U.S. GOVERNMENT PUBLISHING OFFICE

32–979 WASHINGTON : 2018

BANKRUPTCY ADMINISTRATION IMPROVEMENT 

ACT OF 2017 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

REGULATORY REFORM, 

COMMERCIAL AND ANTITRUST LAW 

OF THE

COMMITTEE ON THE JUDICIARY 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FIFTEENTH CONGRESS 

SECOND SESSION 

SEPTEMBER 26, 2018 

Serial No. 115–66 

Printed for the use of the Committee on the Judiciary 

( 

Available via the World Wide Web: http://www.govinfo.gov 

(II) 

COMMITTEE ON THE JUDICIARY 

BOB GOODLATTE, Virginia, Chairman 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

LAMAR SMITH, Texas 

STEVE CHABOT, Ohio 

DARRELL E. ISSA, California 

STEVE KING, Iowa 

LOUIE GOHMERT, Texas 

JIM JORDAN, Ohio 

TED POE, Texas 

TOM MARINO, Pennsylvania 

TREY GOWDY, South Carolina 

RAU ́ L LABRADOR, Idaho 

BLAKE FARENTHOLD, Texas 

DOUG COLLINS, Georgia 

RON DESANTIS, Florida 

KEN BUCK, Colorado 

JOHN RATCLIFFE, Texas 

MARTHA ROBY, Alabama 

MATT GAETZ, Florida 

MIKE JOHNSON, Louisiana 

ANDY BIGGS, Arizona 

JOHN RUTHERFORD, Florida 

KAREN HANDEL, Georgia 

KEITH ROTHFUS, Pennsylvania 

JERROLD NADLER, New York 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

STEVE COHEN, Tennessee 

HENRY C. ‘‘HANK’’ JOHNSON, JR., Georgia 

THEODORE E. DEUTCH, Florida 

LUIS V. GUTIE ́ RREZ, Illinois 

KAREN BASS, California 

CEDRIC L. RICHMOND, Louisiana 

HAKEEM S. JEFFRIES, New York 

DAVID CICILLINE, Rhode Island 

ERIC SWALWELL, California 

TED LIEU, California 

JAMIE RASKIN, Maryland 

PRAMILA JAYAPAL, Washington 

BRAD SCHNEIDER, Illinois 

VALDEZ VENITA ‘‘VAL’’ DEMINGS, Florida 

SHELLEY HUSBAND, Chief of Staff and General Counsel 

PERRY APELBAUM, Minority Staff Director and Chief Counsel 

SUBCOMMITTEE ON REGULATORY REFORM, COMMERCIAL AND ANTITRUST LAW

TOM MARINO, Pennsylvania, Chairman 

BLAKE FARENTHOLD, Texas Vice-Chairman 

DARRELL E. ISSA, California 

DOUG COLLINS, Georgia 

KEN BUCK, Colorado 

JOHN RATCLIFFE, Texas 

MATT GAETZ, Florida 

KAREN HANDEL, Florida 

DAVID CICILLINE, Rhode Island 

HENRY C. ‘‘HANK’’ JOHNSON, Jr., Georgia 

ERIC SWALWELL, California 

BRAD SCHNEIDER, Illinois 

VALDEZ VENITA ‘‘VAL’’ DEMINGS, Florida 

(III) 

C O N T E N T S 

SEPTEMBER 26, 2018 

OPENING STATEMENTS 

Page 

The Honorable Bob Goodlatte, Virginia, Chairman, Committee on the Judiciary ......................................................................................................................... 26

The Honorable Tom Marino, Pennsylvania, Chairman, Subcommittee on Regulatory Reform, Commercial and Antitrust Law, Committee on the Judiciary ......................................................................................................................... 1 

The Honorable David Cicilline, Rhode Island, Ranking Member, Subcommittee on Regulatory Reform, Commercial and Antitrust Law, Committee on the Judiciary ........................................................................................ 2 

WITNESSES 

The Honorable Alan C. Stout, Bankruptcy Court Judge, U.S. District Court 

for the Western District of Kentucky 

Oral Statement ................................................................................................. 6 

Mr. Clifford J. White III, Director, U.S. Trustee Program 

Oral Statement ................................................................................................. 7 

Mr. N. Neville Reid, Capital Partner, Fox Swibel Levin & Carroll LLP, 

Co-Chair of the Bankruptcy, Restructuring and Creditors’ Rights Group 

Oral Statement ................................................................................................. 9 

Ms. Ariane Holtschlag, Attorney, Law Office of William J. Factor, Ltd. 

Oral Statement ................................................................................................. 11 

Mr. John Rao, Attorney, National Consumer Law Center 

Oral Statement ................................................................................................. 12 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Letter submitted by the Honorable Tom Marino, Pennsylvania, Chairman, 

Subcommittee on Regulatory Reform, Commercial and Antitrust Law, Committee on the Judiciary. These materials are available at the Committee 

and can be accessed on the Committee Repository at: 

https://docs.house.gov/meetings/JU/JU05/20180926/108455/HHRG-115- 

JU05-20180926-SD003.pdf 

Opening Statement submitted by the Honorable Jerrold Nadler, New York, 

Ranking Member, Subcommittee on Regulatory Reform, Commercial and 

Antitrust Law, Committee on the Judiciary. This material is available 

at the Committee and can be accessed on the Committee Repository at: 

https://docs.house.gov/meetings/JU/JU05/20180926/108455/HHRG-115- 

JU05-20180926-SD002.pdf 

Letter submitted by the Honorable Hank Johnson, Georgia, Subcommittee 

on Regulatory Reform, Commercial and Antitrust Law, Committee on the 

Judiciary. These materials are available at the Committee and can be 

accessed on the Committee Repository at: 

https://docs.house.gov/meetings/JU/JU05/20180926/108455/HHRG-115- 

JU05-20180926-SD004.pdf 

(1) 

BANKRUPTCY ADMINISTRATION 

IMPROVEMENT ACT OF 2017 

WEDNESDAY, SEPTEMBER 26, 2018 

HOUSE OF REPRESENTATIVES

SUBCOMMITTEE ON REGULATORY REFORM

COMMERCIAL AND ANTITRUST LAW

COMMITTEE ON THE JUDICIARY

Washington, DC. 

The Subcommittee met, pursuant to call, at 10:00 a.m., in Room 

2237, Rayburn House Office Building, Hon. Tom Marino [Chairman 

of the Subcommittee] presiding. 

Present: Representatives Marino, Goodlatte, Buck, Handel, 

Cicilline, Johnson, Schneider, and Demings. 

Staff Present: Daniel Flores, Counsel; Andrea Woodard, Clerk; 

Susan Jensen, Minority Counsel; and Slade Bond, Minority Counsel. 

Mr. MARINO. Good morning. The Subcommittee on Regulatory 

Reform, Commercial and Antitrust Law will now come to order. 

Without objection, the Chair is authorized to declare recesses of the 

Committee at any time. We don’t expect to be interrupted by votes 

at this point. 

We welcome everyone here to today’s hearing on H.R. 3553, the 

‘‘Bankruptcy Administration Improvement Act of 2017’’. I now recognize myself for an opening statement. 

Bankruptcy trustees are the backbone of the United States bankruptcy system. Chapter 7 cases are bankruptcy proceedings for the 

liquidation of assets by an individual debtor. 

There are approximately 1,000 chapter 7 trustees who receive 

cases and collectively administer over one million cases annually. 

The trustees are private citizens appointed and supervised by the 

Office of the U.S. Trustee to administer bankruptcy cases under 

chapter 7 of the U.S. Bankruptcy Code. 

These men and women are vitally important to the operation of 

our bankruptcy system. However, they have not received a raise in 

over 20 years. This is especially concerning because chapter 7 is 

the most popular form of bankruptcy. 

There has not been a fee increase to file chapter 7 cases or a 

raise in the trustees’ compensations since 1995. In 2016, chapter 7 

trustees collected and distributed over $300 billion in assets. We 

2 

must pay our trustees a better wage to ensure that cases are efficiently handled and quality trustees continue to handle chapter 7 

cases. 

My bipartisan legislation, H.R. 3553, the Bankruptcy Administration Improvement Act, introduced with Congressman Ed Perlmutter from Colorado, would remedy this by raising the compensation for trustees from $60 to $120. This raise would be accomplished by increasing the filing fee for a debtor by $60. This raise 

is proportional to 2018 dollars. H.R. 3553 also indexes the cost of 

filing, as well as the trustees’ compensation per case, to inflation. 

I know there are some concerns with this legislation in regards 

to the debtor having to pay a larger filing fee. However, this bill 

does not disturb the court’s existing authority under the Bankruptcy Code to waive a filing fee for an indigent filer. 

I am open to any ideas for different funding possibilities to increase compensation for chapter 7 trustees, but we must find a way 

to increase the amount of money that trustees receive for handling 

the case, otherwise we risk losing a critical mass of trustees willing 

to do the work required by chapter 7 cases. 

I am looking forward to hearing from our distinguished panel on 

ways to improve this legislation and what their thoughts are on a 

raise for chapter 7 trustees. Sixty dollars to handle a bankruptcy 

case is not adequate compensation; 23 years without a raise is too 

long. I hope that we are able to come together and give the chapter 

7 trustees a much-deserved raise. 

The Chair now recognizes the Ranking Member of the Regulatory 

Reform Committee, Congressman Cicilline. 

Mr. CICILLINE. Thank you, Mr. Chairman. 

Welcome to our witnesses. 

Today’s hearing concerns the compensation of bankruptcy trustees in cases under chapter 7 of the Bankruptcy Code, which provides debtors with a fresh start through the complete resolution of 

their debt. In chapter 7 bankruptcies, trustees act as a fiduciary 

appointed by the Justice Department to ensure that debtors comply 

with various requirements, including filing documents with the 

court and surrendering their nonexempt assets for liquidation 

along with other essential responsibilities. 

