provided by Ch. 7 Panel Trustees. In fiscal year 2007, Ch. 7 Trustees distributed $2.86 billion to creditors in Ch. 

7 cases. 

8 

A major problem, however, has been our compensation. Under the present law, 

Trustees receive $60 for administering Chapter 7 cases in which ‘‘no assets’’ are liquidated. The last increase in this Trustee compensation occurred in 1994, when the 

fee was raised from $45 to $60. Let me emphasize that this is a flat fee per case. 

A case could take a hour, a few hours, days, weeks, or in some unique circumstances, years, to bring to closure. Trustees essentially work on a ‘‘contingent’’ 

basis because if their efforts do not result in a dividend to creditors, they receive 

only the $60 no asset fee. Every trustee can tell about cases in which he or she devoted many, many hours and much money and did not recover any assets. In other 

cases, Trustees are obligated by their statutory duties to spend the time and money 

to fulfill their duty without additional compensation. That happens on a daily basis 

in my practice. 

We are proceeding on 14 years with the no increase in our compensation. As I 

mentioned, our duties have increased. It is taking us longer to process cases, yet 

we remain stuck at a level from the mid 1990s. 

Many trustees are considering leaving the system. Fewer younger lawyers, accountants, and other individuals are interested in becoming a Trustee. It takes 

years for a new trustee to begin making a profit because the new trustee must build 

up a pipeline of cases and most asset cases take more than a year to administer. 

Without an increase in the ‘‘no asset’’ fee as an income base, the new Trustee will 

have to struggle to make his or her practice economically viable. We want new individuals to join the Trustee program and stay with it, otherwise, we will eventually 

have a lack of seasoned Trustees administering the bankruptcy system. 

Just to clarify, Trustees can earn more than $60 per case from Chapter 7 cases 

where there are assets, however, only five percent of Chapter 7 cases have assets. 

Most are small cases, and our compensation is minimal from those cases. Chapter 

7 cases with significant assets are rare, and mostly in large metropolitan areas. This 

is why the lack of decent compensation in no asset cases is particularly difficult for 

Trustees is small or rural areas. 

I should also note that Congress has allowed debtors to waive the filing fee altogether if they can demonstrate a lack of funds—a so called ‘‘informa pauperis’’ filing. 

While we think a waiver policy is appropriate for those truly in need, in these cases, 

a Trustee receives no income. We expect that this type of filing may also be on the 

increase. 

The Congress has looked at increasing our compensation, but for one reason or 

another, our raise has gotten entangled in other legislative battles and nothing has 

happened. Increasing our compensation has always enjoyed bi-partisan support. It 

has passed the House a number of times, usually, as part of a larger legislative 

package. Most recently, in 2006, the House passed H.R. 5585, a bill to improve the 

netting of financial obligations in bankruptcy. The bill was co-sponsored on a bi-partisan basis by Congresswoman Debbie Wasserman Schulz and Congressman Patrick 

McHenry. While it was primarily a financial services bill, Section 7 of that bill provided a $55 per case raise for Trustees. It passed the House by Voice Vote. Regrettably, our provision was stripped in the Senate, reportedly by some Senators that 

did not want an increase in the bankruptcy filing fee. The Deficit Reduction Act of 

2005 (P.L. 109–171) was also another missed opportunity for Trustees. The filing 

fee for Chapter 7 was raised significantly, but none of the increased funds were used 

to compensate Trustees. 

In early 2008, the Senate Judiciary Committee reported out S. 1638, a bill to increase compensation for federal judges. Senators Richard Durbin (D-IL) and John 

Kyl (R-AZ) added an amendment increasing our compensation by an additional $60 

per case. We are hopeful that the Senate can pass this bill, but time may be running 

out again. For your reference, I have attached that particular section of the bill. 

We would urge the House of Representatives to take up our per case compensation increase in a free standing bill, based on Section 12 of S. 1638, and act on it 

quickly. 

Thank you again for this opportunity to testify, and I would be pleased to answer 

any questions. 

9 

ATTACHMENT 


RF.eps
10 

Ms. SA ́ NCHEZ. Thank you, Mr. Furr. We appreciate your testimony. You came in under the 5-minute mark, so well done. 

At this time I would invite Mr. Crane to give his oral testimony. 

TESTIMONY OF EUGENE CRANE, ESQ., CRANE, HEYMAN, 

SIMON, WELCH & CLAR, CHICAGO, IL 

Mr. CRANE. Good afternoon, Madam Chair, senators, Ranking 

Member Cannon, distinguished counsel. Again, we thank you for 

the opportunity to address you on this issue, which we think is crucial not only to the finances in existence of the trustee but the integrity of the bankruptcy system. 

The 1978 Bankruptcy Code changed the law and where in the 

past referees in bankruptcy, who will now be our judges, conducted 

examinations into the affairs of the debtor in open court hearings. 

That was passed for the trustee to separate the administrator from 

the judicial function. 

As such, we have assumed that quasi-judicial function of examining the debtors. As Mr. Furr stated, approximately 95 or 96 percent of all the bankruptcy cases, individual no asset cases, are 

heard by trustees. These people never see a court. We represent 

the court, and I take seriously the fact that we represent what I 

consider the bankruptcy code and judicial system. And that is a responsibility we bear. 

