May 2011

 

Record Bankruptcy Filings, Too Few Judges

Judge Joy Flowers Conti (W.D. Pa.), was named chair of the Judicial Conference Committee on the Administration of the Bankruptcy System in October 2010. A member of the committee since 2007, Conti was appointed to the bench in 2002.

You bring your experience as a former bankruptcy attorney to your role as committee chair. Could you talk a little about that experience?

I was a law school professor when the 1978 Code was enacted and went into effect. I taught bankruptcy and bankruptcy reorganization. In practice, I was the debtor’s counsel in one of the first Chapter 11 cases filed in my district under the new Code. From my experience, I developed a respect for the bankruptcy system and an understanding of how the bankruptcy process works.

How is work progressing on enhancements to the Next Generation of Case Management/Electronic Case Files System that will affect bankruptcy judges and chambers and also the filers? Can you talk about the planned improvements or changes?

The Bankruptcy Committee has been very interested in the progress of the “Next Gen” project. The project is on schedule to meet a primary goal of completing the collection and documentation of functional requirements by February 2012. A lot of hard work has been performed by members of the functional requirements groups, (FRGs), comprised primarily of judges, chambers and clerks, office staff. After the functional requirements are collected, the project will proceed through other phases, including design and development. Project participants are to be congratulated for the fine work they’ve accomplished to date.

While specific functionality that will be in the Next Gen system can’t be described at this point, there are several interesting concepts that have been talked about. One idea that could benefit all users is what has been called the “MyECF” page. This page would provide users in the system with a way to organize the user’s preferences and links to information in the system. Another concept that is under consideration is a process to draft opinions and other documents entirely within the case management system. This approach will be especially helpful to judges and chambers staff.

How did the passage of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 affect the type of bankruptcy filings?

It was widely reported in the press that the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, popularly referred to as BAPCPA, brought on a surge of filings in mid- to late-2005. This surge in filings amounted to an estimated 725,000 filings above the “normal” level for the time period. That surge resulted from what many observers understand was the mistaken belief that, after the effective date of BAPCPA, individuals would no longer be permitted to file for bankruptcy protection. The vast majority of the pre-effective date filings were under chapter 7. Subsequent to BAPCPA’s effective date of October 17, 2005, the total number of bankruptcy filings plunged. In fact, in November 2005, there were only 14,500 total bankruptcy petitions filed in the entire country. That level of filings had not been seen in the previous 40 years.

In the intervening years, the level of filings largely returned to pre-BAPCPA levels. Immediately following the effective date of BAPCPA, the mix of total filings shifted dramatically toward chapter 13 filings. Historically, chapter 13 filings tended to represent about 29 percent of total bankruptcy petitions filed. Immediately after the new law took effect, the proportion of total filings represented by chapter 13 filings jumped to in excess of 50 percent, while chapter 7 filings, which historically accounted for about 70 percent of all bankruptcy filings, fell to well below 50 percent. Whether this shift in the mix was the direct result of the new law or a statistical anomaly occasioned by the pre-effective date surge, which effectively accelerated the filing of hundreds of thousands of chapter 7 bankruptcy filings, may never be known. Since that time, however, the mix of filings has gradually shifted back to the pre-BAPCPA levels. By late 2010, chapter 7 filings were again accounting for about 70 percent of total bankruptcy filings.

It is difficult to determine whether the recession accounted for the surge in the number of bankruptcy filings over the last few years with any degree of confidence. Although intuitively it appears plausible that the recession did in fact “cause” some bankruptcies, the reality is that bankruptcy relief may not benefit everyone who lost a job or had mortgage difficulties.

How did BAPCPA affect the workload of bankruptcy judges?

Statistics indicate that the work of bankruptcy judges on a per case basis increased substantially under BAPCPA compared with the level of work under the prior bankruptcy law. In all, BAPCPA created more than 35 types of new motions, objections, and hearings— many related to consumer matters— that did not exist before its enactment. The overall consequence of BAPCPA is estimated to be a 42 percent increase in judicial workload. It is estimated that the impact of BAPCPA was a 37 percent increase in the average judicial workload per chapter 7 case, and an increase of 54 percent in judicial workload per chapter 13 case. The overall impact on chapter 11 cases is estimated to be a 4 percent increase per case.

When you consider the level and mix of bankruptcy filings, they’ve returned to near pre-BAPCPA levels.

How are bankruptcy courts handling the increased workload?