There are two sources of trustee compensation today. The first 

comes from filing fees paid by debtors. In addition to paying for 

legal representation and compulsory debt counseling, debtors must 

also pay a $335 fee to file for a chapter 7 bankruptcy. Chapter 7 

trustees receive $60 of this filing fee, a compensation level that has 

not been adjusted since 1994. 

The second source of trustee compensation is a commission on 

any assets that can be liquidated and distributed to creditors. In 

these cases, the trustee may receive a percentage of this distribution on a scale outlined by Section 326 of the Bankruptcy Code. 

Because more than 90 percent of chapter 7 bankruptcies are noasset cases, where the debtor does not own assets that can be liquidated, there is wide agreement that chapter 7 trustees are long 

overdue for an increase in compensation. But I firmly believe that 

the solution to increasing trustees’ compensation is not saddling 

consumer debtors with higher filing fees, which have already increased significantly since 2005, particularly at a time when wages 

3 

are flat and too many hardworking Americans are living paycheck 

to paycheck. 

John Rao, a leading consumer bankruptcy expert and one of our 

witnesses today, notes that, and I quote, ‘‘Consumers in financial 

distress typically live hand-to-mouth and have no savings they can 

rely upon, and it is already an enormous struggle for consumers to 

come up with the costs needed to file bankruptcy relief,’’ end quote. 

There are, however, potential win-win solutions that would increase chapter 7 trustee compensation without adding to the financial hardship of consumer debtors. 

The first of these would be revising the statutory formula for 

payments to trustees in asset cases. This formula has also not 

changed since 1994 and could be modified to benefit the trustee 

system without imposing additional financial hardship on consumer debtors. Moreover, as Mr. Rao argues, a fund could be established to ensure an equitable distribution of payments among trustees. 

Secondly, there’s nothing preventing Congress from reducing 

other fees paid by consumer debtors as a trade-off for higher trustee compensation. In many ways the amendments to the Bankruptcy Code in 2005 stacked the deck against consumer debtors 

with mountains of paperwork and other wasteful requirements that 

have done little to improve the bankruptcy system. 

The Government Accountability Office has reported that this requirement may often serve more as an administrative obstacle than 

as a timely presentation of meaningful options for consumers in 

dire financial situations without alternatives to bankruptcy. As a 

result, these burdensome requirements have deterred honest, hardworking families from obtaining bankruptcy relief. 

That’s why there’s ample support among consumer advocates for 

finding a compromise that eliminates these administrative burdens 

for consumer debtors, if only in limited cases such as those involving exigent circumstances. Is there any reason why a family facing 

a home foreclosure or catastrophic medical debt should go through 

credit counseling before even filing for bankruptcy? 

I believe there is room for agreement on this issue, and I’m encouraged by the majority’s openness to finding the right solution to 

this issue. And with that in mind, I thank our panel of esteemed 

witnesses. I look forward to working together on finding ways to 

improve the bankruptcy system. 

Again, welcome to our witnesses. And I yield the balance of my 

time. 

Mr. MARINO. Okay. Without objection, the other members’ opening statements may be made part of the record. 

I will begin by swearing in our witnesses before I introduce 

them. 

I ask if you would all please rise, raise your right hand. 

Do you swear that the testimony you are about to give before 

this Committee is the whole truth and nothing but the truth, so 

help you God? 

Let the record reflect that every witness has answered in the affirmative. 

Please be seated. 

4 

I’m going to introduce, go through everyone’s vitae completely, 

and then we’ll come back and start with questions. My colleague 

and I have to be in two different hearings at the same time, so he 

is heading out to cover for both of us. 

Clifford White III has served as Director of the U.S. Trustee Program since 2006. Mr. White has more than 30 years in Federal 

service, and most of his tenure has been with the United States 

Trustee Program, including formerly as the Deputy Director and as 

an Assistant United States trustee. 

Prior to joining the Program Mr. White served as a Deputy Assistant Attorney General within the Department of Justice—there 

we have something in common, sir—and as an official at two other 

Federal agencies. He has been recognized with an Attorney General’s Award for Distinguished Service and was conferred the Presidential Rank Award of Meritorious Executive in 2006 and Distinguished Executive in 2009. 

Mr. White earned his bachelor’s degree and his JD with honors 

from the George Washington University and George Washington 

University Law School. 

Welcome, sir. 

Judge Alan Stout was appointed U.S. bankruptcy judge for the 

Western District of Kentucky on October 25, 2011. Judge Stout is 

a member of the National Conference of Bankruptcy Judges and 

currently serves as co-chair of the Legislative Committee. 

Judge Stout was a participating bankruptcy attorney in both Paducah and Marion, Kentucky, for 30 years. He also served as a 

chapter 7 panel trustee for 25 years. Before assuming the bench, 

he served as the Crittenden County attorney for 21 years and master commissioner of the Crittenden Circuit Courts for 5 years. 

Judge Stout has previously served as president and on the board 

of directors of the National Association of Bankruptcy Trustees. 

Judge Stout earned his bachelor’s degree from Murray State University and his JD from the Salmon P. Chase College of Law at 

Northern Kentucky University. 

And welcome to you, sir. 

Neville Reid is a capital partner and co-chair of the Bankruptcy, 

Restructuring and Creditors’ Rights Group at Fox Swibel in Chicago. He has represented a wide array of clients in all aspects of 

bankruptcy, restructuring, insolvency, and creditors’ rights cases 

and transactions for over 25 years. Mr. Reid’s clients include receivers and bankruptcy trustees, distressed businesses seeking to 

restructure their debt and financial affairs, corporate unsecured 

creditors, secured lenders, and investors seeking to acquire assets 

from distressed entities. 

Additionally, Mr. Reid has been a bankruptcy panel trustee for 

chapter 7 and chapter 11 bankruptcy cases for over 23 years. In 

that capacity he frequently investigates and recovers fraudulent 

transfers and various assets for the benefit of creditors of corporate 

entities and individual debtors. 

In 2011, Mr. Reid led his firm’s representation of the U.S. Treasury Department in closing $1.7 billion of small business lending 

fund transactions designed to inject capital into middle market financial institutions and stimulate middle market lending as part 

of the Federal Government’s economic recovery strategy. 

5 

Mr. Reid has served as one of a select group of bankruptcy trustees in Chicago for over 22 years. He is regularly appointed by 

bankruptcy judges in Chicago to oversee the liquidation of Chicago 

area companies for the benefit of secured and unsecured creditors. 

Mr. Reid earned his bachelor’s degree from Harvard College 

magna cum laude and his JD from Harvard Law School. 

And welcome to you, sir. 

Ariane Holtschlag is a partner with Factor Law in Chicago, Illinois. Her practice is focused primarily in the field of consumer 

bankruptcy and is equally divided among representing trustees, 

debtors, and creditors in chapter 7 and 13. Ms. Holtschlag also represents individuals and small businesses in chapter 11. 

She is testifying as a member of and on behalf of the American 

Bankruptcy Institute’s Commission on Consumer Bankruptcy. She 

earned her bachelor’s degree from Illinois Wesleyan University, 

and her JD from the University of Iowa College of Law. 

Good morning to you. 

Attorney John Rao is an attorney with the National Consumer 

Law Center where he focuses on consumer credit, mortgage servicing, and bankruptcy issues. He is a contributing author and editor of NCLC’s ‘‘Consumer Bankruptcy Law and Practice,’’ a co-author of NCLC’s ‘‘Foreclosures and Mortgage Servicing and Bankruptcy Basics,’’ and a contributing author to ‘‘Collier on Bankruptcy’’ and the ‘‘Collier Bankruptcy Practice Guide.’’ 

Mr. Rao served as a member of the Federal Judicial Conference 

Advisory Committee on Bankruptcy Rules from 2006 to 2012, to 

which he was appointed by Chief Justice John Roberts. He is a conferee on the National Bankruptcy Conference, fellow of the American College of Bankruptcy, member of the editorial board of ‘‘Collier on Bankruptcy,’’ board member of the National Consumer 

Bankruptcy Rights Center, commissioner on the American Bankruptcy Institute’s Commission on Consumer Bankruptcy, and 

former board member of the National Association of Consumer 

Bankruptcy Attorneys and the American Bankruptcy Institute. 

He earned his bachelor’s degree from Boston University and his 

JD from the University of California Hastings College of Law. 

Thank you, sir, for being here. 

Each of the witnesses’ written statements will be entered into 

the record in its entirety. I ask that each witness summarize his 

or her testimony in 5 minutes or less. 

You see these little boxes in front of you. And to help you with 

them, there are timing lights on it, and I think you get the gist of 

that. But sometimes, like I do, I get so involved in our conversations that I don’t even look at the box or look at things. 

So I will diplomatically raise the little gavel here, and when you 

see me twirling that in my fingers would you please wrap up your 

statement and then we can get further into your comments during 

the questioning phase. 

So with that, Mr. Stout, would you please like to make your 

opening statement? 

6 

TESTIMONY OF THE HONORABLE ALAN C. STOUT, BANKRUPTCY COURT JUDGE, U.S. DISTRICT COURT FOR THE 

WESTERN DISTRICT OF KENTUCKY; MR. CLIFFORD J. WHITE 

III, DIRECTOR, U.S. TRUSTEE PROGRAM; MR. N. NEVILLE 

REID, CAPITAL PARTNER, CO-CHAIR OF THE BANKRUPTCY, 

RESTRUCTURING AND CREDITORS’ RIGHTS GROUP, FOX 

SWIBEL LEVIN & CARROLL LLP; MS. ARIANE HOLTSCHLAG, 

PARTNER, LAW OFFICE OF WILLIAM J. FACTOR, LTD.; AND 

MR. JOHN RAO, ATTORNEY, NATIONAL CONSUMER LAW CENTER 

STATEMENT OF ALAN C. STOUT 

Judge STOUT. Thank you, Mr. Chairman, members of the Subcommittee. As the Chairman said, my name is Alan Stout. I’m the 

United States bankruptcy judge for the Western District of Kentucky. 

