Bankruptcy Court Tax Returns

August 9, 2023

When you are requesting a copy of a judgment debtor’s tax returns at a bankruptcy court or hearing, does the judgment debtor or their attorney, have the right to ask you to first sign a some sort of “confidentiality and/or non-disparagement” agreements, before you are allowed to see the bankrupt judgment debtor’s tax returns?

One of many judgment-related articles: I am a judgment broker, not a lawyer, and this article is my opinion based on my experience in California, please consult with a lawyer if you need legal advice.

This article is based on my understanding of the applicable law in California (the Ninth Circuit).

I am not aware of any requirements under the applicable bankruptcy codes that impose a duty upon you not to disparage the debtor. Of course, one cannot readily consider such an agreement in any case without first knowing what it would mean to disparage the judgment debtor regarding their tax returns. I do not see any reason to agree to refrain from pointing out any apparent inconsistencies or outright fraud in the judgment debtor’s tax return(s).

Regarding confidentiality, by their very nature, tax returns should be considered confidential and not subject to general disclosure without good cause. In bankruptcy, that consideration is balanced with the judgment debtor’s obligation to fully and accurately disclose their financial interests and the creditors’ rights to reasonably investigate and challenge them. It is probably not unreasonable for the debtor to request, and you to agree, that you will not publish the contents of their tax returns, nor disclose them to any third parties without a reasonable need to know.

However, I would be careful not to agree to any prohibitions on introducing them as evidence in the bankruptcy proceedings or any subsequent judgment enforcement proceedings. Remember, the plain language of the applicable bankruptcy code requires the debtor to provide this information to you without any conditions or risk having the case dismissed. The rule of thumb is to be reasonable and address reasonable concerns, but do not give up any of your substantive rights

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