Bankruptcy is a federal court procedure designed to help both individuals and businesses eliminate debts they cannot fully repay as well as help creditors receive some payment in an equitable manner. Individuals usually file for bankruptcy under one of two chapters of the Bankruptcy Code. Under Chapter 7, the filer’s eligible nonexempt assets are reduced to cash and distributed to creditors in accordance with distribution priorities and procedures set out in the Bankruptcy Code. Under Chapter 13, filers submit a repayment plan to the court agreeing to pay part or all of their debts over time, usually 3 to 5 years. Upon the successful completion of both Chapter 7 and 13 cases, the filer’s personal liability for eligible debts is discharged at the end of the bankruptcy process, which means that creditors may take no further action against the individual to collect any unpaid portion of the debt. Most debtors who file for bankruptcy use an attorney, but some debtors represent themselves without the aid of an attorney and are referred to as pro se debtors. The bankruptcy system is complex and involves entities in both the judicial and executive branches of government (see fig. 1). Within the judicial branch, 90 federal bankruptcy courts have jurisdiction over bankruptcy cases. The Administrative Office of the United States Courts (AOUSC) serves as the central support entity for federal courts, including bankruptcy courts, providing a wide range of administrative, legal, financial, management, and information technology functions. The Director of AOUSC is supervised by the Judicial Conference of the United States, the judiciary’s principal policy-making body. Within the executive branch, the Trustee Program, a component of the Department of Justice, is responsible for overseeing the administration of most bankruptcy cases. The program consists of the Executive Office for U.S. Trustees, which provides general policy and legal guidance, oversees operations, and handles administrative functions, as well as 95 field offices and 21 U.S. Trustees—federal officials charged with supervising the administration of federal bankruptcy cases. The Trustee Program appoints and supervises approximately 1,400 private trustees, who are not government employees, to administer bankruptcy estates and distribute payments to creditors. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 was signed into law on April 20, 2005, and most of its provisions became effective on October 17, 2005. The following are among the most significant changes the act made with respect to consumer bankruptcies: Means test. The act established a new means test to determine whether a debtor is eligible to file under Chapter 7. If a debtor’s current monthly income minus allowable living expenses exceeds certain thresholds, a Chapter 7 petition is presumed to be abusive and the debtor may have to file under Chapter 11 or under Chapter 13 (which requires repayment of at least a portion of outstanding debt over a period of several years under a court-approved plan) or receive no bankruptcy relief at all. Credit counseling and debtor education. The act created certain counseling and education requirements for filers. To be a “debtor” (that is, eligible to file for bankruptcy), an individual, except in limited circumstances, must receive credit counseling from a provider approved by the Trustee Program (or the bankruptcy administrator, if applicable). In addition, prior to discharge of debts, debtors must complete a personal financial management instructional course—typically referred to as debtor education—from an approved provider. Debtor audits. The act required that procedures be established for independent audit firms to audit bankruptcy petitions, schedules, and other information in consumer bankruptcy cases filed on or after October 20, 2006. The act specified that the procedures should include random audits of at least one out of every 250 bankruptcy cases in each judicial district, as well as additional audits of cases with incomes or expenditures above certain statistical norms. New reporting and data collection requirements. The act required that the judiciary collect certain new aggregate statistics and report on them annually beginning no later than July 1, 2008. The act also required that the Attorney General—who delegated the authority to the Trustee Program—draft rules requiring private trustees to submit uniform final reports on individual bankruptcy cases that include certain specified information about the case. The Bankruptcy Reform Act was enacted, in part, to address certain factors viewed as contributing to an escalation in bankruptcy filings. As shown in figure 2, consumer bankruptcy filings in the United States more than doubled between 1990 and 2004, with an average of more than 1.5 million people filing annually between 2001 and 2004. In the months leading up to the effective date of the act (October 17, 2005), bankruptcy filings rose dramatically because many consumers believed it would be more difficult to receive bankruptcy protection once the act went into effect. Immediately after the act went into effect, filings fell substantially. Although filings have been rising since that time, they are still well below historic levels, with about 823,000 Chapter 7 and Chapter 13 consumer bankruptcies reported in calendar year 2007. The Trustee Program estimated its costs related to carrying out responsibilities resulting