Let me preface my remarks here today by saying that I am testifying on my own behalf as an individual bankruptcy judge. I do not 

represent other members of the judiciary, however, some judges 

have expressed their support for this to me. I do not represent the 

National Conference of Bankruptcy Judges here today, nor do I 

represent the Judicial Council or the Administrative Office of the 

Courts, except for one caveat that I will mention briefly shortly. 

Prior to being appointed to the bench in 2011 I was a bankruptcy 

lawyer. I served as a bankruptcy lawyer for 30 years. I represented 

debtors in bankruptcy, I represented creditors, I represented banks, 

I represented credit unions, in all forms of bankruptcy, chapter 7, 

chapter 11, chapter 13, and even did some chapter 12 farm bankruptcy work. I think all this brings some practical experience that 

I bring to this issue. 

In addition to serving as a bankruptcy lawyer, I was a chapter 

7 panel trustee for 25 years. During that time, I administered over 

11,000 cases as a bankruptcy trustee, and during the time I was 

a practicing lawyer I was involved with over 3,000 cases, as I said, 

representing debtors and creditors, primarily representing consumer debtors in chapter 7 cases. So I think I do have a unique 

perspective in addition to my 7 years of being on the bench that 

I bring to this issue. 

I support the bill as proposed to provide a $60 increase to the 

no-asset fees paid to chapter 7 trustees, keeping in mind that over 

90 percent of the cases are no-asset cases. The trustees have not 

had a raise in many years, as the Chair alluded to. 

I support passage of H.R. 3553 with one exception. Yesterday, 

James Duff, in his capacity as secretary of the Judicial Council, 

sent a letter to the Chair and to the Ranking Member setting forth 

that the judiciary did regard one aspect of the bill as very problematic in providing for indexing an increase tied to inflation every 3 

years. 

To the extent that the judiciary has expressed concerns with 

that, I echo those concerns and do not want to take a position contrary to the Judicial Council or the Administrative Office of the 

Courts relative to that issue. And so that letter is dated September 

25, and I think it is in the record, and would direct attention to 

that for more specificity. 

7 

The whole purpose of filing chapter 7 bankruptcy in a consumer 

setting is to give debtors, unfortunate debtors many times due to 

circumstances beyond their control, a fresh start. Some of the most 

common reasons for consumer bankruptcies are medical bills, uninsured medical bills, or underinsured medical situations, unemployment or underemployment, credit card debt, and small business situations where debtors have failed in small businesses and many 

times have guaranteed a lot of debt and they have to file chapter 

7 to discharge or wipe out that debt. 

Another phenomenon we have seen recently is an increase in elderly debtors seeking bankruptcy relief, as well. 

And let me point out one thing, that it is critical to note that in 

regard to this bill there’s one component that remains in place. 

Currently, whenever a debtor files bankruptcy, if their income is 

below 150 percent of the poverty level they’re able to file a fee 

waiver request, and courts routinely deal with these in what’s 

called in forma pauperis requests where we routinely grant waivers 

of the filing fee in total. And sometimes, if a debtor seeks a waiver 

of the filing fee, if we don’t grant the full waiver we will allow the 

debtor to make payments in installments over a period of time to 

lessen the burden on debtors. 

So the fee waiver provision of the code remains in effect, and according to statistics provided by Director White’s office, these are 

granted in about 4—between 4 and 5 percent of the cases fee waivers are granted. 

It is no secret that attorneys’ fees and other fees and costs have 

gone up since 1994 when the last fee increase was put in place for 

the chapter 7 trustees. Debtors’ counsel fees have gone up, courtappointed lawyers’ fees have gone up, and even compensation for 

judges has raised. So the trustee fee of $60 has been frozen for 24 

years. It needs to be increased for the good and integrity of the 

bankruptcy system. 

Thank you. 

Judge Stout’s written statement is available at the Committee or 

on the Committee Repository at:https://docs.house.gov/meetings/JU/ 

JU05/20180926/108455/HHRG-115-JU05-Wstate-StoutA20180926.pdf 

Mr. MARINO. Thank you, sir. 

Director White. 

STATEMENT OF CLIFFORD J. WHITE III 

Mr. WHITE. Thank you. Good morning, Mr. Chairman and members of the Subcommittee. I thank you for the opportunity to appear before you today in support of an increase in compensation for 

chapter 7 trustees. 

The U.S. Trustee Program appoints and oversees about 1,100 

chapter 7 trustees who serve as fiduciaries for bankruptcy estates. 

These trustees liquidate available assets and return approximately 

$3 billion annually to creditors. As the watchdog of the bankruptcy 

system, the USTP can attest to the essential role played by chapter 

7 trustees in ensuring that debtors receive a fresh start and that 

creditors receive repayment as entitled by law. 

The trustee compensation provisions of the law, as has been 

noted, have not been changed in 24 years, but over that time there 

8 

has been inflation and Congress has added to the trustees’ duties. 

So I respectfully ask Congress to increase compensation so that the 

bankruptcy system can continue to benefit from the skilled and 

competent core of chapter 7 trustees. 

The basic duties of a chapter 7 trustee are set forth in Section 

704 of the Bankruptcy Code, and these include responsibilities that 

were added by the Congress in amendments passed in 2005. Chapter 7 trustees also support the United States Trustee Program in 

fulfilling our civil and criminal enforcement responsibilities in the 

system. 

Through their day-to-day administration of cases, trustees often 

identify cases that warrant U.S. Trustee enforcement actions, including cases of concealment of assets or other fraudulent activities. In my testimony I provide a recent example of a successful 

criminal prosecution in which a chapter 7 trustee worked closely 

with our office to investigate the conduct of the debtor’s attorney. 

It is important to note, as well, that trustees commit a significant amount of time to investigating the financial affairs of all 

debtors to determine if there are assets available for distribution. 

Now, in the end, as has been noted, more than 90 percent of cases 

have no assets to administer, but in some cases that appear to be 

no-asset cases, the trustee’s investigation identifies property that 

can be liquidated for the benefit of creditors. 

For carrying out these critical responsibilities chapter 7 trustees 

receive compensation from two sources. First, they receive $60 for 

every case assigned. That no-asset fee is paid from part of the filing 

fee paid by chapter 7 debtors. And second, the trustees receive a 

percentage fee based on distributions in asset cases. 

The no-asset fee, again, was set in 1994, and if adjusted for inflation alone that fee would be $100. If also adjusted for additional 

duties of the trustee, then the $120 level contained in H.R. 3553 

would be entirely reasonable. 

The percentage fee calculation also has not changed in the last 

24 years, but in 2005 Congress did attempt to strengthen the percentage fee for asset cases by providing that the bankruptcy courts 

should award the percentage fee as a commission. 

The U.S. Trustee Program has taken the position in court that 

absent extraordinary circumstances trustees are entitled by law to 

the full percentage fee. Our legal position has been adopted by two 

circuit courts of appeals, but some bankruptcy courts have adopted 

other interpretations that result in lower fees paid to the trustees 

under the commission system. 

There are two important trends in chapter 7 administration that 

pertain to trustee compensation. First, total compensation paid to 

chapter 7 trustees, including for legal and accounting services for 

which they can separately charge a fee in a case, has been declining, and last year total compensation paid to chapter 7 trustees 

plummeted by 18 percent. And second, the number of applicants 

who apply for vacant trustee positions has declined significantly, 

from an average of 58 candidates in 2010 to 20 applicants in 2017. 

So although it’s difficult to measure the precise impact of diminished compensation, it stands to reason that continued decreases in 

compensation may threaten the financial viability of trustee operVerDate Sep 11 2014 04:07 Dec 01, 2018 Jkt 032979 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 E:\HR\OC\A979.XXX A979
9 

ations and the ability to retain and recruit the highest caliber of 

trustees. 

Now, the cost of raising the no-asset fee would be about $27 million per year at current filing levels. In my testimony I discuss 

some possible sources that could be considered. As a technical matter, if the no-asset fee is indexed as provided in the bill, the revenue source also should be indexed to avoid a shortfall for trustees 

or any other recipients from that funding source. 

Chapter 7 trustees do an outstanding job administering cases 

fairly and efficiently, and after 24 years without a raise, chapter 

7 trustees deserve an increase in compensation. And I would be 

happy to respond to any questions from the Subcommittee. 

Director White’s written statement is available at the Committee 

or on the Committee Repository at: https://docs.house.gov/meetings/ 

JU/JU05/20180926/108455/HHRG-115-JU05-Wstate-WhiteC20180926.pdf 

Mr. MARINO. Thank you. 

STATEMENT OF MR. REID 

Mr. REID. Thank you, Mr. Chairman. 

During my 24 years as a bankruptcy trustee I have administered 

over 8,000 cases. I’m testifying here today in support of H.R. 3553 

on behalf of the National Association of Bankruptcy Trustees and 

its 887 members. 

The NABT, as to which I am currently the vice president, is the 

leading national association representing bankruptcy trustees. 

Trustees in turn are the front line of the chapter 7 bankruptcy system. We investigate the truth of a debtor’s bankruptcy petition disclosures, pursue and liquidate assets for the benefit of a debtor’s 

creditors, make criminal referrals where we find debtor misconduct 

that may otherwise go undetected, and perform numerous other responsibilities that enable the bankruptcy system to function. 

