Talk about congressional irresponsibility. US bankruptcies are running at levels twice as high as last year and well ahead of the number recorded in the recession year of 1975. And if that wasn't bad enough, the US Supreme Court ruled last June that the law governing the federal bankruptcy court system is unconstitutional because it granted the nation's 220 bankruptcy judges more authority than could be granted under the Constitution. The high court gave Congress a deadline of Oct. 24 to write a new law. Lawmakers missed that deadline, so the court gave Congress a second deadline: Dec. 24.
Guess what? While lawmakers found time to increase their salaries (in the House) and ensure unlimited outside income from speeches (in the Senate) they did not find the time to enact a new federal bankruptcy law.
This means that the entire US bankruptcy court system is now operating under a legal cloud. Bankruptcy judges can still decide a range of legal issues. But the more difficult findings and orders must then be reviewed by a federal district court judge. Thus, not only will questions arise as to the long-term legality of decisions now being made by bankruptcy judges, but district court jurists are being given added responsibilities at a time when many courts are clogged with cases.
The lawmakers had ample time to address the issue. They could have endorsed such alternatives as transferring powers granted bankruptcy judges to federal district courts, or upgrading the status of bankruptcy judges to Article III judges as defined in the Constitution. In his annual report, Chief Justice Warren Burger cautioned against giving full federal judicial status to bankruptcy judges.
Caught in the middle of the judicial muddle are the many firms now filing for bankruptcy. Of concern to many businesses is that they may not be able to obtain needed bank financing - or sell off marginal divisions - because creditors will be uncertain about the permanence of bankruptcy court orders.
The new Congress must quickly take up this unfinished business.