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Delaware Slated for New Bankruptcy Judge Amid Money Woes

Delaware’s U.S. Bankruptcy Court, the busiest in the country for Chapter 11 filings, is getting an additional judge to help handle what officials see as a “full-blown crisis” called “devastating” at a Senate hearing today.

The court, based in Wilmington, has a caseload justifying a dozen judges, while it has only half that number now, Chief Delaware U.S. District Judge Gregory M. Sleet, who oversees the bankruptcy unit, said in his 2013 annual report.

“The seventh judgeship is important and funding it is obviously necessary,” Democratic Delaware U.S. Senator Chris Coons, chairman of the Senate Judiciary Subcommittee on Bankruptcy and the Courts, said in a statement.

The budget cuts have been “devastating” to the courts, and “we have no available surplus funding,” Judge Julia Gibbons of the U.S. Court of Appeals for the Sixth Circuit told Coons at today’s hearing in Washington.

The cuts, and reduction in court staff, mean delays, and the U.S. history of fairness and prompt justice “is in jeopardy,” said W. West Allen, a lawyer and representative of the Federal Bar Association.

“We’re on the verge of being crippled,” said Michael Nachmanoff, federal public defender for Eastern Virginia. He said his staff may have to be reduced by 35 percent.

Automatic Cuts

The spending sequestration is the practice of imposing automatic, across-the-board spending cuts in the face of annual budget deficits. The idea of imposing automatic spending cuts in the federal budget was first put in place by the Balanced Budget and Emergency Deficit Control Act of 1985.

Coons has been helping to strengthen the financial underpinnings of the bankruptcy courts, sponsoring the bipartisan Temporary Bankruptcy Judgeship Extension Act to extend expiring authorizations in 14 states and Puerto Rico.

“A full-blown crisis awaits us” in Delaware as the bankruptcy court deals with 28 percent in budget cuts over three years, necessitating the elimination of 23 of 72 office employees and a furlough program “whereby all staff of the clerk’s office take one day every two weeks, without pay, equating to a 10 percent decrease in their salaries,” Sleet wrote.

Not Funded

The additional bankruptcy judge authorized for Delaware by federal court administrators “has not been funded,” Sleet said.

Current sitting bankruptcy judges in Delaware are Chief Judge Kevin Gross, Peter Walsh, Mary Walrath, Kevin Carey, Brendan Shannon, and Christopher Sontchi.

Some of the largest bankruptcies filed in 2013 in Delaware include marketing solutions company, Dex One Corp., which filed on March 17 with assets of $2.84 billion and debt of $2.79 billion; lead battery maker Exide Technologies (XIDEQ), which filed June 10 with assets of $1.89 billion and debt totaling $1.14 billion; and vodka seller Central European Distribution Corp., which filed April 7 with assets of $1.98 billion and debt of $1.73 billion.

To contact the reporters on this story: Phil Milford in Wilmington, Delaware, at pmilford@bloomberg.net; Dawn McCarty in Wilmington, Delaware, at dmccarty@bloomberg.net.

To contact the editor responsible for this story: Andrew Dunn at adunn8@bloomberg.net.

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