The NABT strongly urges the passage of this bill in order to reduce the economic burden that trustees have been carrying for the 

benefit of the bankruptcy system for at least the past 23 years, 

during which time their responsibilities under the Bankruptcy 

Code have increased but their compensation in real terms has decreased. 

Trustees routinely incur substantial nonpayment risk when they 

investigate potential assets for creditors, but don’t always recover 

the value of their time when those assets don’t materialize or when 

they collect information supporting criminal referrals for government attorneys. 

When Congress enacted BAPCPA in 2005 it effectively put in 

place an unfunded mandate by requiring trustees to perform even 

more responsibilities in bankruptcy cases without increasing their 

compensation in no-asset cases, thus further deepening trustees’ inherent nonpayment risk. Since approximately 90 percent of all 

chapter 7 cases are no-asset cases the only source of recovery for 

trustees in most cases is the no-asset fee, and even that fee is not 

available in cases where the debtor’s filing fee is waived. 

Since the no-asset fee has remained constant since 1995, during 

which time inflation has increased by 64 percent, in real terms 

trustees have been required to do more for less. 

10 

Despite the real decline in their compensation, trustees have 

faithfully created enormous value for creditors, including tax authorities, and for debtors at costs substantially below what the 

market would normally require. Some of the main creditors benefiting from the collections by trustees are Federal and State taxing 

authorities. In 2016 trustees distributed roughly $170 million to 

taxing authorities from their asset cases. 

Payments to tax creditors also benefit debtors because debtors’ 

tax debt would normally be nondischargeable and would survive 

their bankruptcy. Yet few debtors have the ability of a trustee to 

carry nonpayment risk and collect assets in order to reduce tax 

debt. Without the trustee, neither the taxing authorities nor the 

debtor would likely be able to reduce the unpaid tax liability. 

Yet again, the trustee does this at a cost to herself since ordinarily a creditor’s private collection agent would charge a 33 percent contingency fee to collect an asset, but trustees typically receive in compensation in their asset cases less than 10 percent of 

the value of the total assets they collect. 

The increase in the no-asset fee, while certainly not eliminating 

these economic burdens on trustees, will undoubtedly help to alleviate them. 

In addition, the fee increase will lower the growing risk that experienced trustees will begin to leave the trustee practice altogether given its deepening unprofitability. The total number of 

trustees declined by 30 percent since 2002. The loss of even more 

experienced trustees will limit the valuable mentoring that veteran 

trustees provide to new trustees and will hurt communities who 

substantially benefit from the dollars that trustee collections inject 

into their local economy. 

Some have argued that debtors who don’t receive a fee waiver 

still cannot afford the proposed filing fee increase and that other 

ways must therefore be found to fund the trustee fee increase. 

These arguments overlook the effect of the debtor’s discharge. For 

those debtors who pay the filing fee and receive their discharge the 

elimination of many thousands of dollars of discharged debt, frequently hundreds of thousands of dollars of debt, will in nearly all 

instances create at least $60 of additional cash flow for the debtor 

to cover the incremental filing fee, thus still making bankruptcy a 

tremendous bargain for debtors. 

Ultimately the increase in the filing fee is the only feasible way 

to ensure long-term funding for the badly needed trustee fee increase. The NABT has addressed other alternative proposals in the 

20 years it has been working on this issue only to find that such 

proposals put more burdens on taxpayers, Federal agencies, or 

creditors that those entities should not or apparently will not bear. 

For all of these reasons, the NABT requests that Congress pass 

H.R. 3553. Thank you, Mr. Chairman. 

Mr. Reid’s written statement is available at the Committee or on 

the Committee Repository at: https://docs.house.gov/meetings/JU/ 

JU05/20180926/108455/HHRG-115-JU05-Wstate-ReidN20180926.pdf 

Mr. MARINO. Thank you. 

Attorney Holtschlag. 

11 

STATEMENT OF ARIANE HOLTSCHLAG 

Ms. HOLTSCHLAG. Chairman Marino and members of the subcommittee, thank you for the opportunity to appear here today. I’m 

a partner at the law firm of the Law Offices of William J. Factor 

with offices in Chicago and Northbrook, which I believe is Representative Schneider’s stomping grounds. I am admitted to practice in the State of Illinois, and I have practiced in the field of consumer bankruptcy for over 10 years. 

I am testifying here today as a member of and on behalf of the 

American Bankruptcy Institute’s Commission on Consumer Bankruptcy. The American Bankruptcy Institute, the ABI, is the world’s 

largest association of insolvency professionals, made up of over 

11,000 members in multidisciplinary roles, including attorneys, 

bankers, judges, lenders, professors, turnaround specialists, accountants, and others. These members represent debtor, creditor, 

and other stakeholder interests. Founded in 1982, ABI is a nonprofit and nonpartisan organization and is organized under the Internal Revenue Code Section 501(c)(3). 

ABI also plays a leading role in providing congressional leaders 

and the general public with an unbiased reporting and analysis of 

bankruptcy regulations, laws, and trends. Although ABI is not an 

advocacy group, it is often called on to testify before Congress, analyze proposed bills, and conduct periodic briefings for congressional 

committees, legislative staff, and other government regulators and 

the media. 

In December of 2016, the ABI’s board of directors passed a resolution creating the Commission on Consumer Bankruptcy and 

charging that commission with researching and recommending improvements to the consumer bankruptcy system that can be implemented within the existing structure. 

The 17-person commission is chaired by retired U.S. Bankruptcy 

Judges William Brown and Elizabeth Perris, with more than 50 

years of combined judicial experience. The commission reporter is 

Robert Lawless, the Max L. Rowe Professor of Law and co-director 

of the Program on Law, Behavior & Social Science at the University of Illinois College of Law. 

Commission members serve without compensation. The commission is funded by grants from the ABI Anthony H.N. Schnelling 

Endowment and the Endowment for Education of the National 

Conference of Bankruptcy Judges. 

After soliciting public feedback, commission members identified 

more than 50 discrete issues for study and divided these issues 

among three advisory committees composed of 52 bankruptcy professionals. The commissioners and the committee members represent diverse stakeholder interests in the bankruptcy system, including attorneys who represent primarily debtors and attorneys 

who primarily represent creditors, as well as chapter 7 trustees, 

chapter 13 trustees, retired bankruptcy judges, government officials, and academics. 

Compensation for chapter 7 trustees was one of the issues identified for study. The commission and its committees began their formal study in April of 2017. The commission conducted seven public 

meetings in which we have heard from nearly 80 expert witnesses 

and received more than 130 written statements. In the comments 

12 

and written statements to the commission the need to raise trustee 

compensation enjoyed almost unanimous support. 

The commission plans to release its final report in the spring of 

2019. The work will be the product of an open and collaborative 

process aimed at achieving consensus among these diverse stakeholders. Indeed, only recommendations that are approved by a twothirds majority of the commission will become part of the commission’s final report. 

The commission did not intend to make public any recommendations before issuance of its final report, however, because it completed its deliberations on the issue of chapter 7 trustee compensation and because of the importance of the topic to the operation of 

the bankruptcy system we are releasing this statement at the invitation of the Subcommittee. 

The recommendations from the commission are as follows. With 

respect to chapter 7 trustee compensation the commission recommends that compensation should be increased for trustees to 

$120 per case with the increase in the fee coming from bankruptcy 

filing and other court fees already paid into the general treasury. 

These bankruptcy filing and other court fees should be placed into 

a special fund earmarked for trustee compensation. 

And secondly, that the breakpoints for trustee compensation in 

asset cases should also be adjusted to allow for more trustee compensation. Specifically, a 25 percent commission is currently applicable to the first $5,000 in distributions in a case. The commission 

recommends that this breakpoint be increased to $10,000. A 10 percent fee is currently in effect for distributions between $5,000 and 

$50,000. The commission recommends that this be changed to distributions between $10,000 and $100,000. 

Finally, the commission recommends that the percentage fee on distributions exceeding $1 million be increased from 3 percent to 

4 percent. The 5 percent applicable commission on distributions between $100,000 and $1 million would not change. 

These are the recommendations of ABI’s Consumer Commission. 

Thank you. 

Ms. Holtschlag’s written statement is available at the Committee 

or on the Committee Repository at: https://docs.house.gov/meetings/ 

JU/JU05/20180926/108455/HHRG-115-JU05-Wstate-HoltschlagA20180926.pdf 

Mr. MARINO. Thank you. 

Mr. Rao. 

STATEMENT OF JOHN RAO 

Mr. RAO. Mr. Chairman, members of the Subcommittee, thank 

you for inviting me to testify today on H.R. 3553. I am here today 

testifying on behalf of the low-income clients of the National Consumer Law Center and also on behalf of the National Association 

of Consumer Bankruptcy Attorneys. 

The organizations and their clients that I represent fully support 

the goal of this bill. Chapter 7 trustees should receive an increase 

in compensation. The proposed increase, an initial $60 per case, is 

fair and appropriate. 

The real challenge, however, is coming up with the means to pay 

for this increase that is spread equitably among those in the bankVerDate Sep 11 2014 04:07 Dec 01, 2018 Jkt 032979 PO 00000 Frm 00016 Fmt 6633 Sfmt 6633 E:\HR\OC\A979.XXX A979
13 

ruptcy system and not taxpayers. Our opposition to H.R. 3553 is 

that it looks only to debtors and their families who are already experiencing financial hardship to fund the increased filing fees and 

does not consider alternative methods of funding. In addition to raising the current filing fee to $395, it provides 

that the trustee portion of the statutory filing fee will be subject 

to an inflation adjustor every 3 years. While we don’t oppose that, 

the bill does not address how that will be funded. The Judicial Conference, in our view, will be forced to increase filing fees every time 

there’s an upward adjustment based on the inflation. The next inflation adjustment will likely bring the filing fee over $400, which 

is more than what civil litigants pay currently to file a civil case 

in Federal District Court. 

