APPOINTMENT OF A CHAPTER 11 TRUSTEE:

Cause for appointment: There is cause for the appointment

A Chapter 11 trustee may be appointed for example, if the debtor in possession (either before or after the filing of the bankruptcy petition) commits acts showing fraud, dishonesty, incompetence, or gross mismanagement.

(I) Example: Where Debtor

(i) used employees' funds (withheld for taxes, union dues, and contributions

(ii) issued checks knowing that there were inadequate funds in the bank, and

(iii) failed to keep accurate financial records, a Chapter 11 trustee was appointed to replace Debtor's current management.

b. Burden of proof: The party requesting appointment of a Chapter 11 trustee must prove that sufficient cause exists, and the standard applied is that of "clear and convincing evidence."

c. Duties of trustee: The duties of a Trustee in a Chapter 11 case include the following

(1) To account for all property received;

(2) To examine proofs of claims and object to the allowance of any improper ones;

(3) To provide information requested by parties in interest about the estate and the administration of the estate;

(4) If the court authorizes the operation of the debtor's business, to file periodic financial reports, including a statement of receipts and disbursements, with the court, the United States trustee, and the appropriate taxing authorities;

(5) To prepare and file with the court and with the United States trustee a final report and account concerning the case;

(6) To file any document required under Bankruptcy Code  list of creditors, schedule of assets and liabilities that has not been filed by the debtor

(7) To investigate the debtor's conduct, financial condition, and business operations, as well as the advisability of continuing the debtor's business

(8) To file n report of the investigation, relating any fads evidencing fraud, dishonesty, incompetence, misconduct, or mismanagement, and lo send a copy of the findings lo any creditors' committee or equity security holders' committee

(9) To file a Chapter 11 plan as soon as feasible, or recommend conversion of the case to another chapter

(10) To provide available information to the taxing authorities concerning any year for which the debtor failed lo file a return  and
 

(11)  After a plan has been confirmed, to file any required reports

d. Authority to operate business: A trustee who is appointed in a Chapter 11 case is authorized to manage the business of the debtor, unless the court  rules otherwise. As a consequence, the trustee replaces the debtor's directors, and they must surrender the corporation's property to the trustee.

e. Termination of trustee's appointment:

The trustee's appointment may be terminated by the court at any lime before a plan is confirmed. Such a request may be made by a party in interest or by the United States trustee, after which, upon proper notice, the court conducts a hearing to determine the advisability of (i) terminating the trustee's appointment and (ii) restoring the estate property and the operation of the business to the debtor.

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