Under the case law, we were considered independent fiduciaries 

to represent the law, recover assets, represent the parties. As case 

law developed, we began to be responsible not only for dividends 

to creditors, but for the interest of the debtor. You may wonder 

where we have an adversarial position toward debtors, but for example if a debtor has a personal injury case and they are severely 

injured, loss of life, limb, whatever, and there is only $200,000 in 

a bankruptcy estate, if we recover $200,000, pay the creditors in 

full and costs of administration, that is not the end of our job. We 

may have some debtor who is permanently impaired, whose interests we have to be aware of at that point, and see that they are 

compensated beyond that. 

To that extent, we represent debtor’s interest. If creditors have 

violated truth in lending laws, we bring actions on behalf of the estate and the debtor. If mortgages or security documents are improper, we bring actions to set those aside and recover the funds 

for the estate. 

And in a bankruptcy estate, if there are excess funds after the 

creditors are paid, that is surplus that the debtors recover and 

helps them go on with their life. I consider this an extremely important function, have spent most of my 50-some years in practice 

and 45 years as a trustee, building up whatever expertise and 

knowledge I have in the bankruptcy field. I would hate to leave it. 

Our duties include, as has been suggested, objecting to a debtor’s 

discharge if a debtor has done something wrong, report of a violation that is a violation of Title 8 of the criminal code. 

Now in today’s climate, the chaotic climate of the financial industry, we are seeing countless motions by lenders to modify these 

things or annul the injunction to allow them to proceed against the 

debtor and foreclose on their houses and other property. This has 

occasioned a great deal more time, more effort on our part. We 

11 

have to evaluate the houses before we go to the hearing. We have 

to go to a hearing. We have to appear and testify. And all of that 

is covered by the $60 fee. 

Of course, we could at that point come up with a no asset estate 

anyway, which usually is the case. But that is a serious obligation 

that we take very seriously and feel very strongly about. We are 

committed under the code, under the new requirements to review 

the debtor’s income tax returns and make sure there is no abuse 

of the system. Abuse is a term of art in the act that provides for 

a creditor having more than $271 in excess funds after paying all 

their obligations that are allowed under the code. I wonder if that 

is really such an abuse. But, anyway, that happens to be the law 

and we have to enforce the law and we try. 

I am required to report support obligations to the agencies that 

handle them for every debtor that has such a thing. In forma 

pauperis filings were mentioned before. We don’t get paid on those 

because our fee comes from the filing fee, but there is a more important issue. People who file in forma pauperis petitions would 

qualify for legal aid and for help. They don’t get that. By the time 

we see them or the court sees them, it is too late and they are 

mired. The creditors take advantage of them. Nobody is there to 

help them but the trustee. 

Inadvertently, we have become part of the debtors defense system or advisory system. You can’t turn these people down. They 

call up, ‘‘What do I do? My forms are no good. I can’t afford a lawyer. It is too late to get a lawyer.’’ We send them to various legal 

aide agencies and try to work it out for them. This is a function 

that the trustees assume because we feel it is in the nature of the 

justice of the system and the integrity of bankruptcy to provide 

complete relief. 

But we don’t just represent creditors. We represent, we believe, 

the court. We represent the debtors. We represent the entire system. And I think the system sits pretty much on our shoulders at 

this point, and they are getting a little weak at the moment because of the lack of funds that are available to us. Obviously, I am 

sure you all know that $60 per case isn’t going to carry us very far. 

If we have an asset case, there is a percentage thing, but they are 

getting more and more rare these days, except for mega-bankruptcy cases. 

The trustee system is one that allows for an independent party, 

which we think we are, to administer an estate, regardless of what 

the creditors want, regardless of what the debtor wants, and sometimes in spite of what our overseers in the U.S. Trustees Office 

want, because independence to us means independence and we 

have to do what we think is appropriate as fiduciaries handling the 

money and property and lives of the debtors in a bankruptcy proceeding. I would hate to give it up. I have been doing it for 45 

years—doing other things, too. Our office does handle many different kinds of bankruptcy. We represent trustees, we represent 

debtors, we represent creditors, which provide income for us and 

allow us to continue. 

But the trustee work is kind of the spot, the work that goes closest to my heart, in performing something that is of value to the 

people who file it. All the other laws in the country provide purVerDate Aug 31 2005 14:46 Apr 24, 2009 Jkt 000000 PO 00000 Frm 00015 Fmt 6633 Sfmt 6601 H:\WORK\COMM\091608\44493.000 HJUD1 PsN: 44493
12 

suing and collecting money and putting people in jail. The bankruptcy law is the only law that works retroactively and says we are 

going to give you relief for what you did in the past, and I think 

that is probably one of the noblest relief valves we have in this 

country. And I want to continue to be a part of that. And I want 

to continue to be able to afford to be a part of that. 

Thank you very much for allowing me to address the Subcommittee. 

[The prepared statement of Mr. Crane follows:] 

13 

PREPARED STATEMENT OF EUGENE CRANE


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Ms. SA ́ NCHEZ. Thank you, Mr. Crane. We appreciate your testimony. 

At this time I would invite Judge McGarity to give her testimony. 

TESTIMONY OF THE HONORABLE MARGARET DEE McGARITY, 

UNITED STATES BANKRUPTCY COURT, EASTERN DISTRICT 

OF WISCONSIN, MILWAUKEE, WI 

Judge MCGARITY. Thank you. 

