Trustee’s Broad Duty to Disclose Information to Interested Parties under Section 704(a)(7) of the Bankruptcy Code – Law Review by Jose Cardoz

Abstract

https://scholarship.law.stjohns.edu/bankruptcy_research_library/321

A trustee has a duty to disclose information to interested parties upon request. Section 1109(b) of title 11 of the United States Code (the “Bankruptcy Code”) includes creditors in the definition of interested parties. Trustees must obtain a court order to be excused from their duty to disclose.

A trustee’s duty of disclosure is “broad and extensive.” Courts are reluctant to excuse the trustee from their duty of disclosure unless the trustee points to a compelling “countervailing fiduciary duty … whose performance is more important than avoiding the harm resulting from withholding the information in question.”

First, this article explores the expansive scope of the trustee’s duty to disclose. Second, the article discusses the limitations on the trustee’s duty to disclose, and when a trustee may be excused from their duty of disclosure.

Commentary:

While the analysis here is somewhat abbreviated (since this is a note rather than a more comprehensive work) and also focuses on the duties of Chapter 11 Trustees, which are rather uncommon,  11 U.S.C. 1302(b)(1)  does make the disclosure duties in 11 U.S.C  § 704(a)(7) applicable to Chapter 13 Trustees as well. Obviously, this also applies to Chapter 7 Trustees. This obligation to disclose details regarding the administration of the estate could be used to obtain communication with other parties (in order to identify collusive bidding), with auctioneers (to determine what, if any, appraisals were given) and even potentially the U.S. Trustee or Bankruptcy Administrator and Judges (making such private meetings even more suspect.) 

boltz2
Member of the Law Offices of John T. Orcutt, P.C.

Edward C. Boltz is a managing partner of the Law Offices of John T. Orcutt, P.C., where he has managed the firm’s office in Durham, North Carolina since 1998, representing clients in not only Chapter 13 and Chapter 7 bankruptcies, but also in related consumer rights litigation, including fighting abusive mortgage practices. Mr. Boltz received his B.A. from Washington University in St. Louis in 1993 and his J.D. from George Washington University in 1996. He is a member of the North Carolina State Bar, where he has been certified as a specialist in consumer bankruptcy law. He is admitted to practice before the Districts Courts in both the Eastern and Middle Districts of North Carolina. Mr. Boltz is the current President of the National Association of Consumer Bankruptcy Attorneys (NACBA). Previously, he has served as the Secretary of NACBA, and has jointly responsible for directing the NACBA State Chair program, Mr. Boltz has also served on the Bankruptcy Council for the North Carolina Bar Association and previously served as the Bankruptcy Chair for the North Carolina Association of Trial Lawyers.

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