A skilled examiner can make all the difference

The U.S. Bankruptcy Code provides for the appointment of a bankruptcy examiner to investigate the debtor with respect to allegations of fraud, dishonesty, incompetence, misconduct or mismanagement. The right examiner, with a clearly defined mission, will have a major influence on the bankruptcy process. The difference between a successful financial restructuring or liquidation — resulting in substantial recoveries for the key constituencies — and a time-consuming (and asset-consuming) meltdown, can depend on the approach of the examiner and the examiner’s support team.

Typically, in Chapter 11 cases in which a bankruptcy trustee has not been appointed, the court will order the appointment of an examiner upon the request of any affected party in the case and upon a determination that such appointment is in the best interests of the creditors or the estate. Furthermore, the Bankruptcy Code provides for the appointment of an examiner if “the debtor’s…unsecured debts…exceed $5,000,000.” When the court finds that the case warrants appointment of a bankruptcy examiner, the court will direct the U.S. trustee (an official of the U.S. Department of Justice) to make the appointment. The trustee will usually canvass major creditors in the case for suggestions as to who should fill the role as the examiner.