American Bankruptcy Institute
32 IV. Proposed Recommendations: Commencing the Case
3. the estate neutral
Recommended Principles:
• The Bankruptcy Code should be amended to delete any reference to an “examiner” and to incorporate the concept of a more flexible “estate neutral,” as described in
these principles.
• Section 1104(c) of the Bankruptcy Code should be amended to set forth the standards for, and potential authority and duties of, an estate neutral, as described in these principles.
• Section 1104(c) should not mandate the appointment of an estate neutral in any circumstances.
• The court should be permitted to order the U.S. Trustee to appoint an estate neutral if (i) a trustee is not appointed and (ii)(a) the appointment is in the best interests of the estate, or (b) for cause.116
• An order directing the U.S. Trustee to appoint an estate neutral should specify the scope of the estate neutral’s duties and the duration of the appointment. The court may direct the U.S. Trustee to appoint more than one estate neutral in any given case to serve different functions if necessary or warranted by the circumstances of the case. Nevertheless, the Bankruptcy Code should include a presumption against the appointment of more than one estate neutral in any given case.
• An order directing the U.S. Trustee to appoint an estate neutral should not permit that individual to: (i) propose a chapter 11 plan for the debtor; (ii) act as a mediator in any matter affecting the chapter 11 case, unless such action is the primary purpose of the individual’s original appointment; (iii) initiate litigation on behalf of the debtor or the estate, unless such action is within the scope of the individual’s original appointment and the individual was not previously engaged to investigate or examine matters relating to the litigation or the debtor’s chapter 11 case; or (iv) except as provided in the principles for small and medium-sized enterprise cases, operate the debtor’s business.
• Upon the entry by the court of an order directing the U.S. Trustee to appoint an estate neutral, the U.S. Trustee should, in conformity with the procedures established for the appointment of a chapter 11 trustee, appoint a disinterested person to serve as the estate neutral. A party in interest should have the ability to object to the person appointed as the estate neutral under the same procedures and subject to the same standards established in the principles governing objections to the person appointed as the chapter 11 trustee. See Section IV.A.2, The Chapter 11 Trustee.
116 Bankruptcy cases in Alabama and North Carolina are not under the jurisdiction of the U.S. Trustee, but rather are administrated by Bankruptcy Administrators in those jurisdictions. Accordingly, the applicable rules of those jurisdictions would govern the appointment process.