Bankruptcy Meets the Fourth Amendment.
By Dan Gibbons
Law Clerk to

A recent decision from the Bankruptcy Court of the Eastern District of Michigan may prove significant in the future. Taunt v. Barman (In re Barman) holds that the Fourth Amendment restrictions concerning search and seizure applies to a Chapter 7 bankruptcy trustee when making inspections of a debtor's residence. 252 B.R. 403, 407 (Bankr. E.D. Mich. 2000).

In Barman, the Chapter 7 debtor listed $500 worth of clothing as his only asset in his bankruptcy schedules. The trustee suspected the debtor owned additional personal property located at his residence, including video poker machines which are illegal in Michigan. In connection with an adversary proceeding, the trustee filed an ex parte motion for an order authorizing the trustee to enter the debtor's residence to inspect, inventory and appraise personal property. The court granted the trustee's motion. After the trustee conducted the inspection, the debtor moved to suppress the use of any evidence obtained during the inspection on the ground that the inspection violated his Fourth Amendment rights against unreasonable searches and seizures.

How could the Fourth Amendment possibly be applicable to a bankruptcy trustee? The court found the trustee should be considered a "government actor" to which the Constitutional protections applied because the "trustee acts under the authority of law when inspecting a debtor's residence for property of the estate . . ." and that [e]very aspect of a trustee's position and function is subject to either federal executive or judicial control." 252 B.R. at 412. The trustee is appointed and supervised by the United States Trustee, an official in the Department of Justice, and the trustee's fees and authority to hire professionals are subject to court approval. Id. Also, trustees enjoy derived judicial immunity , another feature demonstrating their close connection to the government and particularly to the bankruptcy courts.

Even so, when a debtor files for bankruptcy relief, doesn't the debtor consent to search of his or her home by the trustee? The court found the debtor retained a reasonable expectation of privacy in his residence following his filing of the bankruptcy petition. Id. at 414. Although that expectation of privacy is reduced following the detailed disclosures made during the bankruptcy, the debtor retained a reasonable expectation of privacy in his home for three reasons. Id. First, unlike the disclosures filed with the court, the debtor's home is not open to the public. Id. Second, the debtor's general duty to cooperate by filing written disclosures and appearing at the creditors' meeting does not require a debtor to allow an inspection without a court order. Id. at 414-15. Third, although the debtor's personal property is brought into the estate under Section 541(a), in almost every case this property reverts to the debtor through exemption, so the estate's interest in the property is limited in both time and function. 252 B.R. at 415.

Having concluded that the trustee was subject to the Fourth Amendment, the court the applied the leading Supreme Court administrative inspection and search cases and balanced the interests of the trustee and public against the interests of the debtor to determine the constitutionally required process for inspecting the debtor's residence. Id. at 416. The court found in requesting, obtaining and executing an inspection order in bankruptcy the Fourth Amendment requires that: (1) the trustee set forth detailed facts in a written motion establishing there is reason to believe there is property of the estate on the premises to be inspected; (2) the motion should be processed by the court according to the ordinary motion process, and if a party seeks an inspection order without prior notice, the motion must set forth detailed facts establishing the necessity for that relief; (3) unless the motion sets forth facts necessitating otherwise, the inspection should take place during normal business hours, in the debtor's presence, and without forcible entry; and (4) the inspection order must identify the premises to be inspected and contain factual findings in support of the court's grant of inspection complying with (1), (2) and (3). Id. at 418.

Since in Barman the court found the trustee's motion established all four elements, the debtor's motion to suppress was denied. Id. at 420. Ample reason had been given to believe there was property of the estate at the debtor's residence. Id. at 419. The trustee's motion established that no notice was given to the debtor in order to avoid irreparable harm to the estate through immediate disposal of the property. Id. Last, the order provided that inspection should commence during business hours and that no forced entry be attempted without further order from the court. Id. at 420.

It should be no surprise that Barman has been appealed to the District Court. If nothing else Barman is an example of creative lawyering. Who would think that a bankruptcy court would find itself embroiled in an issue over application of the Fourth Amendment?