Debtors Must Cooperate With the Bankruptcy Trustee

April 2, 2010

When a consumer bankruptcy case is filed, a trustee is appointed to oversee and administer the case. The trustee does not represent the interests of the debtor and cannot give legal advice, which is the role of your bankruptcy attorney. However, it is important to cooperate with the trustee and any request for information.

The issue of a debtor’s duty to cooperate with the trustee was recently litigated in the case of In re Royce Homes, LP. 2009 WL 3052439 (Bkrtcy. S.D.Tex.). In that Chapter 7 case the trustee requested financial documents and information from a corporate debtor. In response to the request the debtor provided access to “storage facilities containing stacks of documents and old computer servers, most of which are wholly unresponsive to the Trustee’s request.” The trustee filed a motion asking the bankruptcy court to compel the debtor’s cooperation.

In deciding the matter the court cited several sections of the bankruptcy code and rules which require debtors to cooperate with the trustee. Notably section 521(a)(3) requires the Debtor to “cooperate with the trustee as necessary to enable the trustee to perform the trustee’s duties under this title.” The court ordered the debtor to provide the specific information that the trustee had requested, rather than simply dumping documents or permitting access to records. The court emphasized the debtor’s duty to cooperate by stating, “It is well settled that a [trustee] should not be required to drag information from a reluctant and uncooperative debtor. Because of the extraordinary relief offered under the Bankruptcy Code delay and avoidance tactics are inconsistent with, and offensive to, its purpose and spirit.”

Cooperation with the trustee is an important part of the bankruptcy process. Failure to cooperate or to testify truthfully could result in a discharge, or worse. Your bankruptcy attorney can help guide you through this process of disclosure with the trustee and protect your interests.
 

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