Since 2005 we have seen that there are many consumers who 

need bankruptcy relief but are simply too broke to file. This is because the costs of bankruptcy have increased significantly since the 

2005 Bankruptcy Act. As Ranking Member Cicilline mentioned, 

there’s been increases in filing fees, in paying for credit counseling 

and debtor education, there are a lot of additional filing requirements, which has increased legal fees, all of which has been documented by the GAO study that was done about the BAPCPA costs. 

As a result, the total cost of filing bankruptcy of chapter 7 cases has doubled since 2005 from under $1,000 in most cases to over 

$2,000 or more, which is really beyond the reach of many. Some may say that the $60 filing fee increase is modest and 

would not be a barrier to access to bankruptcy relief. This does not 

consider that so many consumers just do not have the savings, 

again, as Ranking Member Cicilline mentioned. Even in these good 

economic times a recent Federal Reserve Board survey showed that 

41 percent of consumers could not or are not able to come up with 

$400 for an emergency. It is an enormous struggle for consumers 

to come up with the $2,000 or more to file a case. An additional 

$60 only makes this more difficult. 

Several witnesses said that there’s little impact on court access 

because there’s filing fee waivers. Well, there’s only in most cases, 

even since 2005 in the 13 years, there’s only less than 5 percent 

of consumers who actually get fee waivers, and the increase has 

been from about 2 percent to 5 percent. So very few consumers actually get those. 

So what are the alternatives? One way to raise funds would be 

to adjust the breakpoints, as the ABI commission report has suggested. My written testimony provides slightly different breakpoint 

adjustments, but it could help to fund, easily help fund the $60 increase. 

And some have suggested that this would not be helpful to trustees who are in States where there are not a lot of asset cases. My 

recommendation is that a portion of the trustee commissions be put 

into a fund and redistributed to all trustees. I think that would be 

a way to ensure that everyone would get the increase under this 

bill. 

Another alternative method would be to require creditors to pay 

a small filing fee of less than $5, and small creditors could be exempted from it when they file a proof of claim in a case. Mr. Reid 

has mentioned that trustees do a great job of collecting debts for 

14 

creditors and they do it at a lower cost than what those creditors 

would pay outside of bankruptcy. Why not have them pay a small 

$5 for when they file a proof of claim to help fund this? 

And finally there are other methods of reducing the costs by reducing the cost of filing bankruptcy and, again, Ranking Member 

Cicilline mentioned those some of those in his opening statements. 

In conclusion, NACBA and NCLC value the role of chapter 7 

trustees, however, it is critical that financially distressed consumers not be asked to bear this increase alone. 

Thank you. 

Mr. Rao’s written statement is available at the Committee or on 

the Committee Repository at: 

https://docs.house.gov/meetings/JU/JU05/20180926/108455/HHRG115-JU05-Wstate-RaoJ-20180926.pdf 

Mr. MARINO. Thank you. 

We will now move into the questioning phase of our hearing, and 

I will recognize myself to begin the questioning. 

Director White, in your written testimony you stated that a $60 

raise in the chapter 7 debtor filing fee would mostly represent an 

inflation adjustment plus a fair adjustment to account for trustees’ 

added workload in cases today. Do you, therefore, think that the 

approach in the bill is sound, simply to adjust one time now for 

those reasons than adjust for inflation going forward? 

Mr. WHITE. I think that either alternative is better than the status quo. There is certainly a logic to the indexing. 

The point I made in the oral statement was simply I think 

there’s a technical change that should be made in the bill so that 

whatever the increase is for the no-asset fee that the source of revenue to fund that fee also be adjusted similarly so that it is indexed as well. I think that’s a technical, that’s a technical fix. 

Mr. MARINO. Yes, you are right. 

Mr. WHITE. But the bill makes perfect sense. 

Mr. MARINO. If we were to amend the bill to rely partially on 

other sources or funds for a raise for chapter 7 trustees are you 

aware of other sources of funding that the Department of Justice 

or elsewhere in the Federal Government that could help to supply 

the needed funds? 

Mr. WHITE. Well, in the written statement I identify that what 

is in the bill now is perfectly reasonable with regard to the filing 

fee, but it does fall disproportionately, [rather] entirely, on the 

debtors. There is the compensation, which has the commission fee, 

which has the downsides that Mr. Rao pointed out, plus the fact 

it does not incentivize the investigation in no-asset cases, which is 

so critical. It would only affect the asset cases, and we need the 

trustees to be paying attention to the no-asset cases. 

But there are scores of fees that are charged by the court system 

for those participants in the bankruptcy system, and all are probably worthy of some consideration to reach the right balance. Everyone individually that has been suggested, including what is in 

the bill now, makes perfect sense. 

I would like to perhaps go beyond and just make one point, because it has been in at least one of the witness’ testimony, and that 

is why not offset the amount of money through eliminating the 

15 

credit counseling requirement that was imposed in 2005. I think 

that would be unwise. 

Mr. MARINO. Thank you. 

Attorney Rao, asset cases tend to be concentrated in the more 

prosperous and urban districts. Doesn’t that mean that your proposal to fund a chapter 7 trustee raise out of funds raised in asset 

cases would discriminate against trustees and ultimately debtors in 

poor and rural districts? How could that be fair? 

Mr. RAO. Yes, Chairman Marino, I agree that the asset cases and 

how they’re recovered do vary from State to State. It is not only 

in large urban areas, but it also depends upon the exemption 

scheme in particular States. And, in fact, a lot of the small asset 

cases are trustees recovering earned income tax credits and tax refunds that low-income debtors have. 

So my proposal, as I see it, is that we can increase the 

breakpoints and then have, as I have mentioned in my testimony, 

a fund that would IN a very small portion of the trustee commissions, I would say even less than 5 percent of all commissions could 

be paid into a fund and that could be distributed to all trustees to 

pay the $120 increase. 

And I disagree that it would change the incentives for trustees. 

That small adjustment would hardly make a difference for trustees 

and they would continue to be incentivized to pursue asset cases. 

Mr. MARINO. But do you think that the court is not adequate in 

determining who is indigent and who would ask for their fees to 

be reduced or completely eliminated? 

Mr. RAO. Well, I’m sorry, you’re asking about the—— 

Mr. MARINO. If a person can request in forma pauperis if they 

can’t afford this. 

Mr. RAO. Yes, I mean, the issue with the fee waivers is a different one. In that situation, as I said, very few debtors actually 

seek it, and for those who do seek it I have looked at, unfortunately, a lot of the statistics on this, and it really varies. In some 

districts debtors do receive in forma pauperis relief. In other districts, even though there may be a very high poverty level in that 

district, they do not receive them, and it is because it is up to the 

discretion of the judge. 

And it’s not just the income guidelines, but there’s also a test 

that the judge would review as to whether or not the debtor has 

the ability to pay the filing fee in installments. And so in some districts they’re denied frequently and some debtors don’t even ask for 

the fee waivers because they know that they’re probably not going 

to get them. 

Mr. MARINO. It seems like we all agree on the raises are needed, 

much needed. The path to get there, there seem to be various 

paths. That’s one of the reasons why we’re having this hearing 

today, because as the director pointed out some of this can be done 

from the technical aspect of revising laws as we move forward. 

My time has more than expired. I now recognize the gentleman 

from Georgia, Congressman Johnson. 

Mr. JOHNSON. Thank you, Mr. Chairman. 

Mr. Chairman, I would like to submit for the record a letter 

dated September 25, 2018, from the Judicial Conference of the 

United States entering its opinion on H.R. 3553. 

16 

Mr. MARINO. Without objection. 

This material is available at the Committee or on the Committee 

Repository at: https://docs.house.gov/meetings/JU/JU05/20180926/ 

108455/HHRG-115-JU05-20180926-SD004.pdf 

Mr. JOHNSON. And thank you. I thank the witnesses for appearing. 

In 2005, prior to the passage of the Bankruptcy Abuse Prevention and Consumer Protection Act, the chapter 7 filing fee was 

$155. There have been three statutorily mandated filing fee increases since 2005. The filing fee has more than doubled and now 

stands at $335. 

The Bankruptcy Abuse Prevention and Consumer Protection Act 

has imposed various other expenses that debtors must pay in a 

chapter 7 case, $25 to $40 extra for mandatory prebankruptcy credit counseling that has been found to be ineffective and a waste of 

taxpayer money basically, a waste of debtor money. Another $20 to 

$25 for postbankruptcy financial management training, that has 

dubious results, as well. 

And also the passage of the Bankruptcy Abuse Prevention and 

Consumer Protection Act has resulted in an increase in attorneys’ 

fees to debtors due to the additional responsibilities and documentation requirements that have been imposed on debtors’ attorneys. 

So this is a substantial increase in costs to debtors. And I think 

most of us here today believe increasing the fee for the chapter 7 

trustee is definitely reasonable and appropriate, but we disagree on 

how that increase should be paid or, in other words, who should 

pay it. Should it be the debtors or should it be an across-the-board 

situation. 

We are really talking about how we treat some of the most disadvantaged people in our society at a key and difficult time in their 

lives. That’s really what we’re talking about. 

Mr. White, trustees are appointed as fiduciaries for creditors in 

bankruptcy proceedings. Isn’t that correct? 

Mr. WHITE. Yes, although I would go beyond appointed as fiduciaries for creditors. It is for the whole estate, so whoever may be 

a stakeholder. 

So we view the role of the trustee to also be looking out for the 

integrity of the whole system, which is why they will report to us 

when they identify cases of fraud or abuse, whether that be fraud 

or abuse or improper actions by debtors, creditors, or others. 

