Working Together The Clerks Office and the U.S. Trustee

Journal Issue

Mar 2003

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Numerous government employees are involved in making the current
bankruptcy system work for its "customers." This public service
includes handling forms, processing fees, scheduling hearings, performing
quality-control checks, noticing parties, coordinating data and trying to
maintain the system's integrity. For those districts where the U.S Trustee
program is in place, the typical close collaboration between the clerk and the
U.S. Trustee makes this service that much better for all involved. While it is
assumed that this is generally understood, what may not be as obvious are the
various levels on which this relationship typically operates in order to make
the system even more effective.

<h3>U.S. Trustee Program</h3>

The
Executive Office of the U.S. Trustee (EOUST) of the Department of Justice was
initially a pilot program for 18 districts under the Bankruptcy Reform Act of
1978. With the passage of the Bankruptcy Judges, U.S. Trustees and Family
Farmer Act of 1986, it became a permanent program in all federal districts
except for those in Alabama and North Carolina. Financial support for the
program comes mainly from fees collected from parties in the bankruptcy
process.<a href="#2" name="2a">2</a> In the initial 1978 act, the program's primary role was stated
by Congress to be a "watchdog over the bankruptcy process."<a href="#3" name="3a">3</a> The
program's stated mission is as follows:

<blockquote>
The U.S. Trustee
Program acts in the public interest to promote the efficiency and to protect
and preserve the integrity of the bankruptcy system. It works to secure the
just, speedy and economical resolution of bankruptcy cases; monitors the
conduct of parties and takes action to ensure compliance with applicable laws
and procedures; identifies and investigates bankruptcy fraud and abuse; and
oversees administrative functions in bankruptcy cases.<a href="#4" name="4a">4</a>
</blockquote>

The attorney
general appoints the U.S Trustees and assistant U.S. Trustees in each of the
current 21 regions. It is with the assistant U.S. Trustees and their staff in
the 95 field offices that the clerk's office typically communicates and
collaborates on a regular basis.

<h3>Clerk's Office</h3>

As an entity of the Judicial Branch, "the overriding duty common to all
[court] clerks is to provide the support necessary to permit the court as an
institution to fulfill its constitutional, statutory and societal
responsibilities."<a href="#5" name="5a">5</a> This support goes to both the internal workings of
the clerk's office as well as the external coordination required with
organizations such as the U.S. Trustee Program. In comparing the duty of clerks
with the stated mission for the U.S. Trustee, it can be easily seen that there
"must be a great deal of cooperation between the U.S. Trustee and the
clerk's office to ensure that cases are efficiently and effectively
administered."<a href="#6" name="6a">6</a>

<blockquote><blockquote>
<hr>
<big><center>
This
level of cooperation should continue to mature and become stronger as
electronic filing changes the landscape for bankruptcy courts.
</center></big>
<hr>
</blockquote></blockquote>

<h3>Limitations</h3>

With
the similarities of each office to support the bankruptcy system noted, it is
also important to note that limitations and parameters based on the separation
of powers are adhered to as well. The overall policy in this realm is that:

<blockquote>
communication
between the judicial and administrative systems is expressly not prohibited.
The court may discuss general problems of administration and improvement of
bankruptcy administration, including the operation of the U.S. Trustee system,
with the U.S. Trustee... Only ex parte meetings
and communications with the court concerning matters affecting a particular
case or proceeding are prohibited. Fed. R. Bankr. P. 9003(b).<a href="#7" name="7a">7</a>
</blockquote>

Please note that
some gray areas will always exist in how those lines are seen and interpreted.

<h3>Benefits</h3>

With
the basic structural foundation discussion complete, several specific ways in
which the unique relationship between the clerk's office and the U.S.
Trustee is put into practice to further benefit the bankruptcy system and its
players can now be noted.

<h3>Panel Trustee Information</h3>

Panel
trustees, as appointed by the U.S. Trustee, are integral players in the overall
bankruptcy process. Therefore, having current information on that trustee is
essential for noticing and case-processing purposes. Typically, this
information is communicated by the assistant U.S. Trustee in a timely manner to
the clerk so that any upcoming changes are properly coordinated and accurate
information is provided. This mainly occurs when a new panel trustee is
selected or moves to a new office location. While that type of coordination can
be relatively minor, it is with the more major structural types of changes
where the close collaboration between offices becomes more critical. One
example of this was with the chapter 13 trustee's office for the state of
Arkansas when the U.S. Trustee decided to split it into not two offices, but
three. As stated by Assistant U.S. Trustee for Arkansas Charles Tucker:

This [the benefit of coordinating efforts] was demonstrated in our
relationship during the chapter 13 trustee split. While that was a matter
initiated by the U.S. Trustee, [the clerk office's] cooperation was of
invaluable assistance in resolving some of the most troubling issues arising
from the split, such as the handling of claims, and flow of paper between the
four offices and other details. Our ability to meet together with the three
chapter 13 trustees at the early stages of the split was an important factor in
the surprising[ly] smooth transition from a single chapter 13 trusteeship to
three trusteeships.