I would like to thank the Members and the staff for allowing me 

to address the Subcommittee on the current issue of the terribly 

antiquated level of trustee compensation. 

I wholeheartedly support just compensation for the men and 

women who are a vital part of the bankruptcy system. 

My name is Margaret Dee McGarity. I am chief judge of the 

United States Bankruptcy Court for the Eastern District of Wisconsin. 

I have been a bankruptcy judge for slightly over 20 years. And 

before that I practiced law in Milwaukee, which included serving 

as a Chapter 7 trustee in bankruptcy, the first time in 1978, which 

was under the former Bankruptcy Act. Thirty years ago, trustees received $10 per case. However, all 

that was necessary to be a trustee was a legal pad, a telephone and 

the Federal Building Law Library. There were no audits, no U.S. 

Trustee meetings, no means test analysis, no mandatory electronic 

filing, no PACER court records access, no notices to special creditors. Someone from the clerk’s office even ran the tape recording 

at the meeting of creditors. There was no specialized overhead in 

being a bankruptcy trustee and no unproductive time of any significance. 

Other trustees in my district were experienced and generous 

with their knowledge and expertise. My best research tool was my 

telephone. 

My experience as a trustee bears no resemblance to what it 

means to be a trustee today. Offices require regular updates of 

hardware and software to manage their cases and to interface with 

the court system. This is the electronic age. We can’t go back, and 

I am not suggesting that we do. 

There is additional oversight now, with reports and audits. Accountability is good, but it is not compensable. The 2005 act requires considerable additional duties for trustees, such as notifying 

domestic support obligation claimants about state agency services. 

These duties have nothing to do with the bankruptcy or the adjudicative process and they are not compensated. They should be. 

But not at the expense of the courts. 

The trustees I worked with long ago were at the top of our profession, and many are today. But as time has gone by, these experienced trustees have often told me, ‘‘I can’t afford to do this anymore.’’ 

With the changes in technology and the law since 1994, no one 

should be surprised at this. I have heard that non-trustee law practice or other business, or non-lawyer trustees, has had to support 

the trustee portion of the business. They can do this for a while, 

and they do these because there are many dedicated trustees who 

19 

enjoy the work and believe it is valuable. Many experienced trustees are still working within the system and are sitting at the table 

here today. And the courts and creditors depend on them, but this 

situation cannot continue. 

What happens when service to the courts becomes so unproductive that a good attorney or accountant reluctantly gives it up for 

more lucrative pursuits? Sometimes, unfortunately, people who 

can’t make more money at other pursuits move in to fill the void 

in trustee positions. Or if the trustees don’t quit, more energy is 

spent on whatever makes money. And the trustee duties move to 

the back burner. 

Recently I received a letter from a wage claimant of a defunct 

corporation who told me that the trustee was not answering phone 

calls. She had waited 2 years for wages owed by the former employer. I don’t know what this trustee must have to do to administer the case, but I understand that the trustee is more motivated 

to work on something that will pay the bills as opposed to trustee 

work that doesn’t pay the bills. This causes more work for the 

courts and the legitimacy of the system in the eyes of the public 

suffers. 

Bankruptcy is the only exposure many ordinary people have to 

the Federal justice system. The trustees are in the frontlines of 

contact with creditors and debtors. Failure to provide just compensation for those who represent the system means that dedicated 

trustees may prop up the system for a while, but soon only the mediocre or worse will work for us. This is not what I want for the 

system of justice that I have served for my entire career. 

The current proposal is that filing fee will fund the increase in 

trustee compensation, but what about the 2005 provision for waiver 

of the fee? The trustee still has all the duties prescribed by statute, 

but he or she is required to work for nothing. We don’t do this to 

attorneys who represent the indigent accused. We don’t do this to 

jurors. But we do it to bankruptcy trustees. This is deplorable 

treatment of people who render a very valuable service to the 

courts and the creditors, and who are the face of the Federal Government to many citizens who have no other exposure to courts. 

I urge you to recognize the importance of bankruptcy trustees to 

the court system and to modify their compensation so that talented, skilled and experienced individuals will continue to serve it 

and make it work. 

Thank you for your kind attention and consideration. I would be 

happy to answer any questions that you have. 

[The prepared statement of Judge McGarity follows:] 

20 

PREPARED STATEMENT OF THE HONORABLE MARGARET DEE MCGARITY


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Ms. SA ́ NCHEZ. Thank you, Judge McGarity. 

At this time I will invite our last business to give his oral remarks. 

Mr. Williams? 

TESTIMONY OF JACK F. WILLIAMS, ESQ., PROFESSOR, 

AMERICAN BANKRUPTCY INSTITUTE, ALEXANDRIA, VA 

Mr. WILLIAMS. Thank you very much, madam Chairwoman, and 

Members of the Subcommittee. 

Good afternoon, and thank you very much for inviting me to visit 

with you over proposed legislation that would increase compensation for Chapter 7 bankruptcy trustees in no asset cases. 

In this country, we ask much of our bankruptcy system, yet no 

system is any better than the people who operate within it. Therefore, it is incumbent that we retain and attract competent, honest 

and committed trustees. As designed, our present system simply 

will not work effectively without them. 

The legislation proposed today seeks to increase the no asset Chapter 7 trustee fee from $60 to $120. At the $60 level, we are 

talking about at a low end of billable hour somewhere between 10 

and 14 minutes per file before the trustee starts to eat into his own 

human capital. This is an increase that is immodest in nature, yet 

funds what is absolutely one of the most effective components of 

our bankruptcy system. 