Mr. JOHNSON. It’s basically fraud and abuse on the part of the 

debtor you’re looking for? 

Mr. WHITE. I don’t agree with that, respectfully, sir. 

Mr. JOHNSON. You’re not looking for fraud and abuse by creditors. You’re looking for it on behalf of or on the part of or at the 

instance of debtors, and I mean, that’s just a fact. 

Mr. WHITE. May I respectfully—— 

Mr. JOHNSON. They have other responsibilities, but you must 

admit that trustees are appointed as fiduciaries for creditors 

among their other responsibilities, and your due diligence efforts 

benefit creditors. Isn’t that correct? 

Mr. WHITE. In part, but may I just have a complete—I think it’s 

very important to note the U.S. Trustee Program, in partnership 

17 

with the chapter 7 trustees, in looking out for the integrity of the 

system, we have brought, in part because of information provided 

by chapter 7 trustees, actions that have resulted in tens, hundreds 

of millions of dollars of settlements with financial [institutions], including one that we announced 2 days ago. 

Mr. JOHNSON. Those come out of the hides of the debtors, not the 

creditors. It’s the debtors who have been found to be hiding assets 

or that kind of thing. 

Mr. WHITE. In some cases, but the settlement this week, for example, on robo-signing of claims, was where $[5] million is going 

to be returned to debtors. 

Mr. JOHNSON. And is that a chapter 7 or is that a—— 

Mr. WHITE. They were 7 and 13, but was primarily 13. But if you 

look at the history of the Program it has been, I think, very much 

balanced with regard to looking out for the integrity whoever the 

wrongdoer may be, including cases—— 

Mr. JOHNSON. Well, I guess that’s my point, and I only have 5 

minutes, and I’m trying to have a discussion. 

But I guess my point is to show that debtors have borne an inordinate share of administrative costs that are associated with these 

filing fee increases. Those are paid by the debtor. And we need to 

find a way to shield the debtor from further exposure to unilateral 

cost increases. 

And with that, I will yield back. 

Mr. MARINO. Director White, would you like to respond in any 

way? 

Mr. WHITE. Just to reinforce the importance of looking out, as 

trustees do, for wrongdoing on the part of any of the actors in this 

system. 

If I could also respond further, respectfully, Mr. Johnson, I don’t 

think it is established by studies that credit counseling is ineffective. We administer that program, and there were a lot of concerns 

about it when it was enacted in 2005, and we have addressed some 

of the major concerns. There’s universal access. The cost of credit 

counseling averages about $25. 

And what we do know, to the extent the data are not dispositive, 

but what the impact may be is 10 to 15 percent of certificates that 

are issued are not used in bankruptcy, at least not immediately. So 

that’s not dispositive, but it is some indication maybe the counseling has some positive impact. 

One of the concerns I have, because I think probably our Program needs to look at ways we can enrich the quality of counseling 

because it was a consumer protection measure, that’s what it was 

designed to be, so debtors were not going to be misled by non-attorney petition preparers or others. 

But we have, by the criticisms that have been made by the consumer bar sometimes, I think a chilling effect on the receptivity of 

debtors to get benefit from the credit counseling. And furthermore, 

just last month we successfully brought a case in bankruptcy court 

where a bankruptcy mill, a firm doing a lot of cases, was directing 

their staff to take the credit counseling and filing false certificates, 

and those were the findings of the bankruptcy court. 

So I think that for credit counseling to have its full positive impact we in the Program need to reevaluate how could we make it 

18 

better. But I don’t share the view, respectfully, sir, that studies 

show that it is not and cannot be more effective. 

Mr. JOHNSON. And you do not share the view—— 

Mr. MARINO. The gentleman’s time has expired. We’re going to 

have a second round of questioning. 

Mr. JOHNSON. If I could just follow up on that one point, Mr. 

Chairman. 

Mr. MARINO. Briefly. 

Mr. JOHNSON. Yes. So you disagree with the GAO study that 

found that this requirement for credit counseling presents more of 

an administrative obstacle then as a timely presentation of meaningful options to debtors, you disagree with that conclusion? 

Mr. WHITE. I think that the conclusions of the GAO were not just 

left there. I would have to go back to the study. But I don’t believe 

that it is finding that the credit counseling can be of no utility. 

I totally agree with you, Mr. Johnson, and our practice in the 

U.S. Trustee Program shows a great sensitivity to the fact that 

debtors are in dire financial distress overwhelmingly, and any burdens on them ought to be carefully considered. I totally agree. 

I’m trying to present the view, however, that credit counseling is 

designed to be of assistance, and in part through the way we have 

administered the program, its cost is only $25, not nearly on average, not nearly what was anticipated when that law was passed in 

2005. 

Mr. JOHNSON. Thank you. 

Mr. MARINO. All right. Thank you. 

The Chair recognizes Congresswoman Handel from Georgia. 

Mrs. HANDEL. Thank you, Mr. Chairman. And thank you to all 

the witnesses. 

Let me first apologize for not hearing your testimony but know 

that I have read it, so I appreciate that, and your willingness to 

share it ahead of time. 

I am going to continue on the line of the credit counseling for just 

a minute, Director White. It seems to me that credit counseling is 

an important component of helping anyone who is faced and is experiencing dire financial circumstances sort of better understand 

how they can, one, move out of that and, secondly, better protect 

themselves going forward to ever facing that type of stress and 

strain ever again. 

So, as you talk about enriching the quality of the counseling, can 

you just expand on that a little bit more of things that you are 

doing and ways that we can do that? 

Mr. WHITE. Well, you are correct that the purpose of credit counseling is to see if there are alternatives to bankruptcy. So we do 

have some indications that, when that course is taken, there are 

statutory standards and that it does have that effect without there 

being strong data. That would take a longer, more extensive study. 

I think, though, after more than 10 years, it probably would be 

a good idea if the U.S. Trustee Program could look for ways to see 

if the curriculum could be enriched, and the way that we—the way 

that we regulate, if you will, the credit counselors to ensure that 

kind of consistency. 

But it is of concern that if you have the debtor bar telling the 

client that this is a useless exercise, it becomes a self-fulfilling 

19 

prophesy. So we also need to be careful, we do in the U.S. Trustee 

Program, on the enforcement side, that if we see that attorneys are 

overreaching, as they did in the case we brought last month—or 

successfully concluded last month—we are taking enforcement action to have a deterrent effect, because credit counseling is designed to be for the benefit of the debtor. It is not designed to be 

a penalty. 

Mrs. HANDEL. What is the penalty—— 

Mr. WHITE. The penalty that is—— 

Mrs. HANDEL [continuing]. For a lawyer who would be—— 

Mr. WHITE. In that case, there was injunctive relief that was imposed and monetary penalties on that law firm. 

Mrs. HANDEL. Okay. Might we be able to expect some recommendations from you on specifically how to revamp a credit 

counseling program? 

Mr. WHITE. If we have any specific suggestions that are ripe, I 

would be happy to share them with the Subcommittee. 

Mrs. HANDEL. Okay. Great. 

And one more question for you. 

The Department of Justice recently filed a statement of interest 

in an asbestos-related bankruptcy case. As you know, this Committee has spent some considerable time and effort trying to understand fraud in the asbestos trustee created during the bankruptcy. 

How concerned is your office about the fraud in these types of 

trusts? 

Mr. WHITE. We have been concerned. I have testified before this 

Subcommittee before that the risk of fraud and abuse is greater because there is essentially not a policeman for the trust—, because 

they are created and operate postbankruptcy—neither by the court 

nor by the U.S. Trustee. 

Two weeks ago, for the first time, the Department did file a 

statement of interest in a case looking at the front end, when the 

bankruptcy court still has greater authority over the case, to say 

that no plan establishing a trust should be approved unless there 

are greater transparency and antifraud provisions, unless there is 

a greater disclosure of attorneys’ fees and administrative costs so 

that victims are not gouged through unnecessary costs, and standards to prevent conflicts of interest. 

And I can tell you that just today, we filed, for the first time, in 

a bankruptcy case in the District of New Jersey, an objection to the 

appointment of a future claims representative in a case. A future 

claims representative has the duty in working with the debtor and 

the claimants to design a plan of organization, a trust plan, that 

will prevent fraud and abuse so that that fund is not depleted by 

wrongful filings and, therefore, allow there to be less money available for distribution to claimants who become sick later. So, in that 

case that we have filed that objection, we assert that there are conflicts of interest because of connections of the future claims representative candidate with the plaintiffs’ bar. Independence is key. 

Independence and transparency are key. 

Mrs. HANDEL. Thank you very much. 

Mr. Chairman, I yield. 

Mr. MARINO. Thank you. 

20 

The Chair now recognizes the Ranking Member, the Congressman from Rhode Island, Mr. Cicilline. 

Mr. CICILLINE. Thank you, Mr. Chairman. 

And I want to begin with you, Mr. Rao. If you would, respond 

to the Director’s statements just a few moments ago that the credit 

counseling benefits—that credit counseling benefits the bankruptcy 

system. And I would just like to know your thoughts if you could 

respond to that. I know you have written and thought about that 

a lot. 

Mr. RAO. Yes, Ranking Member. Thank you. 

Yes, I respectfully disagree with Director White. I think particularly when you are talking about the credit counseling that is required before filing bankruptcy, I think most studies have shown 

that the consumers usually delay their decision to file bankruptcy 

for a very long time, and it is usually at the very—when they have 

explored all options, and it is just at that point they have no other 

way of getting out of their debt problems, and then they decide 

that they are going to consider filing bankruptcy. 

And I think all the studies show that requiring credit counseling 

at that point is just too late. There are no viable alternatives for 

them other than filing bankruptcy. People do not do this lightly. 

