Section 1106 enumerates the duties of a Chapter 11 trustee. The duties incorporate by reference certain Chapter 7 trustee duties under Section 704 and add Chapter 11-specific duties relating to investigation of the debtor, filing a statement of investigation, filing a plan or recommending conversion or dismissal, and furnishing post-confirmation reports.
What Is Section 1106?
Section 1106 enumerates the duties that follow appointment under Section 1104. The provision is structured in two parts: subsection (a) lists the operational and investigative duties of a Chapter 11 trustee, and subsection (b) defines the narrower duties of an examiner, which are limited to a subset of the trustee's investigative tasks. Section 1106 is one of the most important provisions in Chapter 11 because it does not only govern court-appointed trustees; through the operation of Section 1107(a), most of these duties are also borne by the debtor in possession.
Official citation: 11 U.S.C. § 1106
Section 1106(a): Trustee Duties
The trustee inherits the duties of a Chapter 7 trustee specified in Section 704 by reference, plus the additional Chapter 11 duties enumerated directly in Section 1106(a). The combined catalog is extensive.
1106(a)(1): Section 704 Duties
Through cross-reference to Section 704(a)(2), (5), (7), (8), (9), (10), (11), and (12), the Chapter 11 trustee is responsible for being accountable for property received, examining proofs of claim and objecting where appropriate, furnishing information to parties in interest, filing reports with governmental units, and providing notice of domestic-support obligations.
1106(a)(2): Filing Required Information
If the debtor has not done so, the trustee must file the list of creditors, schedule of assets and liabilities, schedule of current income and expenditures, and statement of financial affairs required by Section 521(a)(1).
1106(a)(3): The Investigation Requirement
The trustee must investigate the acts, conduct, assets, liabilities, and financial condition of the debtor, the operation of the debtor's business and the desirability of the continuance of such business, and any other matter relevant to the case or to the formulation of a plan. This is the load-bearing investigative duty. Although a DIP also bears most Section 1106 duties under Section 1107(a), Section 1107(a) expressly excepts the 1106(a)(3) investigation duty from the DIP context, on the obvious theory that one cannot reasonably investigate oneself.
1106(a)(4): Report of Investigation
As soon as practicable after completing the investigation, the trustee must file a statement of the investigation, including any fact ascertained pertaining to fraud, dishonesty, incompetence, misconduct, mismanagement, or irregularity in the management of the affairs of the debtor, or to a cause of action available to the estate. A copy of the statement is transmitted to any creditors' committee, any equity security holders' committee, indenture trustee, and any other entity the court designates.
1106(a)(5): The Plan-Filing Duty
As soon as practicable, the trustee must file a plan, file a report explaining why the trustee will not file a plan, or recommend conversion to Chapter 7, 12, or 13 or dismissal of the case. The duty to either propose a plan or explain why none is feasible is one of the most consequential trustee obligations: it shifts the burden of producing a reorganization vehicle off the debtor and onto the fiduciary.
1106(a)(6) and (7): Tax and Special Reports
The trustee must furnish information regarding the estate required for any governmental unit's tax return. If the business of the debtor is authorized to operate, the trustee must file periodic operating reports with the court and the United States Trustee, and any other reports the court orders.
Section 1106(b): Examiner Duties
An examiner appointed under Section 1104(c) is not a substitute for management. Section 1106(b) limits the examiner's duties to performing the investigation and reporting obligations of Section 1106(a)(3) and (a)(4), and "any other duties of the trustee that the court orders the debtor in possession not to perform." The examiner does not operate the business, does not file a plan, and does not displace the DIP.
The court's order appointing an examiner typically defines the scope with specificity. Examiner mandates have ranged from narrowly tailored investigations into a single transaction or claim to broad, multi-volume forensic examinations of pre-petition conduct that take months and generate substantial professional fees. The scope-of-mandate question is often the most contested issue at the examiner-appointment stage.
Interaction with Section 1107: DIP-as-Trustee
Section 1107(a) provides that, subject to limitations the court prescribes, "a debtor in possession shall have all the rights, other than the right to compensation under section 330, and powers, and shall perform all the functions and duties, except the duties specified in sections 1106(a)(2), (3), and (4), of a trustee serving in a case under this chapter." This single sentence makes the DIP a quasi-trustee, bound by the fiduciary duties owed by the trustee to all parties in interest.
The three excepted duties are noteworthy: the DIP need not file information schedules already filed under Section 521 (1106(a)(2)), need not investigate itself (1106(a)(3)), and need not produce a report of self-investigation (1106(a)(4)). All other duties, including the operational duties, the plan-filing duty under 1106(a)(5), the tax-information duty, and the periodic-reporting duty, are owed by the DIP just as by an appointed trustee.
Practitioner note: The DIP's fiduciary status under Section 1107(a) means that pre-petition management, now serving as the DIP, owes duties to creditors and the estate that may conflict with management's pre-petition loyalties to equity. The case law on DIP fiduciary duty is extensive and uniformly strict.
Final Accounting and Closing
While Section 1106 does not contain an express "final accounting" subsection, the operating-reports duty under 1106(a)(7) and the Section 704 cross-reference (incorporating, by way of Section 704(a)(9), the duty to file a final report and account) combine to require the trustee to render a final accounting at the close of the case. Bankruptcy Rule 5009 governs the procedural mechanics of closing.
A confirmed Chapter 11 plan typically discharges the trustee's operating duties at the effective date, but the obligation to render a final account, file final tax returns, and obtain a final decree under Bankruptcy Rule 3022 persists until the case is administratively closed.
Related Bankruptcy Code Sections
This section operates in concert with several other provisions of the Bankruptcy Code:
- Section 1104 - Appointment of trustee or examiner
- Section 1107 - Rights, powers, and duties of debtor in possession
- Section 1108 - Authorization to operate the business
- Section 704 - Duties of Chapter 7 trustee (cross-referenced)
- Section 521 - Debtor duties (schedules and statements)
Understanding how these sections interact is essential for trustees, examiners, debtors in possession, and creditors evaluating fiduciary performance.
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