In other systems in other countries, this function that is shouldered by the Chapter 7 bankruptcy trustee, is usually done by a 

government official. But here what we see is a privatization, if you 

will, of oversight, monitoring and investigation, which has been 

very, very effective, not withstanding the fact that a fee increase 

has not taken place for some 14 years, yet the scope of responsibility has increased substantially. 

Bankruptcy trustees handle—about nine out of every ten or more 

of their cases are no asset cases. But no asset does not mean no 

work. There is still plenty of work to be done from an investigation 

of the schedules that are filed with the bankruptcy petition. Followon work, including investigatory work at the request of the U.S. 

trustee, and the implementation of the new means testing since the 

2005 act, conducting the Section 341 meeting and examination, a 

determination of potential misconduct on the part of the debtor, the 

debtor’s attorneys, the debt relief agencies and bankruptcy petition 

preparers, and of course, abuse itself. 

Those debtors that seek to gain are rooted out by the Chapter 

7 bankruptcy trustee who has a fiduciary duty to the estate, notwithstanding sometimes the lack of funds or the insufficiency of 

funds, who nonetheless investigates debtors who have engaged in 

misconduct and bring actions that are checked to their discharge. 

All of which are absolutely essential for the bankruptcy system to 

work the way we have crafted it. 

Along with expanding the scope of duties while at the same time 

not increasing the compensation, we ask something else of the 

Chapter 7 bankruptcy trustee. We ask that they be the face of government and the face of the judiciary. 

This year at the American Bankruptcy Institute we predict about 

1.2 million bankruptcy filings. We are still very far away from the 

24 

records that we saw not too long ago, but nonetheless a tremendous 

amount, a significant number of bankruptcy filings. Most Americans, when they interface, when they deal with the Federal judiciary, will do so through this window. That is through their interface 

with the bankruptcy system, and they will make a determination 

about all of us and all aspects of government and governmental 

function based on that interaction. 

What we want to make sure from an institutional perspective is 

that we continue to attract competent, thoughtful and dedicated 

trustees to serve this important function, not only from an investigatory purpose, but also from a public service perspective as well. 

It is absolutely important, again, for our system to function effectively. 

Thank you very much for the opportunity to share my thoughts. 

[The prepared statement of Mr. Williams follows:] 

25 

PREPARED STATEMENT OF JACK F. WILLIAMS


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Ms. SA ́ NCHEZ. Thank you, Professor Williams. We appreciate 

your testimony. 

We are now going to begin our rounds of questioning, and I will 

begin by recognizing myself for 5 minutes of questions. And I am 

going to sort of go in reverse order. Usually I go this way, but I 

am going to start with Professor Williams first. 

I am curious to know what amount you think would be fair to 

set for the trustee fee and why. 

Mr. WILLIAMS. The proposal is an increase from $60 to $120. I 

think that is a reasonable increase from an institutional perspective, absolutely necessary. 

I think many of the cases are handled quite effectively with the 

trustee and their assistants, and I think that that fee should permit the trustee to continue to discharge his or her duties, along 

with the assistants that they use. And therefore, the institution 

itself would operate effectively. 

So I think an increase to $120 is a reasonable amount. I would 

not object to an increase to $150. 

Ms. SA ́ NCHEZ. That is what I am trying to get at. Do you think 

that the $120 even sort of begins to put the real, you know, to compensate in a real way the amount of time that goes into it? 

Mr. WILLIAMS. It begins to. 

Again, what we are talking about is moving from about 14 minutes of compensable time to about half an hour of compensable 

time, and trustees are—those who are efficient and experienced, 

seasoned, can work through very quickly many of their cases. Of 

course, there are cases that require additional investigatory work, 

and they will be outside the profile. 

Ms. SA ́ NCHEZ. Thank you. 

In your written statement that you submitted for the record, you 

noted that the 2005 act requires certain ‘‘additional duties of trustees unrelated to the bankruptcy or adjudicative process that should 

be compensated, but not at the expense of the court,’’ and I think 

you said that in your oral testimony as well. 

Would you please explain what you mean when you say not at 

the expense of the court? 

Judge MCGARITY. Well, as I understand it, the filing fees that 

are paid by debtors go into the unappropriated judiciary budget. In 

the past—and of course it has varied a lot because of the new 

law—the fees that come in through the bankruptcy system are 80 

to 90 percent, maybe, I have heard as high as 92 percent, of the 

income that comes into the judicial system, through other filing 

fees and what have you. And of course the rest of the courts run 

on appropriated funds. 

If you deduct a portion of those unappropriated funds, then I 

don’t know. I didn’t multiply a million two, but it is by the $60 increase over what they have now, it would mean that the budget of 

the judiciary would take a hit of, I don’t know, $60 million, $70 

million? 

Our court system is running pretty lean right now, particularly 

when it comes to funding in clerks offices and the people who run 

the administration of the system. To take that amount of money 

out of the funds that run the court system means that it would, 

30 

if you want justice, have to be made up elsewhere, which would 

mean from appropriated funds. 

