Making the Bankruptcy System Less Great

News reports this morning are confirming the rumors that went around the bankruptcy community last night. The Trump Administration has fired Tara Twomey as executive director of the Office of U.S. Trustees. This is a short-sighted and likely illegal decision.

The executive directorship of the US Trustee Program is a nonpolitical position. Twomey's predecessor served under both Republican and Democratic administrations. One report said the termination notice for another DOJ official cited Article II of the Constitution, meaning the Trump Administration must be relying on the wacky and ahistorical "unitary executive theory" where the president has unchecked power. That some judges and law professors have signed up for this idea does not make it any less wacky and ahistorical. The action against Twomey demonstrates that the only thing that matters now is loyalty to the president. Ability does not count. Twomey was a most able leader of the UST Program.

Without the US Trustee's objection, the Purdue Pharma case never would have reached the Supreme Court. The Court agreed with the US Trustee that bankruptcy courts lack the power to forgive the obligations of parties other than those in the bankruptcy case itself. In Purdue Pharma, that meant the Sackler family could not piggyback on the company's bankruptcy to escape accountability for their own actions. Twomey stood up to critics who said the US Trustee Program had "no skin in the game" and should not interfere in a deal that the parties had made. What the US Trustee Program did was exactly what it is supposed to do -- oversee the integrity of the bankruptcy system. It brought the issue to the Supreme Court for its decision on an issue that affects not just the victims of the Sacklers but millions of Americans who have been affected by corporate misconduct.

Under Twomey's leadership the US Trustee Program did dozens of things that make the system work just a little bit better for the people who need it. She oversaw online transition of 341 meetings, where filers must meet with their bankruptcy trustee. The conventional wisdom was that would never work because of security concerns until the necessity of COVID demonstrated otherwise. Twomey saw that the switch became uniform and permanent. Now, consumers do not need to choose between missing work or finding child care and filing bankruptcy. Online 341 meetings save money and are more efficient, which I understand is supposed to have some appeal in Washington currently.

Twomey successfully oversaw the issues created by Siegel v. Fitzgerald, where the Supreme Court blew a potential hole in the budget for the US Trustee Program. Under her leadership, the government litigated the consequences of the decision, resulting in a successful follow-up Court decision that kept the US Trustee Program as financially self sufficient and thereby saving federal money. I also understand those concepts are supposed to be in fashion.

Just last Monday, Twomey joined my Bankruptcy Seminar at the University of Illinois and for the third consecutive year. It is a big time commitment, and every year I have asked Twomey has cheerfully done it. Listening to her talk, the reason becomes apparent. She cares deeply about bringing along the next generation of young lawyers. We talked about the US Trustee Program's efforts to stop bankruptcy cheats--another way she worked to make the system better. We talked about the importance of judgment and exercising that judgment in a way that furthered the purposes of the bankruptcy system. She encouraged careers in public service. At one point, the conversation even turned to how serving as a government lawyer meant furthering the law the legislature has enacted and not imposing your personal preferences about the results you want.

Ironically, Twomey's departure from the DOJ demonstrates the opposite. We have a federal government now riddled with official and lawyers where loyalty is the only thing that matters, not ability and adherence to the rule of law.

Comments

[Janeway]

All valid points. Interesting to see how the UST program looks a few years from now. Trump must have experience with the UST in his many business bankruptcy cases (the individual has never filed). If field offices are closed and there are only a few UST employees per state (instead of multiples per division per district) then the system will suffer and cheats will be emboldened.

[Akira Lincome]

Tara Twomeywas not doing her job I e-mailed her multiple times about the fraud and misconduct they were doing in a debtor case. She did nothing. I just e-mailed her again on 3/10 telling her overaigting your authority. You can be removed from position and did not even no the good news is she has been fired 3/7/2025. I felt relieved and hope now the trustee office can work the way it should have all along. WITH INTEGRITY