S. 1914 Business Bankruptcy Reform Act

S. 1914 Business Bankruptcy Reform Act

To amend title 11, United States Code, provide for business bankruptcy reform, and for other purposes. U.S. Department of Justice

Executive Office for United States Trustees

Office of Research and Planning
901 E Street, NW, Suite 740 Ph: (202) 616-9193
Washington, D.C. 20530 Fax: (202) 616-4576

Samuel J. Gerdano
Executive Director American Bankruptcy Institute
44 Canal Center Plaza
Alexandria, VA 22314

Dear Mr. Gerdano:

The American Bankruptcy Institute recently posted on its web site "An Analysis of S. 1914 Business Reorganization Provisions" by Christian Onsager. Mr. Onsager estimates that implementation of Section 410 of S. 1914 would require over 5,000 additional United States Trustee employees. This analysis of the demands on the United States Trustee Programs is flawed by at least two major errors.

First, his estimate is based on 27,000 chapter 11 filings per year. Annual chapter 11 filings have never reached 27,000 in any year, and the current annual volume is about 10,000 filings. As of April 1998, the open chapter 11 caseload for all United States Trustees was 9,930 cases.

Second, Mr. Onsager appears to make a fundamental arithmetic error. Mr. Onsager estimates that 80 percent of chapter 11 cases will be small business cases under S. 1914's provisions. Based on his estimate of 27,000 case filings, there would then be 21,600 cases requiring -- again according to Mr. Onsager -- an additional 10 hours per case. The additional workload under this analysis would total 210,600 employee hours. A work year is general estimated to consist of 2,080 hours. Using Mr. Onsager's numbers, S. 1914 would require -- at most -- 103 additional United States Trustee employees. Mr. Onsager's estimate of 5,000 additional employees is therefore in error by a multiple of 50, even using his excessive chapter 11 case estimates.

The United States Trustee Program has expressed its support of S. 1914. Because the bill requires practices already put in place by United States Trustees in many chapter 11 cases, and the chapter 11 caseload is likely to be less than half of that predicted by Mr. Onsager, the need for additional personnel would be far more modest than he states. Currently, there are approximately 1,000 employees of the United States Trustee Program. There may be a need for some increase in United States Trustee personnel to meet the needs of S. 1914 and the other provisions in the pending bankruptcy legislation. However, much of the work required by S. 1914 is already being performed by existing personnel. While there will undoubtedly continue to be debate about S. 1914, opposition should not be based on exaggerated estimates of additional employees needed to do the work required by the bill's provisions.

Very truly yours,

Joseph A. Guzinski