The Impact of Proposed Changes in Bankruptcy Administration

An investigation and comparison of ways to improve the effectiveness and efficiency of the U.S. bankruptcy system, this study estimates costs of current bankruptcy functions, evaluates costs and benefits of proposed changes, and evaluates potential uses of automated data-processing equipment in administration of bankruptcy cases. Findings are based on a review of existing literature, observations and interviews in bankruptcy courts, and analysis of data compiled by the Administrative Office of the U.S. Courts. The study produced four different models to compare the costs of alternative approaches to the administration of straight-bankruptcy cases: a current model following existing procedures; a "new-rules" model reflecting the proposed new rules before the Supreme Court; a streamlined model resulting from the study; and a counseling model incorporating extensive financial counseling for individual debtors. Adoption of the streamlined over the current model would result in net annual savings of approximately $3 million in court costs and $7 million in trustee costs. Approximately $6 million of these savings would be achieved by adopting a policy of abandoning low-asset (under $1000) estates to the debtor.