Legislative Update
Paul Swanson, Chair

I apologize for the delay in posting this legislative report. I need not explain to any of you that things have been hectic over the last several weeks. I will use the hiatus before the onslaught of post 10/16 Section 341 hearings to bring you up to date on the NABT efforts to remedy the very real problem of compensation. Obviously, we have all become aware of the burdens which will be placed on Chapter 7 trustees under the new legislation. The cases will start to trickle in shortly and undoubtedly be up to normal levels sometime next year. We need an increase in the no asset fee and we need it now. I fear, frankly, that many trustees, without an increase, will simply give it up. We are doing everything in our power to effectuate the needed changes, but we could also use help from the membership. Over the past six months, members in districts with key legislators have given us incredible assistance in getting to their Members of Congress. We have come very close, but unfortunately haven't achieved our goal. We need one final push (hopefully) to get our legislative changes. Please respond to requests for contacts in Washington which you will be receiving relating to certain key legislators in the near future.

Increasing the No Asset Fee.

Increasing trustee compensation in no asset cases remains our top priority.
Over the past several months, a considerable effort has been made on the part of our legislative counsel and lobbyists to find a legislative vehicle to attach language which would increase truste compensation in no asset cases from $60.00 to $100.00 per case. We have repeatedly received expressions of support for the increase from the leadership in the House and Senate, both Republican and Democrat. Unfortunately, we have been frustrated by the politics that continue to exist with respect to any bankruptcy related legislation. Let me explain this.

As most of your know, our fee increase was included as a part of managers amendment to the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA). The amendment was approved by Republican and Democratic leaders in the Senate and we believed, up to the day before the vote, that our increase was a fait accompli. Unfortunately, last minute dispute over the naming of a federal courthouse kept the entire managers amendment from being included in the final bill. We, along with a number of other constituencies were simply left at the dock as BAPCPA sailed into the statute books.

Since then, we have attempted to attach the fee increase language to several other pieces of legislation, only to be disappointed at the last minute by political infighting completely unrelated to the merits of our issue. For example, last month members of the NABT legislative committee, our representatives in Washington, D.C., and trustees from around the country worked together in an effort to get thefee increase attached to the Appropriations Bill for Science, Justice and State (CJS) pending in the Senate. The fee increase was offered Senator Ben Nelson (D-NE) as an amendment to the CJS Bill. With great assistance of our trustees from Alabama and Maryland, the amendment had the support of the chairman of the CJS subcommittee (Richard Shelby, R-AL) and ranking member (Barbara Mikulski, D- MD). In addition, thanks to the efforts of a member of the legislative committee, we also had the active support of Senator Mitch McConnell (R-KY), the second ranking republican in the Senate.

In order to attach the fee increase to the Appropriations Bill,we also needed the concurrence of the Senate Judiciary Committee as the authorizing committee for bankruptcy related legislation. We were able to get the support of Senators Charles Grassly (R-IA) and Patrick Leahy (D-VT) who were the central players in BAPCPA and with the help of a key trustee in Pennsylvania, Senator Arlen Specter (R-PA), chairman of the judiciary committee, also expressed his support for the increase.

Because we were trying to add the fee increase to an Appropriations Bill, one senator could block the amendment by raising a procedural objection. At the last moment, someone attempted to attach other bankruptcy related provisions to the CJS bill (one of those constituencies left on the dock with us). When an objection was raise to adding that provision, someone objected to adding our fee increase and our amendment was effectively killed. Once again, the objection to our fee increase had nothing to do with the merits, but was scuttled by the continuation of the dispute that began with the managers amendment being left out of BAPCPA.

We anticipate that Congress will continue in session until Thanksgiving and we will continue to do everything possible in the House and Senate to make passage of the fee increase a priority for them. At the time of the writing of this report, a number of bills have been introduced to make changes to BAPCPA, although it is unlikely that significant changes will be approved given what we know of the position of the members who could effectuate these changes. We will, however,look for any reasonable opportunity to attach the fee increase to any available vehicle. You can help us by making your views known to the Senate Judiciary Committee Chairman, Arlen Specter, and ranking member, Patrick Leahy. We have included their contact information below and some suggested language appears which you may want to incorporate in your correspondence to the senators. Please also respond to your legislative alerts if you can help us with a particular legislator from your area who we feel may be an important player on one of these bills. I can't tell you how influential local constituents contacts with legislators are when we are trying to get something done in Washington.

In Forma Pauperis (IFP) Cases

As you have obviously been made painfully aware, BAPCPA contains provisions that allow courts to waive filing fees for qualified debtors. The question has arisen regarding the nonpayment of trustees in such cases because the source of funding for trustees fees is the filing fee. If the filing fee is waived in its entirety, there is no money to pay the trustee. The simplest source of funding is the existing authority of the Judicial Conference to increase miscellaneous fees in bankruptcy cases. For example, we have been told that sufficient funds could be raised by adding a few dollars to the administrative fee charged in all Chapter 7 cases.

The Administrative Office of the Courts (AO), however, has recently taken the position that under the present statutory language, it does not have the authority to pay trustees in Chapter 7 cases where the filing fees are waived by the court. NABT recently met withrepresentatives of the EOUST and the AO to discuss this issue. While NABT does not agree with the AO's interpretation of the statute, everyone agrees that it was not the intention of Congress to deprive trustees of compensation in IFP cases. We are now working with the AO and the House and Senate Judiciary Committees to remedy the situation drafting statutory language which could be attached to a bill which we find for the fee increase or to a Technical Amendments Bill. In the meantime, NABT is communicating with representatives of the AO and the National Conference of Bankruptcy Judges to come up with a temporary solution to ensure that trustees are paid in IFP cases such as encouraging judges to waive all but the trustees fee in IFP cases.

What You Can Do.

Send your communications by fax or e-mail to:
Honorable Arlen Specter, Chairman Senate Committee on the Judiciary
SH-711 Hart Senate Office Building
Washington, DC 20510-3802
Fax (202) 228-1229
E-mail: Arlen_Specter@Specter.Senate.gov

Honorable Patrick J. Leahy
Ranking Member Senate Committee on the Judicary SR-433
Russell Senate Office Building
Washington, DC 20510-4502
Fax (202) 224-3479
E-mail: Senator_Leahy@Leahy.Senate.gov

Suggested language for the communication: (feel free to edit or personalize as you see fit).

Dear Senator _____________:

I am writing to ask for your immediate help to gain passage of a bill to increase compensation of Chapter 7 Bankruptcy Trustee in no asset cases. This is an issue of critical importance in your home state and throughout the United States. Trustees have not had an increase in their compensation for over ten (10) years, and there is broad bi-partisan support in the Senate and House and among the users of the bankruptcy system for increasing trustee compensation in no asset cases from $60.00 to $100.00 per case.

The trustees play a vital role in the operation and administration of the bankruptcy system and our workload and responsibilities have been increased substantially under the Bankruptcy Abuse Prevention and Consumer Protection Act which recently went into effect. Unless trustees are fairly compensation for their services, the bankruptcy system will be unable to retain and attract qualified trustees which will negatively impact the functioning of the system. Please support prompt passage of a bill to provide fair compensation for trustees.