A lot of what trustees do, I think, too, is more in the investigation nature. Now, investigation in the executive branch is done by 

the FBI or the U.S. Attorneys, and the U.S. Trustee also does 

some. But when it falls upon the panel trustees, then it seems to 

me it is a quasi-prosecutorial process. They are the ones who look 

for money that is hidden. They make referrals for prosecutions. 

That is the sort of thing that should be funded by the executive 

branch, because it is in the nature of prosecution. It is in the nature of investigation. Now, the $60 filing fee that already comes out of the unappropriated funds that the judiciary runs on, much of what trustees do of 

course is part of the judicial process. And so I think it is appropriate that that be shared. How? I don’t know. 

Ms. SA ́ NCHEZ. Okay. I was just getting at the point. 

Judge MCGARITY. That is the point. 

Ms. SA ́ NCHEZ. Would a hit to the courts, trying to run the way 

that they are running, if they were the ones that had to provide 

the $60 increase, would be—— 

Judge MCGARITY. And the legislation that I read doesn’t allow an 

increase in the filing fee to make up the difference. So what are 

the courts going to have to do? They are going to have to lay off 

people. 

Ms. SA ́ NCHEZ. Okay. Thank you. 

Mr. Crane, why do the trustee services go uncompensated when 

the bankruptcy—or, I am sorry. Let me rephrase that. I know why, 

because you said why the trustee services go uncompensated when 

the filing fee is waived. But how do you think Congress should address that problem? 

Mr. CRANE. I am sorry? 

Ms. SA ́ NCHEZ. When the filing fee is waived, the trustees don’t 

get compensated because they are—— 

Mr. CRANE. That is correct. 

Ms. SA ́ NCHEZ. So how do you think Congress could fix that problem of the trustee not getting compensated when the filing fee is 

waived? 

Mr. CRANE. I have no objection to the in forma pauperis fees. 

People can’t afford it, and they are entitled to relief. That is not 

our objection. The fact that we don’t get paid from that $60, hopefully, has to 

be offset by the additional funds of any increase we get in the asset 

cases we may get. And that is okay. I think statistically the forma 

pauperis cases are—an NABT trustee did a survey which was published in our journal and shows that may occur anywhere from 2 

to 11 percent of all cases that they handle in any given state. And 

that could turn out to be a sizeable amount of money. 

But that is something that we can’t argue with. If there were a 

provision to pass or if there were additional funds collected in some 

way or appropriated to cover the in forma pauperis, that would be 

great. But, you know, we accept that and if we can make up our 

fees appropriately that percentage can probably be covered so that 

we are not filing our own bankruptcy—— 

Ms. SA ́ NCHEZ. Okay. 

31 

Mr. CRANE [continuing]. Because we would have to hire other 

counsel and, you know. 

Ms. SA ́ NCHEZ. It gets expensive. Thank you, Mr. Crane. 

And last question for Mr. Furr. Have you observed trustees leaving the bankruptcy system because they find that the compensation 

just isn’t keeping up with the amount of time and effort they are 

putting in? 

Mr. FURR. It has happened to a certain extent. It hasn’t happened to a big extent so far. I know of at least one trustee in my 

area who retired rather than take on the duties under BACPA, the 

law that passed a couple of years ago, because he didn’t want to 

have to do the additional duties. And I have heard of other instances around the country. People are leaving; I know people are 

considering it. And we are hoping to stop that. 

Ms. SA ́ NCHEZ. Thank you. 

My time is expired. At this time, I would like to recognize Mr. 

Cannon for 5 minutes of questions. 

Mr. CANNON. Thank you, Madam Chair. 

May I just follow up with Mr. Furr? 

How much more time are trustees spending under—give the new 

duties under BACPA? Do you have any sense of that? 

Mr. FURR. It would depend upon the case, but I would suggest 

it is about twice as much time as was spent before. 

Mr. CANNON. On average it is twice as much per case? 

Mr. FURR. Yes, sir. 

Mr. CANNON. Or just on those cases where—— 

Mr. FURR. No. All cases are those cases. All cases are now covered by BACPA, bankruptcy reform act. So we have to spend that 

additional time on every case. 

Mr. CANNON. And so you think it has doubled your time? 

Mr. FURR. I do. 

Mr. CANNON. But we haven’t raised the compensation? 

Mr. FURR. We have not. The only thing, Congressman, that has 

really enabled us to keep up with it is electronic equipment and 

computerization, which has helped us quite a lot, to try to keep up 

with it. But it still takes a great deal more of my time than it did 

before. 

Mr. CANNON. Are lawyers and their clients coming up with better 

documentation, electronic documentation, as part of that process? 

Mr. FURR. No really. It has not particularly improved that much. 

It is still upon us to go out and search out the information. 

The electronic age has helped us a great deal, because now we 

can access governmental records, deed records, lien records, tax 

records, much easier than we could before, and that has helped us 

quite a lot. But, really, the debtor’s bars, standard of practice, has 

not really improved that much in my opinion. 

Mr. CANNON. Have magistrates established rules, either by district or otherwise, that would require the debtor’s bar to be more 

aggressive in how they provide information? 

Mr. FURR. Well, the bankruptcy law that was passed does do 

that, and local rules do too. And it is really up to us to enforce that, 

because we are the ones that don’t get the information, so we have 

to in essence stay on top of our debtor’s attorneys to make sure 

they do provide the information that we need to do our job. 

