Rudolph J. DiMassa Jr.,left, and George W. Fitting, right, of Duane Morris. Courtesy photos

Introduction

Section 327(a) of the Bankruptcy Code allows debtors to employ estate professionals. The section requires these professionals to be "disinterested persons" who "do not hold or represent an interest adverse to the bankruptcy estate." While well-intentioned, Section 327(a) can have an unduly limiting effect on debtors seeking to retain professionals who have performed prepetition services for the debtor and who have gained beneficial institutional knowledge of the debtor's operations. As an example, professionals often provide services to a business that ultimately files for bankruptcy protection. If these prepetition services remain unpaid as of the bankruptcy petition date, the professionals will become creditors of the debtor, and Section 327(a) renders them ineligible to be retained. Additionally, because prepetition directors and officers are excluded from the definition of "disinterested person" as insiders under Section 101(14), a prepetition chief restructuring officer may be unable to continue providing services to the debtor after the petition date.