Washington, D.C. — House Judiciary Committee Chairman Bob Goodlatte (R-Va.) today delivered the following statement during the Regulatory Reform, Commercial and Antitrust Law Subcommittee’s hearing on “H.R. 3553, the Bankruptcy Administration Improvement Act of 2017.”

Chairman Goodlatte: Chapter 7 trustees play an essential role in the administration of a liquidation bankruptcy.  A chapter 7 trustee investigates the financial affairs of the debtor, pursues preference and fraudulent conveyance claims on behalf of the bankruptcy estate, and determines whether creditors’ proofs of claim are objectionable.  Trustees also serve as administrators of debtors’ plans under the Employee Retirement Income Security Act.

Notwithstanding their performance of numerous important bankruptcy duties, in most cases, chapter 7 trustees are paid only a flat fee of $60 for their services.

This dollar amount was fixed by statute in the mid-1990s, was not indexed to inflation like other dollar amounts in the Code, and has not been increased in over 20 years.

In liquidation cases in which assets are distributed to creditors, a trustee earns a commission based on the value of the administered assets.  That commission, however, is not typically large.  In 2013, for example, the average trustee commission in an asset case was $2,468.

Asset cases, moreover, are by far the minority of cases.  For example, in 2010, out of 1.4 million chapter 7 cases filed, only about 60,000 were asset cases.

Given the range of important duties that chapter 7 trustees must perform, it is not hard to conclude that these trustees are undercompensated.  This seems especially true in cases in which the Bankruptcy Code requires the trustee to administer and close out the debtor’s 401(k) and other ERISA-qualifying benefit plans.  Sometimes this process takes years, but even in those cases, the trustee typically receives only the $60 base-pay amount.

Congress should consider seriously whether and how to raise chapter 7 trustee compensation.  The bill we consider today would provide a raise by increasing bankruptcy filing fees.  That is a reasonable approach, given that the current $60 level has not been adjusted for inflation since it was first set in the 1990s.

I look forward to hearing from our witnesses about this proposal and other options that might reasonably be considered.

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