TESTIMONY OF BERKELEY WRIGHT, CHIEF, BANKRUPTCY DIVISION, ADMINISTRATIVE OFFICE OF THE U.S. COURTS

Mr. WRIGHT. If it is agreeable to you, I will not read the statement I submitted. It is not a very long statement. It covers primarily the mechanics of the transition as we see it from the Administrative Office of the U.S. Courts and what the Director will be required to do to effect the transition. I will paraphrase it very briefly to bring this into focus.

I divide the process into four steps, starting with the date of the enactment of the legislation. The first step for the Director would be setting up a system to properly make the measurements that will be needed, particularly for the bankruptcy court.

The second step is the accumulation of the data once the system is

set up.

The third is obtaining the necessary approvals to establish the positions.

And the fourth is obtaining the appropriation.

I will just touch on each one of those very briefly.

I estimated the time to set up a system to measure the judicial matters that will be handled by the bankruptcy judges to be a minimum of 18 months.

At the present time our system measures cases, the different types of bankrupcy cases filed, whether they are asset cases, (which we learn after the case is closed) or other types of cases. We also measure the cost and payments to creditors in cases of different types.

To measure the need for bankruptcy judges under the new system we will have to measure the number of judicial matters that they are handling. About a year or so ago I set up a hand count to start measuring these judicial matters. But it will not be adequate for the purposes of the new legislation. It is a very primative type of thing, and it does not give us the time averages that we will need. We will be working with time averages for such actions as hearings on claims as compared to a hearing on other issues such as nondischargeability of a debt.

It is necessary to get time averages, and then count the number to determine the amount of time, judicial time that it is going to take. The present system, this hand count, does not now measure the point of origin of the judicial matters. And I would presume that we would tie these into our present case measuring system, and that would give us the point of origin. You need this to know where the new bankruptcy judges would have to be located or where they should go to hear cases.

The last element would be to reflect the changes that are made by the new legislation. The addition of plenary jurisdiction to bankruptcy judges would have a big impact, and we would have to measure that.

Under the second heading, the accumulation of data-and please feel free to interrupt me if you wish-once the new system is set up, there will be a year approximately for what I call a reaction time. It has been our experience that once a law is changed substantially, the statistics that we get for the first year or so are not accurate enough to use. We noticed this under the Dischargeability Act of 1970. I guess

the bar is getting used to the new system, and so the statistics do not actually reflect the true situation.

So we feel that there is a period following an enactment of new legislation where you just have to let the system adjust before you can get an accurate measure.

Also, every system you put in, no matter how carefully you write the instructions, you are going to get bugs in it. Just this small hand count I have made of judicial matters took us almost 6 months to get the bugs out. People think they are reporting what you want, but they are not really doing it. So there will be a period of about a year before we really start getting good accurate statistics.

After that period, another period of about 2 years, I would say, would be a very minimum on which you should accumulate data before you can really say you need a bankruptcy judge at this location or at that location.

The third step is the approval step. Once the Director of the Administrative Office comes up with recommendations of the locations, the number, and the places of holding court for each of the bankruptcy judge positions, and goes through the process of obtaining the views of the councils of the circuit courts and obtaining the views of the district courts as we do now but which would certainly not be necessary as they would have no more interest in this matter-by the time the Director goes to the Bankruptcy Committee of the Judicial Conference, through the Judicial Conference, and gets their approval before it is submitted to Congress, I estimated would take 9 months.

There was one thing that bothered me when I was thinking this through. And that is going through the Judicial Conference. The Judicial Conference, being made up of district judges and the chief judge of each circuit primarily, really is not going to have any interest in the bankruptcy court, unless the bankruptcy judges are going to have representation on the Judicial Conference.

In the committee process right now the judges of the Bankruptcy Committee are circuit and district judges. They are not necessarily members of the Conference, but they are appointed by the Chief Justice. And being district and circuit judges they will not have the interest in this bankruptcy court.

I think as a bare minimum the Bankruptcy Committee of the Conference should certainly be made up of bankruptcy judges. I see nothing in the statute that would prevent this from being done.

Mr. EDWARDS. Are you suggesting that we wrestle with that by statute?

Mr. WRIGHT. No. I think it is not necessary. But I think it should certainly be suggested to them that this is the way it should be done. Mr. EDWARDS. How do they do it with the Tax Court judges or other judges?

Mr. WRIGHT. Well, the Tax Court judges are not on the Judicial Conference. I think the other two members of the Judicial Conference are the Chief Judge of the Court of Claims and the Court of Customs and Patent Appeals. The Tax Court, I believe, is in the executive branch. They are not represented there.

An alternative that I suggested in my paper was, instead of going through the Judicial Conference, have the Chief Justice name a group of bankruptcy judges to perform exactly the same function as the Conference.

The only other alternative would be to have some kind of a congressional committee to receive the recommendations of the Director. I feel that this is a very important thing.

