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The long-term impact of a new bankruptcy law remains uncertain but could require a 10 percent increase in staff for federal bankruptcy courts, the Administrative Office of the U.S. Courts (AO) has told Congress.
Responding to a congressional request, the AO filed a report in August on the impact of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, the 500-plus-page legislation that took effect October 17, 2005.
The report said the significant changes in bankruptcy law and practice generally increased bankruptcy courts’ work for each case filed. “The preliminary analysis indicates the Act caused a 10 percent increase in the staffing requirements of the bankruptcy courts,” it said.
Most of that impact was felt in clerk of court offices. The Act’s impact on bankruptcy judges is less clear, the report said, but the AO and the Federal Judicial Center continue to monitor case filings, workloads and case law developments.
About 600,000 bankruptcy petitions were filed in the first 16 days of October 2006. That figure was roughly the equivalent of 40 percent of what had been a full year’s cases. “Many people contemplating bankruptcy feared that the new law would make it more difficult and more expensive to file a case, particularly under Chapter 7, after October 17, 2005,” the report said. In the following seven months, however, only 250,000 petitions were filed.
“The overall workload of the bankruptcy courts will depend on the level of case filings, a number that remains uncertain at this point,” the report concluded.
Bankruptcy law is aimed primarily at paying off creditors in a fair and orderly way from a debtor’s assets and giving debtors a ‘fresh start.” The 2005 law was designed to recover more money for creditors and ensure that debtors who are able to pay back a portion of their debts do so. You can find the 2005 law on the bottom of the page at http://www.uscourts.gov/bankruptcycourts/resources.html. | 