Document Type
Research Memorandum
Publication Date
2020
Abstract
(Excerpt)
In order to effectuate the efficient resolution of bankruptcy proceedings, courts have followed the public policy of reducing the number of suits that are ancillary to a bankruptcy case. Courts have achieved this goal by limiting those that have standing once a bankruptcy case is initiated. Thus, courts will appoint a trustee who alone has standing to handle the estate of the debtor.
Typically, the issue of standing will be straightforward when a creditor sues a debtor. However, the question becomes more complicated when a creditor sues another creditor, where their only connection is the debtor.
This memorandum focuses on whether a creditor can assert breach of fiduciary duty and fraudulent transfer claims against another creditor if the mutual debtor is in bankruptcy. Part I provides the legal standard dictating when a claim can be brought by an individual creditor during bankruptcy and the exception to the rule. Part II discusses, in three separate sections, a creditor’s claim for breach of fiduciary duties, a claim for fraudulent transfer, and derivative standing.