New reporting and data collection requirements. 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. Immediately after the act went into effect, filings fell substantially. Trustee Program Incurred Approximately $72 Million in Overall Costs, and the Judiciary Approximately $48 Million in Start-up Costs, Related to the Bankruptcy Reform Act

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 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. As shown in table 2, these costs were incurred for the following functions:    Revision of rules, forms, and procedures. Training and communication to courts. As a Result of Fewer Filings Since the Bankruptcy Reform Act, Revenues from Bankruptcy Filing Fees Have Declined

Revenues to the Trustee Program and federal judiciary from bankruptcy  filing fees and other fees have declined since the implementation of the  Bankruptcy Reform Act due to the reduction in the number of bankruptcy  filings. Cost to Bankruptcy Filers Has Risen Due to Increased Legal and Filing Fees and New Counseling and Education Requirements

Based on our sample of bankruptcy files, we estimate that the average  attorney fee for a Chapter 7 case has increased roughly 50 percent since  the Bankruptcy Reform Act. The proportion of Chapter 7 debtors filing  without attorney representation (pro se) appears to have declined, but we  did not find a change in the proportion of Chapter 7 debtors receiving free  legal assistance. For Chapter 13 cases, our analysis found the standard  attorney fees that individual courts approve rose in nearly all the districts  and divisions with such fees that we reviewed. As shown in figure 5, on the basis of our sample we estimate that the  average attorney fee in Chapter 7 consumer bankruptcy cases was $712 in  February–March 2005 and $1,078 in February–March 2007. In more than half of  those districts and divisions, the increase was 55 percent or more. The total fees paid for cases under  Chapter 13 rose from $194 to $274—an increase of $80. As noted earlier, private  trustees—individuals who are not government employees and are  overseen in most districts by the Trustee Program—administer individual  Chapter 7 and Chapter 13 bankruptcy cases. Appendix I: Objectives, Scope, and Methodology

Our report objectives were to examine (1) new costs incurred as a result  of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005  (Bankruptcy Reform Act) by the Department of Justice and the federal  judiciary, (2) new costs incurred as a result of the act by consumers filing  for bankruptcy, and (3) the impact of the act on private trustees. We also obtained documentation from, and  interviewed representatives of, the Department of Justice’s U.S. For the Department of  Justice’s Trustee Program, these included its actual or projected annual  budgets for fiscal years 2005 through 2009, as well as annual budget and  performance summaries, strategic plans, annual reports, and  congressional testimonies by Trustee Program officials. In addition, we collected and  analyzed data on the Trustee Program’s and judiciary’s revenues from  bankruptcy-related statutory and miscellaneous filing fees.
Why GAO Did This Study

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (Bankruptcy Reform Act) made significant changes to the administration of bankruptcy relief, affecting (1) the U.S. Trustee Program (Trustee Program), which oversees the bankruptcy process; (2) the federal judiciary, which includes bankruptcy courts and a central administrative support office; (3) consumers filing for bankruptcy; and (4) private trustees--individuals who administer bankruptcy cases and are supervised by the Trustee Program but are not government employees. The number of new personal bankruptcy filings declined after the act--about 600,000 people filed in 2006 as compared to an average of 1.5 million annually between 2001 and 2004. GAO was asked to examine (1) new costs incurred as a result of the Bankruptcy Reform Act by the Trustee Program and federal judiciary, (2) new costs to consumers, and (3) the impact of the act on private trustees. GAO reviewed budget information from the Trustee Program and federal judiciary, and collected data on attorney fees from a random and projectable sample of personal bankruptcy cases. GAO also obtained documentation and interviewed staff from these entities, as well as from organizations representing consumers, bankruptcy attorneys, creditors, and private trustees.

What GAO Found

The Trustee Program estimated that its costs to carry out responsibilities resulting from the Bankruptcy Reform Act were approximately $72.4 million for fiscal years 2005 through 2007. These costs were mostly for staff time for ongoing activities related to the means test, debtor audits, data collection and reporting, and counseling and education requirements. The federal judiciary could not isolate all costs related to the act since it broadly affected nearly all bankruptcy court staff and operations, but estimated about $48 million was incurred in one-time start-up costs for such things as training and revisions of rules, forms, and procedures. These estimates do not incorporate the effect of the decline in bankruptcy filings since the act, which presumably has helped reduce the Trustee Program's and judiciary's overall costs, but has also reduced fee revenues. Trustee Program filing fee revenues declined from $74 million to $52 million between fiscal years 2005 and 2007, and federal judiciary filing and miscellaneous fee revenues declined from $237 million to $135 million. Consumers filing for bankruptcy pay higher legal and filing fees since the Bankruptcy Reform Act went into effect. Based on a random sample of bankruptcy files, GAO estimated that the average attorney fee for a Chapter 7 case increased from $712 in February-March 2005 to $1,078 in February-March 2007. For Chapter 13 cases, the standard attorney fees that individual courts approve rose in nearly all the districts and divisions with such fees that GAO reviewed, and in more than half the cases the increase was 55 percent or more. As a result of the act and subsequent budget legislation, total bankruptcy filing fees have risen from $209 to $299 for Chapter 7 and from $194 to $274 for Chapter 13. GAO estimated that the proportion of Chapter 7 debtors filing without an attorney had declined and did not find a significant change in the proportion of such debtors receiving free legal assistance. In addition, fees to meet the act's credit counseling and debtor education requirements are typically about $100, although some clients receive a fee reduction or a full waiver. Private trustees told GAO that new Bankruptcy Reform Act requirements related to documentation, verification, and reporting have increased the time and resources they spend administering each case. The caseload of some private trustees has declined in concert with the significant decline in bankruptcy filings that has occurred since the act went into effect, but trustees' overall rate of attrition has not changed significantly.