With great difficulty in those districts where judges have triple and quadruple the threshold number of filings at which point the districts are considered for additional judgeships. That level now is 1,500 weighted filings. In many courts it is the norm for judges and chambers staff to work evenings and weekends. Recalled judges have helped, but recalled judges are not a permanent solution. Also, recalled judges are not available in all of the districts that are in need of judicial assistance.

Calendars are getting longer and it is more difficult to schedule evidentiary hearings and other matters lasting more than a few hours. In some districts, night court is close to a reality. Certain districts requesting additional judgeships have calendars with 300, 400, 500, or more matters scheduled to be heard. In some courts, it is now necessary to wait four to six months or more to have a half-day hearing set on the schedule. A trial taking five or more days may, in fact, take place over 12 months or more with many part-day sessions in order for the hearing to be completed. It is also routinely necessary that the 30-day limit on motions to lift the automatic stay be waived in many courts because the dockets are so crowded that it is simply impossible to reach a final resolution within the 30-day time frame.

Many judges are concerned that they don’t have time to write opinions. This causes a judicial version of a Catch-22: the courts have many cases, which may have similar fact patterns and issues, and written opinions could alleviate some of the judges’ workloads by communicating to the bar how certain matters are addressed. It is beneficial if a judge can rely on a well-reasoned opinion in appropriate cases. But the judges are so pressed for time due to the volume of cases that they are unable to take the time necessary to write an opinion on a recurring issue.

Given the present workload situation, do the bankruptcy courts have adequate resources —including a sufficient number of bankruptcy judges?

The short answer to this question is “no.” Nationwide, there are only 351 authorized bankruptcy judgeships and additional bankruptcy judgeships, are not frequently authorized by Congress. Until BAPCPA authorized 28 additional temporary judgeships in 2005, no additional bankruptcy judgeships had been authorized since 1992.

To address the need for additional judicial resources, the Judicial Conference, on the recommendation of the Bankruptcy Committee, approved requests for 49 additional judgeships, the conversion of 28 temporary judgeships to permanent status, and the extension of two temporary positions for additional five-year periods. The Committee is greatly concerned that the failure to enact bankruptcy judgeship legislation will impair the ability of the bankruptcy courts to perform their work in the face of increasing case filings that are at near-record levels. Failure to convert and extend the temporary judgeships is of particular concern because, without congressional action, the Judiciary could soon have fewer judicial resources to address an historically heavy workload. Many temporary judgeships are due to lapse in the next few years.

The House Judiciary Committee has voted to favorably report the Temporary Bankruptcy Judgeship Extension Act of 2011 (H.R. 1021) on March 17, 2011. This bill would extend for five years 30 existing temporary bankruptcy judgeships that have lapsed, or are lapsing soon, and would thus be in danger of expiring. We hope that this legislation will be considered and acted upon favorably by both Houses of Congress as soon as possible.

Has your Committee made any recommendations for assistance to the bankruptcy courts?

In addition to its recommendations for additional judgeships and the preservation of existing judgeships through conversion or extension of temporary judgeships, the Committee established a working group of Committee members to explore alternative uses of existing judicial resources. Among other things, the group will explore the possibility of establishing a visiting judge information system through the AO to assist circuits and districts in finding judges who are willing and able to provide assistance to overworked courts. Enhancements in technology also are being considered. The group will consider the results of a survey of bankruptcy judges being conducted by the Federal Judicial Center to explore factors that might make recall an attractive alternative to full retirement. Given the difficulty of obtaining additional bankruptcy judgeships, retired bankruptcy judges willing to serve under the recall program are indispensable to the national bankruptcy court system. At the present time, 33 bankruptcy judges are serving on recall. Their service provides individual districts with a costeffective means to address shifting caseloads and valuable experience that benefits the bankruptcy system. Using recalled judges, however, is only a shortterm solution. Also, the Judicial Conference approved at its March 2011 session a recommendation to revise the Conference guidelines for the intercircuit assignment of bankruptcy judges to allow more flexibility and promote greater use of intercircuit assignments.

What are your goals and/or projects as committee chair?

This is a critical time for the bankruptcy court system with so many overworked bankruptcy judges and the possibility of a large number of judicial retirements in the near future. It is essential that the courts continue the effort to obtain adequate judicial resources and create more flexibility and efficiency in using existing resources to address the dramatic increase in the workload. The bankruptcy courts need appropriate resources to serve the public and to meet the needs of justice.