Personal liability of trustees and debtors in possession: Review of the varying standards of care in the United States

Despite increasing attention given to the subject, the US Bankruptcy Code has not been amended to provide protection form personal liability for trustees and debtors in possession (DIP). Many courts have strived to reach the right balance between protecting innocent trustees and providing effective sanctions for good administration. At least 2 federal judicial circuits currently follow cases which state that trustees have derived judicial immunity. The standard was established in the Fifth Circuit by Boullion v. McClanahan, and in the Eighth Circuit by Smallwood v. US. Compelling reasons exist for the legislature to create a uniform statute providing immunity for bankruptcy trustees which would resolve the split of authority that exists in the circuit courts.