Greater Oversight and Guidance of Bankruptcy Process Needed
GGD-84-55
Published: Aug 21, 1984. Publicly Released: Aug 21, 1984.
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Highlights
GAO reviewed the activities of bankruptcy trustees in eight judicial districts to determine whether the interests of debtors and creditors are being protected during the administration of cases under chapters 7 and 13 of the Bankruptcy Reform Act. Chapter 7 of the act provides for the liquidation of a debtor's nonexempt assets; chapter 13 provides a debtor with the opportunity to retain his assets and repay his creditors over a set period of time.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of Justice | The Attorney General and the Director, Administrative Office of the U.S. Courts, should require trustees to invest estate funds to reduce the cost of estate administration and provide the maximum return to creditors. |
Closed – Implemented
Justice advised GAO that, on December 18, 1984, the Executive Office of U.S. Trustees set policies and procedures for trustees to follow in investing estate funds.
|
| Administrative Office of the United States Courts | The Attorney General and the Director, Administrative Office of the U.S. Courts, should require trustees to invest estate funds to reduce the cost of estate administration and provide the maximum return to creditors. |
Closed – Not Implemented
P.L. 99-554, the Bankruptcy Judgeship and U.S. Trustee Act of 1986, transferred trustee oversight and supervision to the Department of Justice. As a result, this recommendation no longer applies to the Administrative Office (AO).
|
| Administrative Office of the United States Courts | The Attorney General and the Director, Administrative Office of the U.S. Courts, should instruct trustees that, if they act as their own attorneys, they will not be reimbursed for attorney fees when they perform trustee duties. |
Closed – Implemented
Justice advised GAO that, on December 18, 1984, the Executive Office of U.S. Trustees issued policies and procedures on trustees' fee applications for attorney services.
|
| Department of Justice | The Attorney General and the Director, Administrative Office of the U.S. Courts, should instruct trustees that, if they act as their own attorneys, they will not be reimbursed for attorney fees when they perform trustee duties. |
Closed – Not Implemented
P.L. 99-554, the Bankruptcy Judgeship and U.S. Trustee Act of 1986, transferred oversight and supervision of trustees to Justice. As a result, this recommendation no longer applies to AO.
|
| Department of Justice | The Attorney General and the Director, Administrative Office of the U.S. Courts, should require U.S. trustees and estate administrators to scrutinize the trustees' billing statements and to advise bankruptcy judges of the appropriateness of the services rendered. |
Closed – Not Implemented
P.L. 99-554, the Bankruptcy Judgeship and U.S. Trustee Act of 1986, transferred oversight and supervision of trustees to Justice. As a result, this recommendation no longer applies to AO.
|
| Administrative Office of the United States Courts | The Attorney General and the Director, Administrative Office of the U.S. Courts, should require U.S. trustees and estate administrators to scrutinize the trustees' billing statements and to advise bankruptcy judges of the appropriateness of the services rendered. |
Closed – Implemented
Justice advised GAO that, on December 18, 1984, the Executive Office of U.S. Trustees issued policies and procedures on monitoring trustees' billing statements.
|
| Administrative Office of the United States Courts | The Attorney General and the Director, Administrative Office of the U.S. Courts, should require U.S. trustees and estate administrators to develop districtwide dollar limits for trustees to follow when deciding to liquidate assets. |
Closed – Implemented
Justice does not agree with GAO that a dollar limit should be established districtwide for trustees to follow in liquidating assets. It believes that trustees should have some flexibility in this area and provided guidance on December 18, 1984, for trustees to follow when deciding to liquidate assets.
|
| Department of Justice | The Attorney General and the Director, Administrative Office of the U.S. Courts, should require U.S. trustees and estate administrators to develop districtwide dollar limits for trustees to follow when deciding to liquidate assets. |
Closed – Not Implemented
P.L. 99-554, the Bankruptcy Judgeship and U.S. Trustee Act of 1986, transferred oversight and supervision of trustees to Justice. As a result, this recommendation no longer applies to AO.
|
| Administrative Office of the United States Courts | The Attorney General and the Director, Administrative Office of the U.S. Courts, should require U.S. trustees and estate administrators to closely monitor chapter 13 trustees' annual financial reports to ensure that trustees are not exceeding the maximum compensation and expense levels. In addition, monitoring activities should be supplemented by having the internal audit staffs of Justice and the judiciary review the financial activities of bankruptcy trustees. |
Closed – Not Implemented
P.L. 99-554, the Bankruptcy Judgeship and U.S. Trustee Act of 1986, transferred oversight and supervision of trustees to Justice. As a result, this recommendation no longer applies to AO.
|
| Department of Justice | The Attorney General and the Director, Administrative Office of the U.S. Courts, should require U.S. trustees and estate administrators to closely monitor chapter 13 trustees' annual financial reports to ensure that trustees are not exceeding the maximum compensation and expense levels. In addition, monitoring activities should be supplemented by having the internal audit staffs of Justice and the judiciary review the financial activities of bankruptcy trustees. |
Closed – Implemented
On December 19, 1985, Justice implemented this recommendation, except that the DOD General Counsel issued an opinion stating that interest earned on deposit-of-plan payments can be used by trustees to defray administrative costs, even though this could result in the trustees' compensation exceeding the 10-percent maximum.
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BankruptcyFraudJudicial reviewMonitoringOverpaymentsPersonal liability (legal)Trusts and estates lawCompensationJudgesInterest earned