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Georgia Bankruptcy Law Offices Have To Pay Close Attention TO The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005

Mr. Chairman and Members of the Subcommittee:

           I appreciate the opportunity to appear before the Subcommittee on behalf of the Department of Justice to discuss the United States Trustee Program’s ongoing work to combat fraud and abuse under current bankruptcy law, as well as the potential enhancement of this work through omnibus bankruptcy reform legislation.

           The Department believes that provisions proposed in H.R. 975, which was introduced on February 27th, would provide important new statutory tools to assist the United States Trustee Program in identifying and civilly prosecuting misconduct by debtors and others who misuse the bankruptcy system.

           The United States Trustee Program (USTP or Program) is the component of the Department of Justice with responsibility for the oversight of bankruptcy trustees and cases. Our mission is to enhance the efficiency and the integrity of the bankruptcy system. In October 2001, the USTP commenced a National Civil Enforcement Initiative to address bankruptcy fraud and abuse. The Program undertook this Initiative for several reasons, including the following:

           –         The bankruptcy caseload is the largest in the federal court system. Disrespect for the bankruptcy system breeds disrespect for the entire judicial system. As the bankruptcy caseload continues to climb, more and more Americans are coming into contact with the nation’s bankruptcy system. In addition to the 1.5 million individuals and businesses that sought debt relief in Fiscal Year 2002, millions more were affected, including creditors, many of them small businesses; employees; retirees; and families. It is critical that this system of justice be respected as one in which the law is strictly and fairly enforced.

           –         The integrity of the bankruptcy system relies upon complete and accurate disclosure by debtors and other participants in the system. The bankruptcy system largely depends upon self-reporting by debtors of their assets, liabilities, and other financial affairs. There is a consensus among bankruptcy professionals, including judges and practicing lawyers, that documents filed by debtors, petition preparers, and even attorneys who represent parties in a bankruptcy case too often are inaccurate and ignore the requirements of the Bankruptcy Code and Rules.

           –         The monetary stakes in the bankruptcy system are substantial. Studies show wide disparity in potential criminal and non-criminal abuse of the bankruptcy system. But with more than 1.5 million new cases filed each year, more than $5 billion disbursed annually by private trustees in chapter 7, 12, and 13 cases, and hundreds of billions of dollars in corporate assets and liabilities subject to chapter 11 protection, potential recoveries are staggering.

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