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.