STATEMENT OF KEVYN D. ORR

DEPUTY DIRECTOR, EXECUTIVE OFFICE FOR UNITED STATES TRUSTEES

March 19, 1998

Mr. Chairman, Mr. Nadler and other members of the Subcommittee. Thank you for the opportunity to appear before you today to discuss the United States Trustees' role in data collection.

I am Kevyn D. Orr, Deputy Director of the Executive Office for United States Trustees. The mission of the United States Trustee Program is to promote the efficiency and to protect and preserve the integrity of the bankruptcy system -- in short, to assure the public confidence in the system. Because data collection and reporting give the public greater understanding of the operation of the bankruptcy system, they enhance the system's integrity.

The Program has made improved data collection and analysis one of its priorities in its long term plan. Admittedly, our efforts are in their infancy. We believe this goal will take time to implement fully. Limited resources and the need to learn how to use the technology and interpret the data accurately dictate that we proceed carefully.

Our early efforts are guided by two principles. First, the data we collect must be of unquestioned integrity. The best way for any organization, including the United States Trustee Program, to assure accuracy and reliability of data is to collect it in conjunction with its regular operations and functions.

The second major principle guiding data collection for the United States Trustees is to take advantage of other sources of existing information. Many entities have information that can illuminate the bankruptcy system and that can assist the United States Trustees in the performance of their duties. In particular, the courts and the private trustees gather information in the performance of their regular duties. They have already invested in gathering the information they believe is essential to their functions, and have the greatest interest in the reliability of that information. Where possible, the United States Trustees should take advantage of information that is already available from another source.

These principles have guided our early efforts to improve data collection. We have already taken steps to redesign the United States Trustee case management system to accommodate numerous fields of bankruptcy data beyond what is presently required by H.R. 3150. The implementation of the first stage is due out January 1, 1999. By that time, we expect to be on a network which will allow us to conduct national electronic queries about any element of information captured on the system. Currently, we are only able to gather select items of information on a quarterly or periodic basis. Whatever information H.R. 3150 requires would be folded into the other statistical measures we have developed and all of it would be made publicly available.

We are also reaching out to our counterparts and other constituencies to avoid redundancy and to control the costs of improved data collections. These include the Administrative Office of the U. S. Courts and the chapter 7 trustees through their organization, the National Association of Bankruptcy Trustees. This has been accomplished through roundtable discussions and other sessions. Pilots are also underway to automate chapter 11 reports and chapter 7 trustee reports.

We are also learning to make better use of our existing data. The database we maintain on chapter 11 fee collections, for example, was recently redesigned to allow us to capture data on the timing and disposition of chapter 11 cases. The results of that work were referred to in Ms. Staiano's testimony earlier today. It reveals that confirmation rates of chapter 11's are much higher than had been previously reported, and that chapter 11 cases are moving through the bankruptcy system more quickly than in years past. Other data we presently collect can and will be put to better statistical use in the very near future.

We are determined to succeed in this endeavor but it will require time and resources. It is also a matter of leadership. In that regard, H.R. 3150 provides much needed direction in making data collection a priority.

H.R. 3150 requires the Director of the Executive Office for United State Trustees to compile certain statistics about individuals debtors with primarily consumer debts who seek relief under chapters 7, 11, and 13 of the Bankruptcy Code. The bill requires the Executive Office to make these statistics public and to report annually to Congress. It also gives the Attorney General the authority to prescribe uniform reporting forms for trustees under all chapters and chapter 11 debtors in possession. We welcome the fact that H.R. 3150 creates a well-defined role for the United States Trustee Program. Many entities, including the United States Trustees, the courts and the private trustees, have information that can illuminate the system and its processes. Our combined efforts must be assimilated into a coherent structure that minimizes redundancy and maximizes public accountability. We think our organization is best situated, both in terms of logistics and function, to perform that role.

At the same time, we urge the Subcommittee to reevaluate the data it is requesting the Program to compile for the annual report. As currently structured, we believe Section 441 raises two issues.

First, it would be extraordinarily expensive to collect and compile much of the information listed in Section 441. Seven categories of information are listed; unfortunately, very little of this information is currently gathered. For example, we do not presently compile the scheduled total of assets and liabilities, keep track of reaffirmations and the number of cases finding a secured claim undersecured, or calculate the amount of debt discharged in the course of their regular duties. This information would be of relevance and may be gathered in particular cases. We look forward to participating in better data collection, but we recognize that the systematic collection of this data in every individual case under chapter 7, 11, and 13 would impose significant costs on the Program.

Second, the report will be based largely on information derived from bankruptcy schedules filed by the debtors, and this information is often subject to questions about accuracy. The inaccuracies in an individual set of schedules may be material in the sense that more accurate information would affect the outcome of a particular case. Nonetheless, when aggregated these inaccuracies may present a grossly distorted picture of what is happening in the bankruptcy system.

As an alternative to the report described in section 441, we would suggest an annual report based on the data gathered in accordance with section 442 of the bill. The information gathered in chapter 11 monthly operating reports and in trustee final reports is data that is or will soon be gathered by the United States Trustees as part of their duty to monitor chapter 11 debtors and chapter 7 and 13 trustees. Compiling and providing this data annually would create a much smaller and less costly burden on the Program than the report outlined in the current version of section 441.

In short, we welcome H.R. 3150's data collection provisions. H.R. 3150 marks an important step for the future study of the bankruptcy system. We look forward to working with you to ensure that the data collection provisions of H.R. 3150 are effective and that the resources needed to implement them are available. Mr. Chairman, I would be glad to respond to any questions that the Subcommittee may have. Thank you.

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