And they have considered options before that. 

Director White mentions that—I think it was about 15 percent 

of consumers get certificates but then don’t file. There’s lots of reasons why that could happen. Most likely because of all of the costs 

of filing bankruptcy—they may not have been able to come up with 

all the money that they need to file bankruptcy—or that the filing 

requirements themselves are so difficult that they just do not go 

that route or delay it again for the future. So I think looking at 

that statistic proves nothing really at all. 

I do think there is some value to the debtor education course 

which comes after the debtor files bankruptcy. And I think studies 

have shown, and clearly in the clients that we interact with, do 

find the value in that. It helps them to look at how to stay out of 

financial trouble after they go through the bankruptcy system. But 

the pre-filing credit counseling is just not helpful. 

Mr. CICILLINE. Thank you. 

And you have also said, Mr. Rao, that the 2005 amendments to 

the Bankruptcy Code substantially increase the demands on debtors and their attorneys. Could you speak a little bit about what 

that means and what the implications are and what some of those 

burdensome requirements are and what we might do to fix that? 

Mr. RAO. Yeah. There is really quite a few of them, but I think 

the most prominent one to discuss is really the requirement that 

debtors and their attorneys need to calculate. So, in most cases, 

debtors who file bankruptcy are below the median income in their 

State, and, therefore, they are not really subject to the means test. 

But even to get to that safe harbor, they have to prove what is referred to as their current monthly income is below that level. And 

to do that, they have to collect 6 months of pay stubs and collect 

a lot of information. And the other problem with this is that it is 

constantly changing. And they have to be very precise on the day 

of filing that that look-back period of 6 months, that income is calculated perfectly, or they run the risk of a challenge and so forth. 

21 

So, if they are struggling to collect the money to file and things 

are changing in their life and they give the documents to the attorney, but then they can’t file, there is a delay, they have got to go 

back now and collect more paperwork, it is just—the whole process 

is very burdensome and costs money. I mean, there’s just quite a 

few other things as well, but that is one of the more difficult ones. 

Mr. CICILLINE. And just to return back to your first point. The 

GAO back in 2007 found that the pre-petition credit counseling required as a result of the 2005 amendments to the Bankruptcy Code 

was not very useful, particularly when debtors are in dire financial 

distress, which I think is exactly the point you made. So that is 

confirmed by the GAO report. 

Mr. RAO. Yes. 

Mr. CICILLINE. Thank you. 

And, with that, I yield back, Mr. Chairman. 

Mr. MARINO. The Chair recognizes now the Congresswoman from 

Florida, Congresswoman Demings. 

Mrs. DEMINGS. Thank you so much, Mr. Chairman. And thank 

you to all of our witnesses for being with us today. 

We have heard it said, a few times now, I think we are all in 

agreement that there does need to be an increase in the compensation to keep good qualified trustees interested in doing this job. 

Judge Stout, you talked about how you worked in all forms of 

bankruptcy, I think for over 25 years. So certainly I am going to 

lean on your expertise as we discuss these issues. 

Do you believe that passing the cost on, of the increase, to the 

debtors is the most viable option? And if not, I would like to hear 

your opinion on some other options. 

Judge STOUT. No, I think it is the most viable option. And I don’t 

think increasing the filing fee by $60 will deter access to the system for debtors. 

There has been a lot of talk here today about the added burden 

Mr. Rao talked about on debtors’ counsel as a result of the changes 

put in effect in 2005. Yes, there is a lot more documents that are 

required to be turned over, but there is a flip side of that too. Yes, 

the debtor is required to provide a lot more documents to the trustee. But then the trustee has to take the time to examine those documents and review them—the bank statements, the payment advices and all these things. 

So, as a result of the added time that lawyers are having to take 

to get everything together for a chapter 7 to successfully be filed, 

the attorneys’ fees have increased. And I think that is accepted 

here. I think Mr. Rao said that the fees have gone up to about 

$2,000 now. In my area, they are not that high, but they are significantly higher than they were in 2005. 

So the attorneys’ fees have gone up, but then the trustee is not 

being compensated for all of the added time they are having to put 

in, between the trustee and their staff, reviewing these documents 

and following up on all the debtors’ advices. 

Mrs. DEMINGS. And passing some of the costs on to the creditors 

is not a viable option, in your opinion, for what reason? 

Judge STOUT. Certainly not for asking a creditor to pay a fee to 

file a proof of claim. I don’t think that is practical at all. 

22 

You know, creditors do pay some fees now whenever they seek 

to modify the automatic stay, to file a motion to modify the stay, 

or terminate the automatic stay. They are required to pay a filing 

fee. And there are other filing fees that creditors pay for filing certain types of actions, adversary proceedings and so forth, in the 

cases. And I don’t know if those could be adjusted. 

Frankly, I don’t have enough background as an appropriator or 

as a legislator to really get into some of the minutia of some of 

these fees and how they are generated and how they are broken 

down. But I do believe that the most practical way to deal with this 

is just simply increase the filing fee. And I don’t think it will affect 

access to the system. 

Mrs. DEMINGS. Mr. Reid, you talked about a number of trustees 

have declined significantly, I believe you said, by about 30 percent. 

Mr. REID. Since 2002. 

Mrs. DEMINGS. Certainly compensation is, I think, a main reason 

for that. But are you aware of other reasons why you have had a 

significant decrease that may not be related to compensation? 

Mr. REID. Well, I don’t know all the reasons why that number 

may have decreased. Based on feedback we have gotten from our 

membership, certainly, the increasing unprofitability of the practice 

is a consideration. There has also been some attrition where trustees have aged and retired and the trustee’s office has decided not 

to fill those positions. And there also has been a decline in filings 

for a certain period of time. 

So I think there are multiple factors. But certainly, one of the 

factors that has contributed to it has been, just anecdotally, the increasing unprofitability of the practice. I believe Mr. White has also 

commented on the number of new applications for the trustee program. It might be helpful to have him comment on whether people 

are actually showing as active interest in the program as they have 

historically. That is also another indicator. 

Mrs. DEMINGS. Mr. White. Director White. 

Mr. WHITE. Yes. Thank you. 

We have found that 7 years ago there were about 58 applicants 

for every trustee opening, and that is down to about 20 now. So 

that is a very precipitous drop over that period of time. 

I had occasion to meet with about 50 of our field office heads a 

couple months ago. And in talking about our trustee oversight responsibilities, one of the main concerns they raised to me is something that Mr. Reid just suggested, which is retirements. If we face 

a wave of retirements any time in the next few years of chapter 

7 trustees with the fact that it may be seen as a less desirable position as evidenced by the smaller queue in line for those for a position, then the system is in some peril. 

Mr. REID. Congresswoman Demings, if I may add to that. 

Mrs. DEMINGS. Please, go ahead. 

Mr. REID. I have been doing this for 24 years as a trustee. And 

one of the things that was very helpful to me as a new trustee was 

the mentoring that I received from veteran trustees. And that is 

one the intangibles here that is extremely important. It takes a 

while to learn how to do this job. It really does. 

Mrs. DEMINGS. Is that a formal program, mentoring program? 

23 

Mr. REID. It probably varies by district. In Chicago, they are superb at having the veteran, older trustees mentor the younger 

trustees. We get together for meetings. And all the trustees know 

that you can call them at any time. 

I can say without a doubt that, over my 24 years, that is extremely valuable. And it has also been rewarding, because now 

that I am older, I guess more gray hairs, I can mentor younger 

trustees. That is an extremely valuable part of this system that 

wouldn’t necessarily appear in statistics but is very real. 

Often in these cases, Congresswoman, we have to deal with a lot 

of very hurt people, a lot of hostility. There is a lot of what you 

may call projection where people, because they are hurt, they 

project that hurt on the trustee. The trustee really has to learn 

how to handle stress. You have to be the calmest person in the 

room. It takes a while to develop that equanimity. 

Again, it is intangible. As the Director says, there will be loss if 

we don’t make—if we don’t keep this an economically viable program. 

Mrs. DEMINGS. Thank you. 

Thank you, Mr. Chairman, I yield back. 

Mr. MARINO. Attorney Holtschlag, could you give us a day’s 

worth of operations in the work that you go through in preparing 

these cases and then getting them before the court? 

Ms. HOLTSCHLAG. In representing consumer debtors? 

Mr. MARINO. Yes. 

Ms. HOLTSCHLAG. So this would be certainly my own experience. 

I am here today testifying on behalf of the American Bankruptcy 

Institute. So, in answering your question, I would be relying on my 

own experience, not speaking on behalf of the ABI. 

Mr. MARINO. Sure. 

Ms. HOLTSCHLAG. It is very difficult to file on behalf of debtors. 

I have been very fortunate in my practice. In my experience, the 

clients that I have had have the money to file for bankruptcy, 

which is nontrivial as so many have discussed today. To pay my 

fees to pay the court’s fees, it is expensive. And there are certainly 

those out there that are too broke to go broke, I suppose. 

The paperwork is immense. The means test, the changes in 2005, 

a lot of practitioners got out of the field in 2005 because of those 

new regulations and the increase in the amount of work that is required. 

I think the bar is up to the challenge, does the work. And I think 

the consumer debtors that file are very much in need of the relief 

that they seek. And I think that the trustees are very much deserving of the raise that is contemplated as recommended by the ABI 

because of their service. And that service is provided not only to 

creditors but to the debtors also. In conducting that meeting, the 

talent and skills that they bring to conducting the meeting of creditors, which is the one and only time that debtors typically appear 

before anybody in the system in chapter 7, so the trustee is very 

much the face of the proceeding for the average consumer debtor. 

And so having talented individuals that are fairly compensated in 

that role, for me as a consumer debtor’s attorney, is essential to the 

process. 