Our sessions with the Bankruptcy Committee when we sit down with the committee, is not exactly an adversary type of hearing, but if they have any questions on any of our recommendations, we are required to justify them to the committees. This is a process that takes at least 1 day. And we give them all types of statistical justifications to make sure that we come up with honest and good recommendations for additional bankruptcy judges, where they are to sit, their salaries, and that type of thing.

The last of the segments is obtaining the appropriations, once all approvals are given to the position. And I estimated that rather arbitrarily at half a year.

Altogether it came up to a total of about 5 years before you could come up with knowing where the position should be, and having the money to pay the people and putting them on board.

On the last page of my statement, I have appended a table showing the costs today to put on a U.S. district judge. This could be used as a cost estimate. You would make certain adjustments and multiply it by the number of positions that were finally approved. And you get a fairly good ball-park figure of what it would cost for the bankruptcy court system.

This, of course, would not take care of the administration. I have quite a few problems with that because I don't fully understand what direction we are going in, on the administration. But I will provide you with a statement of our current appropriation for the bankruptcy system from which you can determine the percentage of the costs that go to the various elements of our present setup. About 75 percent of that goes to personnel costs right now.

Mr. EDWARDS. Do you think that there will be a large additional expenditure each year?

Mr. WRIGHT. Not substantially larger than we have now.

Mr. EDWARDS. Are present facilities such as courtrooms generally suitable?

Mr. WRIGHT. Well, it doesn't really make any difference now as far as I can see. Under that new law, each agency now budgets for the amount to pay the General Services Administration the amount of space occupied. So whether these are in Federal buildings or not in Federal buildings, it is going to cost the same. So I don't see a large increase in what we are paying now.

Mr. EDWARDS. Mr. Drinan.

Mr. DRINAN. Thank you very much, Mr. Wright. I recall that you were present here the first or second day that we started these hearings, and my mind gives rise to the hope that maybe we are approaching the end-since you are sharing your wisdom with us once again.

I have no particular question, Mr. Chairman, since he has outlined all the operations very well.

I wonder, however, if you have any information on the data that you give here concerning New England and the number of bankruptcies. We had the distinguished judge of bankruptcy from Maine here. But I just wonder how the figure 494 as the number of bankruptcies in Maine is reconciled with 123 in Rhode Island. I know that he is a very

aggressive judge, shall we say, and that he works at it very diligently. I wonder if you would want to explain that just for my own curiosity. Mr. WRIGHT. What do you have there?

Mr. DRINAN. The judicial determinations that you have submitted to us, the number of bankruptcies in the first 6 months of fiscal year

1976.

Mr. WRIGHT. These are not the number of bankruptcies, of course; these are the number of judicial determinations that have been made by the judges.

Mr. DRINAN. Yes. It just seems anomalous that Maine, which has probably fewer people than Rhode Island, has three times the number. Mr. WRIGHT. I can't give you an answer to that right offhand.

Mr. DRINAN. It is just a matter of curiosity for me, since I am familiar with some of the people who administer this.

I want to commend you on your foresight. And I am happy to know that if and when this Bankruptcy Act is passed, its implementation will be in very capable hands.

Thank you very much.

Mr. WRIGHT. Thank you.

Mr. EDWARDS. Thank you, Mr. Drinan. Mr. Butler.

Mr. BUTLER. And I hope we live long enough.

What is your suggestion about what we should do during the intervening 5 years of transition?

Mr. WRIGHT. Well, of course, the cases are going to have to go on. The status of the bankruptcy judges there is one that I really have not addressed.

Mr. BUTLER. You think that is a policy decision you do not want to make?

Mr. WRIGHT. Yes; I do, whether they are under the new system or the old system is a little bit beyond the functions of my office. I haven't gone into that.

Mr. BUTLER. I guess my question is basically, what should the legislation provide for the operation of the system during the intervening 5 years while the system is being set up and evaluated?

Mr. WRIGHT. Because of this timelag, I think that the existing bankruptcy judges should be carried over into the system, as we should have someone there just to carry on with the cases-and we are going to continue to have new cases filed. I would keep the system just as it is until it was necessary to make the changes.

Mr. BUTLER. Thank you very much. I appreciate it.

Mr. WRIGHT. Whether the status is the same or not, is an area that I haven't addressed.

Mr. EDWARDS. In the bills as they are written now, insofar as the timing is concerned, are these provisions adequate from your point of view for the transition?

Mr. WRIGHT. Provided it gives us the length of time to set up the new statistical system that we will need.

Mr. EDWARDS. You are very much opposed to the Administrator idea as provided in the Commission's bill?

Mr. WRIGHT. Yes; I am.

Mr. EDWARDS. I don't think it has much support on the subcommittee either.

Mr. WRIGHT. No; I am very much opposed to that.

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