Bankruptcy Code Definition: Accountant


We are going to try something a little different here at The American Board of Certification’s blog.  Interspersed throughout some other interesting and educational posts, we will run through and talk about noteworthy cases and issues related to the definitions found in Section 101 of Title 11 of the United States Code (the “Bankruptcy Code”).  I don’t think anyone else has ever done this, and probably for good reason, but we thought this was a unique way to encourage a thought-provoking discussion on the blog.  I drew the short straw and get to kick it all off with the first definition found in Section 101(1) – Accountant.

11 U.S.C. Section 101(1) says that “the term ‘accountant’ means accountant authorized under applicable law to practice public accounting, and includes professional accounting association, corporation, or partnership, if so authorized.”  Under the former Bankruptcy Act and Rule 901 of the former Rules of Bankruptcy Procedure, the definition of “accountant” included only an accounting partnership or corporation.  The purpose of the definitional change in the Bankruptcy Code was to expand the definition so that there would be a distinction between a professional partnership, a professional corporation, a professional association, or an individual who practices the profession of accounting.  The change codified what courts did anyway, i.e., construe the term accountant to mean individuals, as well as professional firms.  See In re Telford, 36 B.R. 92 (9th Cir. BAP 1982).

Another interesting case involving the word (not necessarily the definition) of accountant is In re Macco Properties, Inc., 540 B.R. 793 (Bankr. W.D. OK 2015).   Macco Properties involved a long Kafkaesque attempt by a disposed principal of a chapter 11 debtor to intimidate and object to everything the chapter 11 trustee did.  One of the items the former principal objected to was the trustee’s application for compensation related to accounting services.  The court previously approved the retention of a PLLC that was owned by the trustee as the trustee’s accountant in the case.  Id. At 861.   The court recognized the long-standing rule that it is not unusual for a trustee to hire his/her own accounting firm.  In fact, Section 328(b) contemplates this very act with the caveat that the trustee may allow compensation for the trustee’s services as an accountant, but only to the extent that the trustee performed accounting services for the estate, and not for performance of any trustee duties that are generally performed without an accountant.  Id.  Since the trustee in Macco Properties took control of the day-to-day operations, he needed professional accounting services, which ultimately benefited the estate.  The disposed principal’s objections were rejected and the trustee’s final application to pay his PLLC for accounting services was approved.  Id at 863-864.

Kirk Burkley, Esq.
Co-Managing Partner, Bernstein-Burkley, P.C.
Chair, ABC Marketing Committee

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