Summary: Over the past several years, bankruptcy filings have risen more sharply than at any other time in history. Filings since 1986 have increased 109 percent--from about 500,000 to an estimated 1,000,000 in 1992; more than 1.2 million bankruptcy filings are predicted for 1993. The oversight and monitoring of bankruptcy trustees is one of several areas in the Justice Department that GAO has deemed to be at "high risk." The trustee system is vulnerable to fraud because of the large number of trustees administering ten of billions of dollars in estate funds and because of the limited resources available to conduct and thoroughly follow up on trustee audits and reports. The Justice Department has sought to improve its oversight of private bankruptcy trustees through more rigorous review of trustee candidates, enhanced trustee reporting requirements, more extensive trustee audit coverage by the Inspector General, and the replacement of 14 of the 21 U.S. Trustees who run the program. Yet several challenges remain to be addressed, including the number of old cases, problems identified by Inspector General audits, and funding limitations. Concerns about possible conflicts of interest between those parts of the Justice Department representing the federal government as a creditor in bankruptcy cases and the Executive Office for U.S. Trustees have not been borne out. Only two cases have been identified in which conflict of interest might have been an issue. The authority of the bankruptcy courts in approving key case administration decisions provides a check and balance to Justice's dual role.