from the Bankruptcy Reform Act to be approximately $72.4 million in fiscal years 2005-2007, mostly in personnel costs, to implement the means test and credit counseling and debtor education requirements, conduct debtor audits, comply with reporting requirements, establish information technology systems, and expand facilities. The federal judiciary could not isolate costs specifically resulting from the Bankruptcy Reform Act since the act had a broad effect on nearly all bankruptcy court staff and operations, but did estimate that $48.4 million was incurred in one-time costs associated with start-up activities to implement the act’s requirements. The largest of these expenses related to necessary revisions of the Bankruptcy Rules, official forms, and court operating procedures. The cost estimates for the Trustee Program and the judiciary do not incorporate the effect of the decline in bankruptcy filings since the act, which presumably has helped reduce their overall costs to some extent. However, this decline in filings also has resulted in some reduction in fee revenues for the Trustee Program and the judiciary. Based on estimates developed at our request, the Trustee Program allocated approximately $72.4 million in fiscal years 2005 through 2007 to carry out responsibilities resulting from the Bankruptcy Reform Act. The majority of these costs represented staff time dedicated to new tasks required by the act. In some cases, the Trustee Program hired new staff— including 156 bankruptcy analysts, attorneys, paralegals, and other administrative and information technology personnel hired as of October 1, 2007—to fulfill new responsibilities. In other cases, the program reallocated the time and responsibilities of existing staff to meet the requirements of the act. While the scope of this report is largely limited to describing costs incurred through fiscal year 2007, many or most of those costs are for ongoing tasks that will continue in fiscal year 2008 and beyond. These cost estimates are approximate for two major reasons. First, the Bankruptcy Reform Act had a broad impact on the agency’s overall operations, and thus it is difficult to isolate staff time devoted specifically to elements of the act. Second, although the cost of overseeing each bankruptcy filing may have increased, to some extent this has been offset by the significant decline in the number of bankruptcy filings following the act, and the net effect on overall costs is difficult to measure. As shown in table 1, the Trustee Program’s most significant costs resulting from the Bankruptcy Reform Act for fiscal years 2005 through 2007 were related to the means test ($42.5 million), credit counseling and debtor education requirements ($6.1 million), debtor audits ($3.0 million), studies and reporting requirements ($5.6 million), information technology ($13.7 million), and facilities expansion ($1.5 million). Means test. As of October 1, 2007, the Trustee Program had hired 127 new staff for duties related to the means test, including attorneys who litigate cases and paralegals, bankruptcy analysts, and legal clerks who review the bankruptcy petition, supporting forms, and financial materials filed by every individual debtor in a Chapter 7 case to identify whether the case is “presumed abusive.” This involves an initial review of each debtor’s income, a more thorough review of debtors with income exceeding the state median, and any related litigation. The program estimated it allocated $15.76 million in fiscal year 2006 and $26.7 million in fiscal year 2007 to implementing the means test. Credit counseling and debtor education. The Trustee Program established a separate unit responsible for developing application forms and procedures, approving and monitoring approved credit counseling and debtor education agencies, and taking steps to help ensure that filers were meeting the new requirements. The program initially used detailees from field offices to staff this unit until permanent staff could be hired. The program estimated its costs related to credit counseling and debtor education to be approximately $6.1 million for fiscal years 2005 through 2007. Debtor audits. The Trustee Program had to develop procedures for the audits described in the act. The program contracted with and supervised six third-party auditors, who completed nearly 4,000 debtor audits during fiscal year 2007. The program obligated $2.6 million in fiscal year 2007 for audit contracts. The Trustee Program estimated that staff time allocated to developing audit procedures and overseeing contractors cost $160,000 in fiscal year 2006 and $280,000 in fiscal year 2007. Studies and reporting requirements. The Trustee Program estimated the costs of the act’s various studies and reporting requirements—which include reports on the results of debtor audits and a study of the effectiveness of debtor education— to have been approximately $263,363 in fiscal year 2005, $3.15 million in fiscal year 2006, and $2.21 million in fiscal year 2007. Information technology. The Trustee Program created several new data systems—including the Means Test Review Management System, Credit Counseling/Debtor Education Tracking System, and Debtor Audit Management System—and modified or updated several others. According to Trustee Program officials, these efforts cost $1.9 million in fiscal year 2005, $7.2 million in fiscal year 2006, and $4.6 million in fiscal year 2007. Facilities expansion.