The Bankruptcy Court under Stress
Change in the operation of the bankruptcy court system has been in motion for the last few years, primarily—but not exclusively—due to the unprecedented budgetary problems faced by the federal judiciary. Part of the problem relates to the insufficient funds appropriated to the judiciary through the national budget, and part of the problem rests with the fact that the judiciary's rent costs are escalating at unparalleled rates, taking up a greater percentage of the judiciary's overall budget. Consequently, there is not enough money remaining to fully fund clerks' office employee salaries. Bankruptcy courts throughout the country have been forced to involuntarily terminate or offer early-out retirement to well-trained staff in order to meet payroll. In the last 18 months, the bankruptcy courts have lost more than 470 on-board staff, or approximately 9 percent of the total staff nationwide.
To cope with limited staff, bankruptcy courts are reducing services to the public, including public hours, intake coverage and telephone assistance. Many bankruptcy courts are now requiring mandatory electronic case and document filing. Fortunately, the migration to electronic case filing could not have occurred at a better time. Now, access to court records is available at any time directly from the Internet and does not require a road trip to the courthouse. The foot traffic in clerks' offices is substantially reduced, thus alleviating the impact of staff shortages and what would otherwise be long waiting lines for service. Consequently, we have evolved into a bankruptcy court structure that is more accessible by computer, but less visible in person: more technology, fewer people.
The substantial increase in document filing requirements, review and verification requirements by debtor's counsel, financial-management classes, exceptionally short deadlines, loss of flexibility in chapter 13 cases, the limit on who can be a debtor in chapter 7 and all sorts of means-test gyrations may have a chilling effect on the public's use of the bankruptcy system.
Further change is expected. With the present national debt and the country at war, it is anticipated that federal government operations as a whole will continue to face budgetary shortfalls. In addition to the internal clerks' office reorganizations resulting from the federal budget woes, more change is surely to be expected with the coming bankruptcy legislation. Here again, it seems the character of the bankruptcy courts will be transforming. When the consumer provisions of the bill are carefully analyzed, one conceivable outcome is that the number of bankruptcy courts in America will be overwhelmed by the number of credit counseling services for pre-debtors. The substantial increase in document filing requirements, review and verification requirements by debtor's counsel, financial-management classes, exceptionally short deadlines, loss of flexibility in chapter 13 cases, the limit on who can be a debtor in chapter 7 and all sorts of means-test gyrations may have a chilling effect on the public's use of the bankruptcy system. In fact, the very idea of bankruptcy is so unpopular these days that some have taken to criticizing the individuals who devote themselves to administering the system. The Los Angeles Times recently reported a Washington lobbyist declaring bankruptcy judges as "part of the problem" and proclaiming them as "not real judges" because they were not appointed under Article III of the U.S. Constitution (Gosselin, Peter, "Judges Say Overhaul Would Weaken Bankruptcy System," Los Angeles Times, March 29, 2005, at Part A, Pg.1).
This attitude, coupled with the long-term funding problems, may no doubt have an effect on the size, originality and independence of the bankruptcy courts. Recognizing these most dire circumstances and predictions for the future, is it possible that in five or 10 years you will be asking where all the bankruptcy courts have gone? I doubt it. The need for a bankruptcy system was present from the inception of our government in 1787, when it was included as a necessary power in §8, Article I of the U.S. Constitution. There has been a bankruptcy law in effect continuously since 1898 and that reveals its longstanding usefulness to the citizens of our country and its necessity for maintaining a democratic society. Today, reliance on credit is a staple of our society. This reality (together with the fact that the standard of living for many Americans continues to deteriorate as a result of increasing medical and housing costs, education expenses and the rising costs of necessities such as food, gas and clothing) will foster the continued need for relief from debt for many honest, hard-working citizens.
Certainly the look and feel of bankruptcy courts will continue to evolve in the coming years. It is anticipated that most practitioners will be conversing with the court more through cyberspace than in person. Additionally, with the resourcefulness of court web sites, the public will be able to retrieve necessary information with the click of a mouse at any time of day or night. Smaller, more skilled clerks' offices will train staff to utilize automation in new and improved ways and to continue to develop efficiencies in the handling and administration of cases. The level of access and information available to the public electronically will be continually improved. Notwithstanding all of these anticipated internal changes, the institution and mission of the bankruptcy court will remain. Bankruptcy judges will be called upon to hear and resolve financial disputes and will ensure the proper administration of cases for those unfortunate debtors and creditors that, actually or figuratively, continue to "walk through our doors."