Zywicki Weighs in on Use of Smart Forms in Bankruptcy Filings

Professor Todd Zywicki told Lawyers USA that a benefit of using "smart forms" from which bankruptcy filers' financial information could easily be obtained is the availability of more accurate data on fraud within the system.

Zywicki, who has testified before Congress on bankruptcy abuse prevention, said, "One reason we don't know how much fraud there is in the bankruptcy system is simply we haven't had very good tools for indentifying and policing [it]." The "smart" technology would allow the government to forego its current practice of random sampling in favor of targeting questionable reported data through data-enabled technology, he said.

Bankruptcy forms too 'smart' for lawyers? Lawyers USA, February 11, 2008. By Kimberly Atkins.

"The U.S. Trustee Program is charged with promoting the efficiency and protecting the integrity of the federal bankruptcy system. It made the new forms available in 2005 and has been urging lawmakers and courts to mandate their use, but there is no time table for this change to be implemented.

"Clifford J. White, director of the U.S. Trustees' Office, recently testified before the House Judiciary Committee about the need to mandate the technology, and pointed out that Congress' 2005 overhaul of bankruptcy law recognized that need.

"'The need for bankruptcy data that's readily accessible was recognized in Sect. 604 of the reform law, which provides that the bankruptcy court should make data publicly available in an electronic format,' he said.

"He explained that the trustee program has been working with the Judicial Conference of the United States to implement the forms, which automatically tag data entered into electronic fields and allow a computer system to automatically collect and review the information.

"'Data-enabled technology [would allow] the program to perform its duties more effectively and allow debtors to know earlier in the process whether the program will deem their case to be presumed abusive,' White said. 'If the courts adopt this new technology as a mandatory standard, then bankruptcy administration will be streamlined and policy makers will have more information to evaluate the effectiveness of the system. '

One way that the data can be used is to identify and prevent fraud. Although federal authorities know that bankruptcy fraud is a big problem, they doesn't know just how widespread it is because there is no effective way to measure it.

"'One reason we don't know how much fraud there is in the bankruptcy system is simply we haven't had very good tools for identifying and policing [it],' said Todd J. Zywicki, a bankruptcy professor at George Mason University School of Law who has testified before Congress about bankruptcy abuse prevention.

"'One of the benefits of getting more accurate data is trying to figure out how much fraud there is in the system.'

"Right now the only way federal officials can search for fraud is by random sampling, Zywicki said. The 'smart' technology would allow the government to target questionable reported data and investigate with a system similar to that the IRS uses for income tax return audits."