Chapter 11 bankruptcy, like bankruptcy under other chapters, starts with the general filing of a bankruptcy petition, supporting schedules, and statement of financial affairs.
(Mc Carroll, James) (Entered: 06/13/2014) Declaration of Geoffrey Varga In Support of Chapter 11 Petition And First Day Pleadings filed by James C.
After confirmation and appointment, the liquidation trustee then serves as the liquidation trust's representative and is responsible for complying with the trust agreement (and confirmation order), liquidating the assets and making distributions to trust beneficiaries. This necessitates a liability policy and/or an indemnity agreement to protect the liquidation trustee from errors and omissions. As a "trustee," a liquidation trustee has potential exposure for numerous liabilities.
The liquidation trustee in essence has the duties and responsibilities of a state law trustee, including fiduciary duties to the liquidation trust. Liability for such errors and omissions is not necessarily limited to such insurance proceeds.
Examples of non-dischargeable debts include certain tax liabilities, fraud claims, breach of fiduciary duty claims and other claims that public policy disfavors discharging (e.g., child support obligations). Because the non-dischargeability action was not seeking a right to payment, the Bankruptcy Court held that it was not a claim and did not fall within the parameters of section 1123(b)(3), which uses the word “claim” when describing what a chapter 11 plan can reserve.
In other words, a chapter 11 debtor is generally allowed to operate in the same manner it operated outside of bankruptcy. Section 523 of the Bankruptcy Code, however, excepts certain pre-bankruptcy debts from being discharged. Instead, such action merely determines whether an underlying claim is dischargeable in bankruptcy.