Chapter 11 Examiner -

      There are some rare Chapter 11 cases where concerns have been raised about the conduct of the DIP, but they do not necessarily merit the appointment of a trustee. In this type of case, the court has Chapter 11 Examinerthe power to appoint an examiner. An examiner's duties are much narrower than those of a trustee, although the court in its discretion can order those duties expanded.

What Does the Examiner Investigate?

      Under Bankruptcy Code Section 1106 (a)(3), the examiner is charged with investigating the acts, conduct, assets, liabilities, and financial condition of the debtor, the operation of the debtor's business and the desirability of consonance of such business, and of any other matter relevant to the case or the formulation of a Chapter 11 plan.

      Under Bankruptcy Code Section 1106(a)(4), the examiner is then to file a written report with the results of the investigation, to include a statement of any fact learned pertaining to fraud, dishonesty, incompetence, misconduct, mismanagement, or irregularity in the management of the affairs of the debtor, or to a cause of action available to the estate.


Additional Tasks of the Examiner

      The Court could decide that the examiner in a particular case should be assigned additional tasks. These can include examining and correcting the debtor's schedules of assets and liabilities; reviewing and objecting to proofs of claim; helping the debtor with the preparation of a plan of reorganization; giving suggestions on the propriety of selling estate assets and assisting with those negotiation; and determining if potential actions against third parties are viable and should be pursued.

      Under Bankruptcy Code Section 321, a person who has served as an examiner in a case is prohibited from thereafter serving as a trustee in the same case. The thinking is that he in effect would be investigating himself.

Written by Henry Rendler

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