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Big (Bad?) US Trustee

posted by Katie Porter

A recent inquiry by Marc Stern to the Bankr-L list serv asked whether anyone had challenged the U.S. Trustee program’s calculations of the median income figures for use in the means test. He observes that the margin of error for the Census calculations can be substantial and that the U.S. Trustee has not incorporated the margin of error into the means test numbers that it promulgates.

The query reminded me of something that struck me last fall when I was teaching the new law for the first time. A central feature of the amended Bankruptcy Code is the tremendous power that it gives to the U.S. Trustee Office. Some of these powers are explicit, such as certifying credit counselors, supervising the audit program, providing more oversight in small business Chapter 11 cases, and waiving the counseling and education requirements (such as after Katrina). Other elements of the U.S. Trustee Office’s expanded influence are more subtle or arise implicitly. Any new law will raise interpretation issue, and the U.S. Trustee actively briefed key issues and intervened in cases. The U.S. Trustee has also promulgated "answers" that interpret BAPCPA. Panel trustees are told to contact the U.S. Trustee office if they do not agree with the interpretation. (There's some interesting stuff here if you haven't seen it).

The calculation of the median income figures identified in the Bankr-L list message is an excellent example of the U.S. Trustee's broader authority. These numbers are important, and the U.S. Trustee is effectively interpreting the law by promulgating these numbers. The law itself does not say that the U.S. Trustee should calculate these numbers. Should a court give deference to the U.S. Trustee’s interpretation of these numbers? Do the usual principles about agency rulemaking apply in this situation? Will courts feel free to interpret the law differently or to give equal weight to a litigant’s reading of the law? What are the advantages or the dangers of the new, more powerful U.S. Trustee?  One likely change seems to be more national uniformity in the bankruptcy system and a reduction in the "local legal culture" effect observed by Sullivan, Warren & Westbrook and Jean Braucher in early studies of the bankruptcy system.

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  • As a public service, the University of Illinois College of Law operates Bankr-L, an e-mail list on which bankruptcy professionals can exchange information. Bankr-L is administered by one of the Credit Slips bloggers, Professor Robert M. Lawless of the University of Illinois. Although Bankr-L is a free service, membership is limited only to persons with a professional connection to the bankruptcy field (e.g., lawyer, accountant, academic, judge). To request a subscription on Bankr-L, click here to visit the page for the list and then click on the link for "Subscribe." After completing the information there, please also send an e-mail to Professor Lawless (rlawless@illinois.edu) with a short description of your professional connection to bankruptcy. A link to a URL with a professional bio or other identifying information would be great.

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