Senate Votes to Extend Bankruptcy Judge Positions, Preventing 'Genuine Crisis'

Congress took a key step Thursday to avoid losing judges in the U.S. Bankruptcy Courts, with the Senate voting to extend 29 temporary judge positions in 20 judicial districts that have expired and cannot be filled without a new law.

Sen. Christopher Coons (D-Del.), the bill’s main proponent, said Friday that this would “prevent a genuine crisis in America’s bankruptcy court system.” But judges cost money, and the $16 million price tag had been the main obstacle for the Senate amid overall efforts to reel in the national debt.

To get unanimous support, the Senate passed a version of a House bill that would extend the 29 temporary judgeships for another five years but first tacked $167 onto the current $1,000 bankruptcy filing fees. That amended version must now pass the House, where the original bill passed unanimously, and Coons expects that to happen.

“Until last night, it was not certain or clear that Congress would act to extend [the judges],” Coons said. “I heard from many practitioners and corporate leaders about the importance of having bankruptcy courts that are fully and appropriately staffed.”

Two judgeships have already been lost because of the expiration of the temporary judgeship law, including the spot for now-retired Judge Arthur Gonzalez in the U.S. District Court for the Southern District of New York. That's left nine judges and one senior judge overseeing bankruptcy cases in Manhattan.  Also, one of the two bankruptcy judges in New Hampshire retired in 2010, while a judge in the Western District of Tennessee is set to leave the bench in July, meaning that district will go from five to four judges if the law is not passed before then.

Coons said Gonzalez’s retirement got the attention of people from the other 14 states and Puerto Rico who stand to lose bankruptcy judges.

Coons and Sen. Chuck Schumer (D-N.Y.) said they will push for the bill to be interpreted in a way that would allow those lost judgeships to be refilled.

In 2005, Congress added 28 temporary bankruptcy judgeships at the same time it made sweeping changes with the Bankruptcy Abuse Prevention and Consumer Protection Act, which also calls on those judges to do more to prevent bankruptcy fraud. As of Oct. 31 of last year, there were 338 bankruptcy judges on the bench nationwide in 90 geographic districts to handle six types of bankruptcy filings, including consumer and business filings under Chapter 7, reorganization filings under Chapter 11 and debt repayment under Chapter 13.

The 2005 law allowed districts to fill a position if a judge left the bench fewer than five years after the temporary spot was filled — but that time has now run out. This is leading to some strange career wrangling.

In some cases, judges are putting off retirement plans, as chief judges and court administrators lean on senior judges to work more hours, bring in visiting judges and find other imperfect fixes.

In Gonzalez’s case, he faced his retirement decision knowing Congress would not allow his post to be filled, and that the court's remaining judges would be faced with a slew of additional cases because of his departure.

Coons was selling the bill with an economic argument, saying bankruptcy judges can turn a failing business into a successful reorganization that protects jobs and creditors. He said the expiring judgeships meant courts would become overwhelmed at the expense of jobs, creditors, and our nation's economy.

Comments

[Evonne Perfect]

Bankruptcy Court is desperate need of reform not encouragement. The problem is well known but ignored and unresolved. The trustees and members of the courts police themselves . It is often reported that illegal unjust actions go with no accountability for abuses, illegal activities, invasions of privacy, illegal kickbacks and other illegal actions go uncontrolled. Frm Att. General Ashcroft spoke out against the corruption in the bankruptcy court system, but the corrections in bad behavior has, so far, gone unanswered. I have observed one trustee disregard the law and try to circumvent laws, commit perjury, work in collusion on cases with attorneys and banks, get illegal kickbacks, file numerous frivolous cases wasting taxpayer dollars. He worked to suppress evidence and illegally invade the privacy of many to gain unrelated evidence,tried to defame the victims he created through his abuses. In addition, this trustee built cases with no factual evidence, subjected private lien holders to a different and more severe set of rules which were not even based, supported or legally enforced by the law . The "set of rules" were not the set of laws the banks are subjected to . I saw him go on a rampage through the lives of his victims. I observed, firsthand, the very same abuses the Frm Att General Ashcroft spoke about in his report . I have read numerous blogs and done countless hours of research into the problems of corruption being rampant, but no one is helping to clean it up. This is not a system we need to support and reward but one we need to address and correct. The poor should not be victimized nor should the public. The current system rewards the trustees first for ringing up bills in legal fees and pays them first out of anything they seize illegally or otherwise. Each appeal means larger legal bills and more money for the trustees. Whether it is factual or has grounds does not matter, it is the pay that does . Eventually through enough appeals and collusion, I observed some trustees are able to run the public out of money and themselves into a larger paycheck. These actions result in taxpayer dollars being tied up and spent in respone to some of the trustees. This the way the system is run now. With millions applying for bankruptcy each year, the corruption in this court system by some of its members has a huge impact on many lives. 60% of bankruptcies are caused by medical bills .Most of those declaring bankruptcy were middle class that, fact alone ,means it could happen to anyone- even you , a family member or someone you know. We need to reform the courts and its members with accountability for illegal actions, enforce strict rules for abuses and stop the self policing. You or someone you know are only one illness or accident away from possibly falling victim to bankruptcy.

[J Alexander]

$16 million for judges -- that's a real problem in a $4 TRILLION budget. Good thing we can raise filing fees on people who don't have any money to cover it. Otherwise we might not be able to cut taxes for rich people. Oh, wait, we do that regardless of whether we're running a big deficit.