Motivating Disclosure by a Debtor in Bankruptcy: The Bankruptcy Code, Intellectual Property, and Fiduciary Duties

Abstract

The fiduciary duties of a bankrupt debtor in possession have not been discussed in detail by the courts. This Note makes a simple and original claim about such duties: that the fiduciary duties of a bankrupt debtor in possession are too low and should be reformed to comport with fiduciary duty standards in related areas of the law, most notably corporate law. In particular, the Note advocates a duty to disclose relevant information about the value of assets dispersed in a bankruptcy proceeding. In coming to this conclusion, the Note considers relevant sections of the Bankruptcy Code, legal precedent, economic analysis, and other bankruptcy policy considerations such as preventing fraud and protecting the honest but unfortunate debtor. Focusing on one important aspect of bankruptcy law, § 363 sales of assets, the Note provides an eclectic and useful framework for further research, both normative and positive, on fiduciary duties in bankruptcy. The Note adds a number of original insights to the existing literature on bankruptcy and fiduciary duties.