September 13, 2019
The Bankruptcy Protector recently discussed notable non-bankruptcy provisions that must be consulted to ensure compliance with privacy issues. In this post, we discuss notable Bankruptcy Code provisions and Bankruptcy Rules on these issues.
Section 101(41) of the Bankruptcy Code—Personally Identifiable Information
In 2005, Congress enacted the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 and, in so doing, added a definition for personally identifiable information, which for an individual obtaining products or services for personal, family, or household use, includes:
Section 107(c) of the Bankruptcy Code
Section 107(c) provides that the bankruptcy court may, for cause, protect an individual from the disclosure of certain information to the extent the court finds that the disclosure would create an undue risk of identity theft or other unlawful injury to the individual or the individual's property. The types of information potentially protected under subsection (c) includes “any name or number that may be used, alone or in conjunction with any other information, to identify a specific individual. . . .”
Bankruptcy Rule 9037
Bankruptcy Rule 9037 addresses an individual's privacy protections for filings made with the court. Subject to certain exceptions, the rule requires that any filing that contains certain sensitive information include only the following portions of such information:
Bankruptcy Rule 9037 allows the court (1) to order a document be filed under seal (subsection (c)) and/or with redactions (subsection (d)(1)), and (2) to limit or prohibit nonparty's remote access to a document filed with the court (subsection (d)(2)).
Selling Personally Identifiable Information in Bankruptcy: Sections 363, 332, and Rule 6004
Section 363(b) provides that a debtor that has a privacy policy that prohibits the transfer of personally identifiable information may not sell or lease such information unless (1) the sale or lease is consistent with the policy or (2) after appointment of a consumer privacy ombudsman, the court finds, after giving due consideration to the facts, circumstances, and conditions, that the sale or lease would not violate applicable nonbankruptcy law. 11 U.S.C. § 363(b)(1). These restrictions only apply if (1) the debtor disclosed the privacy policy to persons not affiliated with the debtor and (2) the policy was in effect on the date of the bankruptcy filing.
Section 332 provides for the U.S. Trustee to appoint a consumer privacy ombudsman (also referred to as a CPO) upon a court order if required under the amended Section 363(b). Bankruptcy Rule 6004(g)(1) requires the party moving to sell personally identifiable information request an order directing the U.S. Trustee to appoint a consumer privacy ombudsman. The U.S. Trustee is required to file a notice of the appointment of a consumer privacy ombudsman at least seven days before the sale hearing if the court orders the appointment of a consumer privacy ombudsman. Fed. R. Bankr. P. 6004(g)(2).
The consumer privacy ombudsman is authorized to appear at the Section 363(b) sale hearing and provide information to assist the court with its consideration of the privacy issues contained in the amended Section 363(b). Section 332 further states that the consumer privacy ombudsman may provide the court with the following information:
11 U.S.C. § 332(b). The consumer privacy ombudsman is also prohibited from disclosing personally identifiable information.
Although there are few decisions discussing these consumer privacy protections, counsel should be aware of these requirements and be prepared to address these issues in connection with a Section 363 sale motion.
A debtor has several options when attempting to sell personally identifiable information. If the debtor (and purchaser) do not intend to comply with the debtor's privacy policy, the debtor must generally seek the appointment of a CPO (as required under Section 363(b)) and work with the CPO.
In some cases, the court or objecting party will want to impose additional conditions to the sale of personally identifiable information. Below is a list of conditions for the sale of personally identifiable information (that have been adopted in some cases):
These materials have been prepared for informational purposes only and are not legal advice. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. Internet subscribers and online readers should not act upon this information without seeking professional counsel.