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.)