Is Trustee Required to Disclose Information Voluntarily Provided by ...

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In In re Newport 222 Mitchell Street, L.P., 2026 WL 1488930, Ch. 7 Case No. 24-54060-sms (Bankr. N.D. Ga. May 27, 2026) (click here for .pdf) a creditor sought to compel the Chapter 7 Trustee to furnish information voluntarily provided to him by another creditor on a confidential basis. The basis for the motion was 11 U.S.C. §704(a)(7) which provides that the Trustee shall, “unless the court orders otherwise, furnish such information concerning the estate and the estate’s administration as is requested by a party in interest.” The Trustee did not oppose the Motion, but suggested the statute should be narrowly interpreted and left it to the discretion of the Court. The Motion was opposed by the creditor that provided the information to the Trustee.

The Moving Creditor cited the case of In re Pearlstein, 2022 WL 1492236 (Bankr. D. Or. May 11, 2022), in which the court allowed discovery from the trustee of the debtor’s financial information. Judge Sigler noted that a more relevant case is In re Walters, 136 B.R. 256 (Bankr. C.D. Cal. 1992), wherein “creditors challenging a debtor’s discharge under §727 argued that § 704(a)(7) required the trustee to provide the creditors information that the trustee’s accountants developed while investigating and prosecuting fraudulent transfer actions against the debtor’s wife, which the court defined as the ‘audit materials.'”

The Walters court … said that it could not accept the argument that the audit materials “constitute ‘information concerning the estate and the estate’s administration’” either under the plain language of the section, the broad context of the Bankruptcy Code generally, or under the specific facts of this case.

Judge Sigler ultimately allowed the Moving Creditor very limited discovery from the Trustee –

Other than the [Debtor’s] Bank Statements, the Requested Discovery belongs to a third party and was collected by the Trustee solely for the purpose of determining whether to pursue claims on behalf of the Estate. The Trustee chose not to pursue those claims and [Moving Creditor], presumably, is displeased with that decision. But a creditor’s discontent with a trustee’s course of action does not warrant an overbroad application of § 704(a)(7).

If the Requested Discovery fell within the scope of § 704(a)(7), the Court may need to evaluate why [Moving Creditor] wants the Requested Discovery or what [Moving Creditor] would do with it. But the threshold inquiry is whether the Requested Discovery is “information concerning the estate and the estate’s administration” and, for the reasons stated on the record at the March 30, 2026 hearing and supplemented in this Order, other than the Bank Statements, it is not.

Scott Riddle’s practice focuses on bankruptcy and reorganization. Scott has represented businesses and other parties in Bankruptcy cases for over 20 years.  You can contact Scott at 404-815-0164 or [email protected].  For more information, click here.