The statistics presented in this article were taken from "Bankruptcy By The Numbers - Chapter 7 Asset Cases" written by ED FLYNN Executive Office for United States Trustees Edward.Flynn@usdoj.gov

The United States Trustee Program (USTP) has collected statistics on the distributions to creditors, professionals, and trustees in chapter 7 asset cases

since 1993. In 2000, the USTP and chapter 7 trustees implemented a new data collection format (Form 4) for the chapter 7 asset cases filed or converted to chapter 7 on or after July 1, 1999. This change significantly increased the amount of data collected and has improved the accuracy and usefulness of the data. In this article we give a brief overview of the most recent asset case statistics. In June 2001 the Executive Office for U.S. Trustees issued a detailed report on chapter 7 asset cases closed between calendar years 1994 and 2000. This report can be found at:

It is reported that certain large credit card companies are involved in supporting "means based" bankruptcy which is the center of argument in current bankruptcy reform. They are seeking a change in bankruptcy law that will provide them with some if not all payment on credit card debt. The article Bankruptcy By The Numbers - Chapter 7 Asset Cases provides statistics proving that unsecured creditors are short-changed in chapter 7 asset cases. The reason as to why they are short-changed has not, to our knowledge, came to the attention of Congress. Statistics provided by the Executive Office for United States Trustees provide that the majority of assets in chapter 7 cases are distributed as compensation to chapter 7 trustess and their hired professionals.

Trustee Compensation	$85,492,924	9 %
Trustee Attorney Fees	$52,886,928	6 %
Outside Attorney Fees	$123,538,163	5 %
Other Professional Fees and Expenses	$66,155,213	6 %
Administrative Costs	$141,798,509	8 %
Prior Chapter Costs	$64,855,525	5 %
Assets Distributed to Secured Creditors	$366,867,659	2 %
Assets Distributed to Priority Creditors	$97,852,165	7 %
Assets Distributed to General Unsecured Creditors	$364,155,620	1 %
Other Disbursements	$89,652,280	2 %

From the statistics provided by the United States Trustee Program, to understand the bigger picture, the columns trustee compensation, trustee attorney fees, outside attorney fees, other professional fees and expenses, administrative costs, and prior chapter costs should be added together. Based on the above statistics, these amounts total $449,234,338. These dollar amounts are assets of the bankruptcy estate that are used to compensate and reimburse expenses of bankruptcy trustees and their hired professionals.

Trustee compensation is money paid to chapter 7 trustees based on a sliding scale percentage from assets. This is provided to them by 11 U.S.C. Section 326. The most recent bankruptcy reform does not discuss any change in this section or compensation otherwise to chapter 7 trustees. In fact, based on a congressional report by Glenn Fine, Inspector General for the USDOJ, chapter 7 trustees want to be paid more for administering cases. Since it is obvious that unsecured creditors only receive 1 percent of assets in chapter 7 cases, to pay trustees more would lessen the amount available to unsecured creditors.

Trustee attorney fees is compensation paid to attorneys who represent bankruptcy trustees. Many chapter 7 trustees are also licensed attorneys, and hire themselves or the law firm they work for to represent themselves as attorney for trustees. They are therefore compensated twice from assets, -- once as trustee, and again as attorney for trustee. Based on some itemized billing filed in cases, attorneys for trustees are paid legal fees for writing and reading correspondence, and making phone calls to arrange turnover of property, sale of property and other duties that are defined by the Bankruptcy Code as duties of trustee.

Trustees do not always need, neither hire attorneys to represent them. Some trustees sell real property, but do not hire attorneys to represent them at closing proceedings. Other trustees hire attorneys to represent them at closing proceedings.

There is no nationwide, distinct pattern of how cases are administered. Rather, it appears that certain procedures are more prevalent in particular Regions moreso than in other Regions. As well, patterns are more prevelant with trustees. In other words, some trustees always hire attorneys. In fact, some trustees hire the same attorneys in all or the majority of asset cases.

Another noted pattern is that some trustees hire attorneys when debtors or other defendant parties are presented by legal counsel. When defendants are pro se or pro per, these same trustees litigate without the help of a hired attorney, or they hire themselves as "attorney for trustee."

At times, chapter 7 debtors are involved in legal action such as lawsuits, probate cases, or actions such as personal injury. Chapter 7 trustees claim court awarded judgments, or inheritance from estates, as property of the bankruptcy estate. When debtors and estates are already represented by legal counsel in these matters, bankruptcy trustees may hire those attorneys.

Chapter 7 trustees hire various individuals in cases, including realtors, accountants, auctioneers, and appraisers. Theses are classified as "professionals."

On Final Reports filed by chapter 7 trustees, they include compensation to trustees, trustee attorney fees, and expenses as "administrative costs." Since the article listed administrative costs separately, it can be reasonably assumed that this represents expenses such as travel, postage, copying, transcript copies, court filing fees, etc.

This amount should represent costs involved in chapter 11 and chapter 13 cases that were converted to chapter 7. As an example, in chapter 13 cases, chapter 13 trustees are paid 10 percent from assets for compensation.

Secured creditors are those who hold liens on property. As examples, mortage and vehicle finance companies are secured creditors. When bankruptcy trustees sell property that have liens, they are suppose to pay the lien amount off in full. Wells of Justice, however, has seen cases where secured creditors are not paid in full. Two cases, Stealing Non-Debtor Owned Property, and Abuse of Authority are cases whereby secured creditors were not paid in full.

In some cases, government agencies, such as the IRS, are considered priority creditors. Another example would be a debtor company that owes social security taxes on wages. Another example would be court ordered child support due and owing that is allowed and paid as a priority claim. At times, some trustees will object to child support claims and not allow their discharge, neither payment from assets.

Other disbursements we have seen in cases consist of payments to co-owners of property. This figure should also represent exemptions and surplus amounts paid to debtors.

Chapter 7 bankruptcy trustees have the duty of representing the interests of unsecured creditors. Unsecured creditors are not generally involved in bankruptcy cases to challenge distribution of assets. Unsecured creditors do not "hire" bankruptcy trustees to agree on fees for administering cases.

Little known is the statute that provides that chapter 7 debtors and/or unsecured creditors can select or elect a trustee before or at the 341(a) meeting of creditors. Debtors and unsecured creditors have dropped the ball and allowed private parties appointed by U.S. Trustees to develop a system where chapter 7 asset cases serve more financial benefit to chapter 7 trustees and their hired professionals than to unsecured creditors.