Mend It, Don't End It: The Case for Retaining the Disinterestedness Requirement for Debtor in Possession's Professionals

Abstract:     
The National Bankruptcy Review Commission initially recommended the repeal of the so-called "disinterestedness" requirement for a debtor in possession's professionals. In the end, however, the Commission reconsidered its initial recommendation and instead chose to maintain the current standard with some minor, but important, revisions. This article argues that the Commission was correct to retain disinterestedness generally, but to modify it in certain circumstances. In particular, this article argues that the advocates of repealing disinterestedness have failed to demonstrate why disinterestedness should be retained for trustees, but not debtors in possession. The fundamental concerns in both cases are identical: preservation of the integrity of the bankruptcy system, preservation of public confidence in the bankruptcy system, and consistency with state ethical standards. The arguments for distinguishing professionals representing debtors in possession from those representing trustees are demonstrated as being flawed.

[Note: The article is followed by comments on main paper by Charles W. Wolfram and Gerald K. Smith. A brief response to those comments is also presented; see Todd J. Zywicki, "Of Bubbling Pots and Bankruptcy Ethics: A Comment on Wolfram & Smith."]

Accepted Paper Series