24 

Mr. MARINO. So, if I could pin you down, to a certain extent, 

what are you talking about hourwise? How many hours in a simple 

bankruptcy where there are no assets? 

Ms. HOLTSCHLAG. I would say at least 10 hours of my time to 

prepare the case for filing. I think that is involving certainly calculation of the means test, preparation of the schedules, which are 

extremely intensive, disclosing everything in every possible way. 

So I would say my personal average, which is anecdotal and no 

way statistically significant across the board, it is 10 hours to prepare a case through the point of case filing. 

Mr. MARINO. Thank you. 

Director White, something that has come to my attention, and I 

wonder if you could respond to this. I have heard that there is a 

substantial amount of unclaimed funds at DOJ that perhaps could 

help distribute the cost, or defer the cost, to a certain extent, for 

those—not only for the increase in the rate for your individuals but 

deferred cost for the person claiming bankruptcy. 

Mr. WHITE. The unclaimed funds are not held by the Department 

of Justice. They are held by the court system. And the courts have 

actually a task force looking at whether or not the administration 

of that system is optimum. 

As I understand it from information provided by the courts, about $300 million is being held in unclaimed funds, and it increases about $10 million per year. And those occur when a trustee 

gets a returned check, for example. The creditor cannot be found. 

But those are not DOJ funds. 

I also am not expert in whatever legal issues there could be with 

regard to the propriety of then distributing those [funds] otherwise. 

I just don’t have any expertise in that area nor have I given that 

sufficient consideration. But you are quite correct. There is $300 

million in unclaimed funds from bankruptcy cases. 

Mr. MARINO. Well, in the 8 years that I have been here, I occasionally—we find unclaimed funds here and there. And I think this 

is one area where it would be important for us to look into to help 

defer these costs. 

Judge Stout, there was some testimony by Attorney Rao concerning people not knowing or asking if they can waive the fee that 

they would have to pay to the court, or it is just not being evenly 

addressed across the country. 

Could you clarify that a little bit if that is at case? 

Judge STOUT. I cannot comment about other courts. I do know 

that I routinely deal with motions to waive filing fees in my court, 

and they are granted fairly often. 

I do take an approach to it that I look beyond the poverty guidelines. I look beyond the schedule I and J of the bankruptcy petition. 

Schedule I is the income. But I will also look at whether or not the 

debtor has substantial exempt assets. Sometimes debtors file bankruptcy, and they may have substantial retirement funds that are 

exempt. And if a debtor has retirement funds that are exempt or 

substantial equity if their residence, then that is a factor I take 

into consideration on whether or not to grant the fee waivers as 

well. 

Mr. MARINO. Mr. Cicilline. 

Mr. CICILLINE. Thank you, Mr. Chairman. 

25 

I want to go back to this question about how the burden of additional costs should be borne. I mean, you would agree, I take it, 

that the primary beneficiaries of asset chapter 7 cases are the 

creditors, right? 

Judge STOUT. Yes, creditors. And as has been alluded to, taxing 

authorities as well. Trustees collect a lot of money that is distributed to taxing authorities. And many times those taxes are nondischargeable, so it benefits the debtor as well. 

Mr. CICILLINE. Given the fact that the creditors largely benefit 

from the administration of bankruptcy cases, wouldn’t it be more 

equitable to require creditors to bear some of this increase rather 

than imposing the entire burden on the debtor? I mean, it just 

seems like kind of—I know you have expressed your support for 

H.R. 3553. But wouldn’t a kind of shared responsibility for this increased cost make sense in light of who benefits from the administration of the bankruptcy system? 

Judge STOUT. Well, I just don’t know how practical that would 

be. Currently, creditors file claims in bankruptcy cases. And Mr. 

Rao alluded to assessing a fee to file a claim. Those claims that are 

filed sometimes, for one reason or another, they don’t receive anything on that claim. Say, for instance, in a case that is designated 

as an asset case, the trustee collects assets, and then there are tax 

claims that come before the creditor claims, the unsecured creditor 

claims, and all the funds collected by the trustee is paid to the taxing authority. And so you have charged a creditor $5, $10 to file 

a proof of claim. They don’t get anything back on it. And I think 

it would have a chilling effect on creditors even filing claims in 

bankruptcy cases. 

There are some mechanisms where creditors do pay for their access to the system, as I alluded to earlier, motions to terminate the 

stay, adversary proceedings, filing fees on those. But that is the 

APs, adversary proceedings, are a small number. 

Mr. CICILLINE. All right. Mr. Rao, you know, when you think 

about other places where creditors would have access to recovery, 

in the private market, creditors would have to pay anywhere between 33 percent and 40 percent commission. But in an asset chapter 7 case, that percentage drops to less than 10 percent. And as 

a result, aren’t creditors vastly benefiting from this disparity, and, 

therefore, shouldn’t creditors pay a greater commission as a result 

of that? 

Mr. RAO. Yes, I think they do. And it is, certainly, especially the 

unsecured creditors, who do benefit, and when you look at some of 

the asset reports that Director White’s office collects, you can see 

that they often do benefit quite considerably from the—even from 

small asset cases. A lot of that money does go to unsecured creditors. And I think it is a small price for them to pay for that. It is 

certainly a much better deal than trying to collect that debt outside 

of bankruptcy. 

I think Judge Stout mentioned in terms of the filing fee that— 

I think my proposal would be that the filing fee for a proof of claim 

would be assessed in the chapter 7 cases, and they would only be 

asked—in the typical chapter 7 case, creditors are not asked to file 

filing fees but only until assets have been recovered. So then a notice goes out, and they can file a fee. Judge Stout is correct that 

26 

there may be some cases where, even after they go through that 

process, they might not get a recovery because of tax priority 

claims. But I think, in many of these cases, they would actually get 

a recovery. And, again, I am talking about a very small amount, 

$5. 

Mr. CICILLINE. Okay. Thank you. 

Mr. Chairman, I would ask unanimous consent that the very eloquent and powerful opening statement of the Ranking Member of 

the full Committee, Mr. Nadler, be made part of the record. 

Mr. MARINO. Without objection. 

Statement submitted by the Honorable Jerrold Nadler, New 

York, Ranking Member, Committee on the Judiciary. This material 

is available at the Committee or on the Committee Repository at: 

https://docs.house.gov/meetings/JU/JU05/20180926/108455/HHRG115-JU05-20180926-SD002.pdf 

Mr. CICILLINE. Thank you. 

I yield back. 

Mr. MARINO. The Chair now recognizes the Chairman of the full 

Judiciary Committee, Congressman Goodlatte from Virginia, for his 

opening statement, and if he would like to proceed, then, into questioning the panel. 

Chairman GOODLATTE. Well, thank you very much, Mr. Chairman. I apologize for being late. I will just give my opening statement and reserve questions for later, if that is appropriate. 

Chapter 7 trustees play an essential role in the administration 

of a liquidation bankruptcy. A chapter 7 trustee investigates the financial affairs of the debtor, pursues preference, and fraudulent 

conveyance claims on behalf of the bankruptcy estate, and determines whether creditors’ proofs of claim are objectionable. Trustees 

also serve as administrators of debtors’ plans under the Employment Retirement Income Security Act. 

Notwithstanding their performance of numerous important bankruptcy duties, in most cases, chapter 7 trustees are paid only a flat 

fee of $60 for their services. This dollar amount was fixed by statute in the mid-1990s, was not indexed to inflation like other dollar 

amounts in the Code, and has not been increased in over 20 years. 

In liquidation cases in which assets are distributed to creditors, 

a trustee earns a commission based on the value of the administered assets. That commission, however, is not typically large. In 

2013, for example, the average trustee commission in an asset case 

was $2,468. Asset cases, moreover, are by far the minority of cases. 

For example, in 2010, out of 1.4 million chapter 7 cases filed, only 

about 60,000 were asset cases. 

Given the range of important duties that chapter 7 trustees must 

perform, it is not hard to conclude that these trustee are undercompensated. This seems especially true in cases in which the Bankruptcy Code requires the trustee to administer and close out the 

debtor’s 401(k) and other ERISA-qualifying benefit plans. Sometimes this process takes years, but even in those cases, the trustee 

typically receives only the $60 base pay amount. 

Congress should consider seriously whether and how to raise 

chapter 7 trustee compensation. The bill we consider today would 

provide a raise by increasing bankruptcy filing fees. That is a reaVerDate Sep 11 2014 04:07 Dec 01, 2018 Jkt 032979 PO 00000 Frm 00030 Fmt 6633 Sfmt 6602 E:\HR\OC\A979.XXX A979
27 

sonable approach given that the current $60 level has not been adjusted for inflation since it was first set in the 1990s. 

I look forward to further discussion in this hearing. 

Thank you. 

Mr. MARINO. I am going to enter into the record a statement 

from and on behalf of the American Bankers Association. I don’t 

hear any objection, so that is so entered. 

This material is available at the Committee or on the Committee 

Repository at: https://docs.house.gov/meetings/JU/JU05/20180926/ 

108455/HHRG-115-JU05-20180926-SD003.pdf 

Mr. MARINO. Ladies and gentlemen, I want to thank you for 

being here. It has been very educational. I always find that our sessions, particularly when we get a chance to have a second round 

and really drill down into the bedrock, and as the Director said, I 

think the technical changes we can take care of. And I stand by 

this is as a good solid piece of legislation. We are going to continue 

to work hard to see that this moves forward. 

So this concludes today’s hearing. Again, thank you for being 

here. 

Thank you for the people in the gallery being here. 

And, without objection, all members will have 5 legislative days 

to submit additional written questions for the witnesses or additional materials for the record. 

The hearing is adjourned. 

[Whereupon, at 11:32 a.m., the Subcommittee was adjourned.] 

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