Chapter 11 Compliance with Rule 9037 and Beyond

• Jurisdiction: United States

11. Compliance with Rule 9037 and Beyond

The Practitioner's Duty to Monitor for Protected Personal Information

Written by:

Jessica L. Wasserstrom

The Garden City Group Inc.

Lake Success, N. Y.

Paul V. Kinealy

The Garden City Group Inc.; Chicago

Companies and individuals who seek the protection of the bankruptcy laws are required, throughout the duration of their bankruptcy case, to submit a rather large amount of information and data to the court—from the petition and its supporting documentation—to the various notice matrices, statements of assets and liabilities, schedules of financial affairs and monthly operating reports. Unless specific relief is sought from the bankruptcy court, all of this data is filed on the court docket and becomes a matter of public record.¹ This level of public disclosure is essential to the proper functioning of the bankruptcy process.

Only with transparency can the bankruptcy court, creditors, U.S. Trustee and other interested parties have access to the information they need in order to accurately assess the debtor's financial situation and ensure a distribution of available assets in accordance with the priorities set forth in the Bankruptcy Code. Furthermore, consistent with the fundamental tenets of bankruptcy law, public access to the details of the debtor's financial affairs and its liabilities aids the administration of bankruptcy cases, promotes the public trust in the system and encourages legal compliance.

In the current technological age, the ease with which publicly available information and data can be accessed, even when stored on "secure" servers, requires bankruptcy practitioners to consider and balance this desire for transparency with the ever-growing need to assess and protect private information. Rather than limiting the focus to simple compliance with the disclosures required by the Bankruptcy Code and Rules, the careful practitioner must now consider simultaneously whether the information being submitted is subject to privacy protection laws or otherwise should be safeguarded to protect the estate and maximize its value. Identity theft and other types of fraud have become increasingly more common. At the same time, electronic filing of documents has become commonplace and has greatly aided the efficiency with which a bankruptcy case can be handled. The challenge for practitioners, and perhaps for lawmakers as well, is to strike a balance between these two competing concerns, so as to satisfy the need for transparency in the bankruptcy process while ensuring that the possibility of unwarranted and potentially damaging disclosure of personally identifiable information does not occur.

A. Protected Information

Various states have enacted their own privacy laws governing the protection of confidential information.² The bankruptcy system took its first steps toward implementing these types of protections in connection with the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), adding Rule 9037 to the Federal Rules of Bankruptcy Procedure. Rule 9037, which took effect in 2007, prohibits certain personal information, such as an individual's Social Security number, birth date or financial account number, or the name of a person known to be a minor, from being disclosed in any document filed with the court. Specifically, Rule 9037(a) requires that this personal information be redacted so that it only provides the following information: (1) the last four digits of a Social Security or taxpayer identification number; (2) an individual's birth year; (3) the initials of any minor; and (4) the last four digits of a financial-account number.

Apart from the specific exemptions listed in Rule 9037(b),³ these restrictions apply to the filing of any document that may contain this information, including, but not limited to, proofs of claims, declarations, motions, orders, settlement agreements or even the exhibits to any of the...