32 

And if we do that, they do. But it is still an adversarial process, 

don’t forget. They are representing a client, and they are trying to 

not give you the money, and you are trying to, you know, recover 

the assets that may be there or may be hidden. And so it is an adversarial process. 

Mr. CANNON. Well, I had an interesting experience on an airplane, sitting next to a magistrate in bankruptcy who walked me 

through what he thought—how his court had operated and was 

going to operate under the new act, before we had actually passed 

it here. And he convinced me in 4 hours of flying that there is a 

lot you can do with rules, local rules, as well as the BACPA, that 

create a system that makes it easier on trustees. 

What I am hearing you say is that that is not—at least in your 

experience, that hasn’t been the case. 

Mr. FURR. Not necessarily. Understand, again, we can’t always 

trust the information we are given. We have to look behind it. We 

have to have a sense that this person is not being honest. When 

you look at someone and they are dressed in clothes that don’t go 

with the income they say they are reporting, or they are wearing 

jewelry that doesn’t go with that, just their demeanor doesn’t go 

with the image they are trying to project, you may realize there is 

something going on here, and you look beyond that. 

So it is a lot of experience and instinct that goes with what we 

do, not just rules. 

Mr. CANNON. When a wise, old state judge told me when I was 

a young practicing lawyer, due process is in the paperwork, but 

once you get these people with their filings and the attached electronic files, that is the paperwork that ultimately nails them if 

they have committed a crime, even if you miss it. 

Has it been easier because of the requirements that have been 

made or not? It sounds to me like you are talking about your job 

is easier because you can go Google somebody and find out other 

information about them. But have we improved our rules so submissions are easier for you to deal with? 

Mr. FURR. Yes, there has been improvement. 

Mr. CANNON. So given the improvement that you have had there, 

is it still twice as much time per case, do you think? 

Mr. FURR. Yes, sir, because we have to read all these papers. The 

typical bankruptcy petition is about 35 pages long in a very simple 

case. 

Mr. CANNON. Right. I am not adversarial here. 

Mr. FURR. And they added about ten additional pages that 

weren’t there before. All those pages need to be reviewed. 

Mr. CANNON. I don’t mean to be adversarial, just to develop the 

record. The fact is, we are demanding a great deal more. There are 

some processes that help out, but it is taking a great deal more 

time, and unless we want to lower the quality of people doing the 

work, we are going to have to raise the pay to those folks. I think 

that is—— 

Mr. FURR. That is correct, sir. 

Mr. CANNON. Thank you, Madam Chair. I yield back. 

Ms. SA ́ NCHEZ. The gentleman yields back his time. 

At this time I would like to recognize the gentleman from Georgia, Mr. Johnson, for 5 minutes of questions. 

33 

Mr. JOHNSON. Thank you, Madam Chair. 

Mr. Furr, would you please briefly walk us through the typical 

Chapter 7 no asset case from the trustee’s perspective, and tell us 

what the trustee’s duties would be and how much time they consume. 

Mr. FURR. Yes, sir. 

On a typical Chapter 7 no asset case, I would normally receive 

a court download by email of the petition being filed and myself 

being appointed trustee. I would open that email up and take a 

look at the bankruptcy petition schedule and financial affairs and 

all the other documents filed with the bankruptcy petition, and I 

might print it off or I might just store it electronically. 

But normally we would print it off, and we would have on those 

papers all the information that the debtor submitted to the court 

as to what their assets, liabilities and affairs were. We would then 

take a look at that. I would look at that and my assistants would 

look at that. I have people in my office who would go through and 

look at all of the cars listed. We go through the latest black book 

that used car dealers use to value each car, and we would write 

down that value on the schedules. 

We would look at the mortgage, the liens on the cars, and we actually go to the State of Florida’s Web site for the Department of 

Motor Vehicles and look up each VIN number on the cars to make 

sure the VIN numbers match, because occasionally the VIN numbers don’t match. And we also occasionally find that there are cars 

listed with the State of Florida belonging to this particular debtor 

that aren’t on the schedules, and we uncover assets that way. 

We take a look at the mortgages that are recorded against the 

debtor’s property to make sure they are in fact recorded mortgages 

and make sure they have the proper legal descriptions. 

Now, this can be done looking through electronic records, and 

generally speaking it can be done fairly rapidly. It is either done 

by myself or someone else in my office. 

WE also then have to take a look at the debtor’s means test, 

which is the test that Congress enacted a couple of years ago to see 

if any consumer debtor could in debt be eligible for Chapter 7 

bankruptcy. In order to test that, we have to look at the debtor’s 

tax returns for 2 years and we have to look at the debtor’s payment 

advices, which are the last several months of their payments, to 

make sure that their pay is matching what they have placed on the 

means test. 

Now, for many people who have low incomes, that is a very quick 

process. In some cases, it can be a longer process in someone who 

has a higher income. But that does take time, to look at all those 

issues. 

We then get that information and put it together, and if there 

is anything else on the schedules that raises an issue, like is there 

child support issues, is there a divorce pending, we may have to 

take a look at that. We get calls from debtors, from creditors occasionally. We always get contacted from car finance companies or 

mortgage companies, asking for relief from stay, particularly today 

when people aren’t able to keep their houses. 

So all of that is packaged together, put into a file. I review it. 

