Page 29 - Bankruptcy Volume 1

Chapter 5

Employment Process and Fee Applications

Overview

Bankruptcy Code Section 327(a) provides that "the trustee, fn 1 with the court’s approval, may employ
one or more attorneys, accountants, appraisers, auctioneers, or other professional persons, that do not
hold or represent an interest adverse to the estate, and that are disinterested persons, to represent or assist
the trustee in carrying out the trustee’s duties under this title." Official committees and examiners may
also retain professionals; such employment also requires court approval.

Qualifications for Employment

Employment by the Trustee

Professionals who seek to be employed by the trustee or the examiner in a bankruptcy proceeding must
(a) be qualified to provide the services; (b) not hold or represent any interest adverse to the estate; (c) be
disinterested; and (d) have not previously served as an examiner in the case.

Employment by an Official Committee

An accountant or financial adviser employed on behalf of an official committee need not be disinterest-
ed under the Bankruptcy Code, but that person may not, while employed by the committee, represent
any other entity having an adverse interest in connection with the case. Judges in many districts, howev-
er, require disinterestedness of an accountant or financial adviser to an official committee.

Disinterestedness

Disinterestedness (as defined in the Bankruptcy Code) is a different legal and ethical concept from inde-
pendence (as required by the AICPA Code of Professional Conduct, and conflicts of interests as dis-
cussed in AICPA consulting services publications). An accountant proposing to perform bankruptcy
services should be knowledgeable of the differences.

To be disinterested, a person must not

 be a creditor, equity security holder, or insider;

 be or have been within two years before the date the petition was filed, a director, officer, or em-
ployee of the debtor; or

 have an interest materially adverse to the estate or its creditors or equity security holders by rea-
son of any direct or indirect relationship to, connection with, or interest in the debtor, or for any
other reason.

fn 1 The term trustee means a court-appointed trustee or the debtor-in-possession. See 11 USC 1107(a).

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