<h3>Policies, Procedures and Rules</h3>

Often,
office policies, procedures, rules and regulations require modification or
changes by the U.S. Trustee, the court or both. As with changes to panel
trustee information, the effective relationship between the two offices
provides enormous benefits by promptly getting the word out and working
together to properly implement the new policies. One recent example comes from
the initiation of the National Debtor Identification Program by the EOUST early
last year. Once notification was provided to us that our district was to be
phased into the program by March, we worked with Charles Edwards, our assistant
U.S. Trustee, to have applicable language incorporated into creditor meeting
notices, post copies of memoranda explaining the program in public areas and
inform staff of this change so they could relay needed information when
questions arise from customers. An even more encompassing example for all who
work in the bankruptcy arena is with the new case management/ electronic case
filing system (CM/ECF) being initiated by the U.S. courts. For the last few
years, clerk's offices have been closely coordinating with their
assistant U.S. Trustees to create new and better efficiencies with CM/ECF in
areas such as streamlined data transfers, ceasing duplicative keying and
case-tracking functions, and developing training programs that work to ease the
transition from dependence on paper to using the technology to its fullest.
This overall transition team concept between the offices has worked very well
for all involved. Charles Tucker states, "I advise all my fellow
assistants that it is very important when moving to [CM/]ECF that they be part
of the transition team, which is what I felt I was during our
implementation." He felt that this was crucial in helping each office
understand the differences in "trustee speak" and "clerk
speak" when creating new processes.

<h3>Watchdog Function</h3>

The
final benefit of the clerk/trustee relationship to be relayed is the
appropriate assistance provided to the U.S. Trustee in their original watchdog
role as set out by Congress in 1978. While the cooperation on the National
Identification Program was mainly in the area of communication, clerk's
offices have typically been asked, and have agreed when possible, to work with
assistant U.S. Trustees to track the timely filing of required reports and fees
and provide notification of questionable trends that sometimes occur with
cases. From my experience and discussions with other courts, this happens most
frequently with pro se filings when a
petition-preparer type of service is involved. Support for this can be found in
this statement from the EOUST: "Many of the most egregious abuses in the
bankruptcy system are perpetrated by those who prey upon debtors who are in
dire financial straits and are not well-equipped to scrutinize offers of
assistance."<a href="#8" name="8a">8</a> The teamwork between offices worked to uncover such a
scheme on pro se filers in the Central District
of California, where a landlord illegally filed a number of petitions on behalf
of his tenants in order to retain the ownership of a building. "[T]hrough
the cooperative efforts of the U.S. Trustee for the Central District of
California, the chapter 13 trustee and the bankruptcy clerk's office,
which had flagged a group of bankruptcy petitions as unusual," this
fraudulent scheme was discovered, and the landlord was prosecuted and fined.<a href="#9" name="9a">9</a>

This
level of cooperation should continue to mature and become stronger as electronic
filing changes the landscape for bankruptcy courts. Its health could be tested
in a big way, though, if bankruptcy legislation is ever passed, given the tough
issues concerning credit counseling, income testing and retention of income tax
returns. It is my belief that the offices would pass such a test given the
solid foundation that has been discussed in this article.

<hr>
<h3>Footnotes</h3>

<a name="1">1</a> The
views expressed herein are those of the author and not necessarily those of
their employers or of any clients or client agencies they may represent. <a href="#1a">Return to article</a>

<a name="2">2</a> Overview
of the U.S. Trustee Program, which is online at <a href="http://www.usdoj.gov" target="window2">http://www.usdoj.gov</a>. <a href="#2a">Return to article</a>

<a name="3">3</a> House
Report No. 989, 95th Cong., 2d Sess. at 88 (reprinted in 1978 U.S. Code
Congressional & Admin. News at 5787, 5963,
6049). <a href="#3a">Return to article</a>

<a name="4">4</a> Mission
statement, which is online at <a href="http://www.usdoj.gov" target="window2">http://www.usdoj.gov</a>. <a href="#4a">Return to article</a>

<a name="5">5</a> Bankruptcy
Court Clerk's Manual, Administrative Office
of the U.S. Courts, 3rd Ed., Chapter 4.02. <a href="#5a">Return to article</a>

<a name="6">6</a> Id., Chapter 8.03.d. <a href="#6a">Return to article</a>

<a name="7">7</a> Id. <a href="#7a">Return to article</a>

<a name="8">8</a> U.S.
Trustee Program Annual Report of Accomplishments, Fiscal Year 2001, p. 13. <a href="#8a">Return to article</a>

<a name="9">9</a> Id. at p. 14. <a href="#9a">Return to article</a>

Journal Authors

William W. Blevins

Journal Date

Saturday, March 1, 2003 - 12:00

Bankruptcy Rule

2003