It is prepared by someone in my office. And we go to a first meetVerDate Aug 31 2005 14:46 Apr 24, 2009 Jkt 000000 PO 00000 Frm 00037 Fmt 6633 Sfmt 6601 H:\WORK\COMM\091608\44493.000 HJUD1 PsN: 44493
34 

ing of creditors. Those occurs three or four times a month for me, 

at which time the debtor comes in. I bring the debtor, usually perhaps their spouse, in. They are sworn in under oath. We examine 

them on the information in those schedules. That can take anywhere from 5 minutes to about 10 minutes in my case. In a large 

case, it could take a lot longer. But typically in a no asset case, 5 

to 7 minutes, pretty quickly, to go through it, look at their tax returns. 

I will also look at their credit card bills and ask them to bring 

those in so I can see if they have in fact bought appliances or other 

things that may have value that we could recover for the creditors. 

We take a look at the value of all their assets. We take a look at 

their jewelry, other things, to see if there is anything for the creditors. 

At the end of the examination, we ask them if they understand 

the effect of bankruptcy on their credit, the effect of a discharge in 

bankruptcy, to make sure they understand what is going on. We 

make sure their attorney has properly informed them. 

Creditors have an opportunity to appear at the hearings, and 

sometimes they do, and ask questions. And then we typically conclude the hearing. 

If that is determined to be a no asset case by me, then I have 

to go back to my office. I have to then log into the U.S. Trustee, 

the court clerk Web site, and electronically file a report of no asset. 

And that is my conclusion of the case. 

Now, that time period I just spoke of, in a no asset case, can be 

anywhere from an hour to a couple of hours, depending upon the 

number of items involved. 

Mr. JOHNSON. Yeah, that is quite a bit of time for you and your 

staff. 

How much would you say that you—how much would that time 

be actually worth as a trustee? What would you consider to be a 

fair trustee fee? 

Mr. FURR. I would say that a fair fee, if you were going to pay 

it by the hour, which it would never occur that way, a fair fee 

would probably be $250 to $300 per case. But there is no way that 

could be justified in the current bankruptcy system. 

I think increasing this fee to $120 would give us a chance to compensate us somewhat fairly. Don’t forget, Congressman, there are 

also cases we get where we retain assets, and we make a larger 

fee on those. And some of what we do is really—we do the no asset 

cases hoping that we will get some asset cases that will counterbalance the base of the no asset fee. 

The no asset fee really is designed I think to give us some base 

of income that we can then do the rest of the practice. 

Mr. JOHNSON. Of the Chapter 7 cases, what percentage are no 

asset cases? 

Mr. FURR. About 95 percent 

Mr. JOHNSON. About 95 percent. And what percent of those are 

in forma pauperis cases? 

Mr. FURR. In my district, probably about 1 percent. In other 

parts of the country, I know for instance Vermont has a very high 

rate. I have heard from trustees in Vermont it can be as much as 

7 to 10 percent there. 

35 

Mr. JOHNSON. Thank you. 

Ms. SA ́ NCHEZ. The time of the gentleman has expired. 

At this time I would like to recognize the gentleman from Massachusetts, Mr. Delahunt, for 5 minutes. 

Mr. DELAHUNT. Thank you, Madam Chair. 

What does the data show in terms of annual compensation to a 

trustee? 

Mr. CRANE. I don’t think there are any statistics that are specific 

to trustee’s compensation. There is a—— 

Mr. DELAHUNT. No, I am just saying nationally, okay. 

Mr. CRANE. Nationally? 

Mr. FURR. I don’t know the answer to that question. 

Mr. DELAHUNT. I would like to see that. 

Mr. CRANE. That is kind of—Congressman, that has to include 

a balance of people who do trustee work, let’s say, on the coast, 

who handle mega-bankruptcy cases, and then mass of trustees in 

middle America and the southwest and the south who really don’t 

get that type of asset cases, who would bring the average way, way 

down. So it is kind of difficult to compute an average. 

Mr. DELAHUNT. That is a very good point. And maybe I think for 

our consideration, if the trustees, the U.S. Trustee, could maybe 

break down the numbers with some kind of formula that would 

make adjustments. 

I mean, I am interested. I have never been to a bankruptcy hearing, although I was very much, as Mr. Cannon would remember, 

very much engaged in the Bankruptcy Reform Act. And I attended 

simply because I am friendly with a lawyer who was seeking a fee, 

and it is an asset case. And the bill is now around $40,000. I know 

you have got to make it up—$60, $120, you know, $200, I mean, 

this is silly. Even if it is a no asset case, you know, you pick the 

phone up and that is probably worth $50 in terms of time. 

But there has got to be a better system, and I think you need 

to present—because I tell you, I haven’t—I was not impressed with 

this particular trustee, because, you know, obviously I am not going 

to identify him, but it was in Boston, and I am kind of monitoring 

the case as a case study for myself in terms of the realities on the 

ground. You walk into the, you know, courtroom. I am an attorney. 

I was the elected prosecutor in the Greater Boston area and served 

in that role for 22 years, so I have tried a number of cases myself. 

It is a nice, little, quiet practice. Everybody knows everybody else. 

It is clear the trustee, at least this particular trustee, you know, 

was taking this on. It was an effort. And I am sure part of that 

is reflected in the frustration in these other cases that you are talking about that are a $60 filing fee. 

Judge MCGARITY. Well, Congressman, it is not really a quiet little practice. When I was a trustee, you know, some of my best information came from former spouses and employees who were familiar with some shenanigans, and so it can be quite lively sometimes. 

Mr. DELAHUNT. I am not—and again, this is anecdotal and this 

is unfair, but this is my interface. 

Judge MCGARITY. Right. Really, this is what—the asset cases are 

just plain different from the no asset cases. 

Mr. DELAHUNT. Right. 

36 

Judge MCGARITY. And since most of them are no asset cases, 

someone who serves as a trustee in Oshkosh, Wisconsin may not 

get a lot of huge asset cases, but serves a very valuable service to 

that constituency. And we have to compensate people for both the 

no asset cases and the asset cases. 

Mr. DELAHUNT. I recognize that, and that is why I suggested 

that the U.S. Trustee, using a formula that is reflective of common 

sense, could provide the Committee, you know, with some guidance 

in terms of annual compensation. Maybe a break down between 

nonasset cases and asset cases. Are there, you know, favorite trustees that are earning very large amounts of money in asset cases? 

Judge MCGARITY. No, not really, because it is on a random draw. 

And I think that is pretty much everywhere. It certainly is where 

I am. It is quite random. And I am not sure that the U.S. Trustee 

keeps those statistics. I obviously cannot speak for the U.S. Trustee. I don’t have anything to do with that. But I would question 

whether they even keep those statistics. 

Mr. DELAHUNT. I guess what I am suggesting is those statistics 

ought to be developed if they are not retained. 

Could I have an additional 2 minutes, Madam Chair? 

Ms. SA ́ NCHEZ. Without objection, the gentleman is given 2 extra 

minutes. 

Mr. DELAHUNT. And I think it would be very informative and enlightening to come before the Committee, and I am sure you could 

provide that information to the Chair and the Ranking Member, to 

educate us. 

Judge MCGARITY. I think it might take years to put together 

those sorts of statistics, and the system is in real crisis right now 

that we need to keep the trustees that we have, we need to keep 

the quality of the trustees that we have, because we encounter real 

problems when we are not able to do that. So I don’t know that—— 

Mr. DELAHUNT. Let me then reframe it. I understand that it will 

take years. I think it would behoove the bankruptcy trustees to 

begin to develop the software to compile that data so that years 

from now when none of us are here but there is another set of witnesses before a similar Committee, that the data is available, because I think we need to make an informed decision. 

I am for people earning money, and I know that being a trustee 

in bankruptcy can be very frustrating. I would like to see, you 

know—and I oppose the so-called Bankruptcy Reform Act that I 

think was clearly skewered toward the credit card issuers. Wait ’til 

that bubble bursts. We will have more than $500 or 500-point declines on the Dow. 

But the reality is there has to be, I think, a legitimate effort to 

do even more work to identify those that are inclined to game the 

system. 

I think you could be—you should be well compensated for doing 

I think a very tedious chore of compiling and analyzing and reaching conclusions. But, I mean, I have no problem saying $60 to $120. 

I could do $200. I could do $250. But you have got to, I think, make 

your case, is what I am suggesting to you. 

I mean, there is data out there. And I go one time to a bankruptcy court in Boston saying—we are unfamiliar with it. We are 

not practitioners. We are not in there every day. I mean, the people 

37 

on this panel are intelligent, they can understand concepts. They 

have some data available. You are here in a very discreet issue. If 

you don’t have the data now, and you can’t get it in timely fashion 

because there is a crisis, I think you will find the Chair and the 

Ranking Member very sympathetic to your cause. 

But what I am suggesting is as time goes on there should be that 

data available so that you can come in here and you can reel off 

those answers, not in anecdotal fashion, but with some empirical 

evidence, because somebody might say, you know, $60 for 5 hours 

work? No, that is wrong. Maybe we have to go to an hourly system. 

Let’s think outside the box. Let’s not just imagine ourselves beholden to what we have always done. 

You have got, what 1.2 million filings this year? Is that the projected? Think of what it is going to be like next year. 

Mr. FURR. Sir, I hope not. 

Mr. DELAHUNT. Well, you know, we had a good day on the Dow, 

it only went down 50 points. 

Ms. SA ́ NCHEZ. The time of the gentleman has expired. 

And I have been asked for unanimous consent to submit Mr. 

Conyers’ opening statement into the record, and without objection 

it will be so ordered. 

I want to thank all of the witnesses for their testimony today. 

Without objection, Members will have 5 legislative days to submit any additional written questions, which we will then forward 

to the witnesses and ask that you answer as soon as you can, so 

that they can be made a part of the record. 

Without objection, the record will remain open for 5 legislative 

days for the submission of any additional materials. 

Again, I want to thank everybody for their time and patience. 

And this hearing of the Subcommittee on Commercial and Administrative Law is adjourned. 

[Whereupon, at 3:07 p.m., the Subcommittee was adjourned.] 

(39) 

A P P E N D I X 

MATERIAL SUBMITTED FOR THE HEARING RECORD

40 

RESPONSE TO POST-HEARING QUESTIONS FROM ROBERT FURR, ESQ., 

FURR AND COHEN, P.A., BOCA RATON, FL 


A-1.eps
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A-2.eps
42 

RESPONSE TO POST-HEARING QUESTIONS FROM JACK F. WILLIAMS, PROFESSOR, 

AMERICAN BANKRUPTCY INSTITUTE, ALEXANDRIA, VA 

Æ 


B-1.eps