Protecting Financial Information in Consumer Bankruptcy Cases

Protecting Financial Information in Consumer Bankruptcy Cases

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n April 30, the White House introduced the "The Clinton-Gore Plan to Enhance Consumers' Financial Privacy: Protecting Core Values in The Information Age."2 As part of the plan, the president directed three federal agencies to study financial privacy and how it is affected by electronic access to financial information contained in consumer bankruptcy case records.3 The study, to be conducted by the Office of Management and Budget, the Treasury Department and the Department of Justice, will be completed by the end of the year.

The study on the privacy of bankruptcy data was largely ignored in press accounts of the president's plan. However, the context of the privacy study may signal significant changes in how personal financial information is viewed in consumer bankruptcy cases. The study was not established as part of any administration initiative on bankruptcy law. Rather, it was an integral part of an initiative on financial privacy. The other elements in the Clinton-Gore Plan concerned issues in the financial services industry, not bankruptcy. The focus of the announcement was on how technology is challenging traditional protections for privacy of financial information:

The financial services industry has changed dramatically in recent years due to greater integration of banking, securities and insurance firms, new technologies that speed and expand access to information, and growing reliance on electronic payments systems (credit cards, debit cards and even so-called digital wallets (online accounts that pay for purchases and bills) instead of cash). Such innovation has helped provide consumers with added convenience, lower prices and more choices. The challenge is to take advantage of these benefits without threatening privacy.4

Why would a study of the handling of bankruptcy information be included in a plan to improve privacy safeguards for financial information? One need only look at a set of bankruptcy schedules in a consumer bankruptcy case to answer this question. The schedules are intended to offer a detailed financial picture of the debtor: asset values, liability amounts, bank account numbers, credit card numbers and personal expenses. Outside of bankruptcy, the handling of similar information would be regulated by an array of statutes, including the Fair Credit Reporting Act and the Right to Financial Privacy Act.5 The administration's announced study suggests an inquiry into the question of whether financial information in bankruptcy cases should also be treated with a due regard for the person who provides the information.

In the past, the debtor's privacy interest was protected by a practical barrier; someone had to travel to the courthouse to see a file.

A New Way of Thinking

Just as technological changes require new methods to generally deal with the privacy of financial information, changes in electronic access to bankruptcy information require an evaluation of how to balance the concerns of access to information in a judicial proceeding with the protection of the individual's interest in the privacy of financial information. Technology offers the promise of improved access to information, but also raises issues of just how much access is appropriate given the sensitivity of the information contained in bankruptcy files.

Currently, the bankruptcy courts are in the midst of moving to electronic case filing, which will reduce or eliminate paper filed with the courts. Anyone with access to the Internet could have access to the court files.6 Much of the information in a bankruptcy case is filed with the court, and accessibility to this information has been of paramount importance to the courts. Generally, anything in the court file that is not under seal is available to anyone.

This policy has a sound basis in judicial practice and tradition,7 as well as in bankruptcy law and policy. There is a long tradition in both federal and state courts that judicial proceedings are open to the public, including the case files and records of what transpires before the court. This tradition has the force of law under the Bankruptcy Code.8 The public accountability of courts in general and the bankruptcy courts in particular require this openness and access to information.

Bankruptcy trustees are also looking to technology as a means of improving access to bankruptcy information. Virtually all private bankruptcy trustees maintain some type of electronic database of their bankruptcy cases, comprised of information from the court file and information gathered by the trustee in the administration of the case. Many trustees provide some type of electronic access to this information because doing so improves communication between private trustees and parties in a case, and enables the parties to monitor their claims more efficiently.

Access to trustee files, however, is currently available only on a trustee-by-trustee basis. There is no single place where a party can go for information on all of its claims in all bankruptcy cases. For a creditor who holds a claim in one or two cases, the current situation is not inconvenient. For national creditors with claims in cases throughout the country, administered by hundreds of bankruptcy trustees, monitoring their cases is expensive and requires many inquiries to individual trustees.

Like the courts, private trustees are considering ways of using technology to improve access to bankruptcy information. Chapter 13 trustees, for example, are evaluating the formation of a National Data Center, where information from all chapter 13 cases could be compiled and access provided to creditors.

However, improved access also raises serious issues that must be addressed. The creditors need information from trustees to monitor their claims, but the question arises whether creditors can transfer this information to third parties for reasons unrelated to the bankruptcy case. Electronic files containing information derived from hundreds or thousands of bankruptcy cases may be valuable not only to creditors in the case, but to others as well. What is the debtor's interest in limiting access to this information to those with a legitimate interest in the case?

Bankruptcy is a public proceeding, and the debtor should be aware that the information in the schedules is open to the public for any purpose. In the past, the debtor's privacy interest was protected by a practical barrier; someone had to travel to the courthouse to see a file. While the courts provided the file to anyone who asked, the inconvenience of traveling to the courthouse limited access to the debtor's information.9 The technology being developed by the courts and the trustees makes this practical barrier obsolete.

A Precedent: Fair Information Principles

The U.S. Trustees are currently grappling with the conundrum of privacy and access to bankruptcy information collected by bankruptcy trustees. In February, the Executive Office for U.S. Trustees held a workshop with representatives of the chapter 7 and chapter 13 trustees, creditors, consumer advocates and privacy experts. During the workshop it became clear that, while the issues are complex, they are not unprecedented. Similar issues have been confronted in other contexts for at least 30 years. As a result, there have evolved a set of "Fair Information Principles" that guide the use and dissemination of sensitive personal data.

These principles have a number of formulations. Listed below are the principles discussed at the workshop:10

  1. The Principle of Openness provides that the existence of record-keeping systems and data banks containing data about individuals be publicly known, along with a description of the main purpose and uses of the data.
  2. The Principle of Individual Participation provides that each individual should have a right to see any data about himself or herself and to correct or remove any data that are not timely, accurate, relevant or complete.
  3. The Principle of Collection Limitation provides that there should be limits to the collection of personal data, that data should be collected by lawful and fair means, and that data should be collected, where appropriate, with the knowledge or consent of the subject.
  4. The Principle of Data Quality provides that personal data should be relevant to the purposes for which they are to be used, and should be accurate, complete, and timely.
  5. The Principle of Finality provides that there must be limits to the uses and disclosure of personal data, that the data should be used only for purposes specified at the time of collection and that data should not be otherwise disclosed without the consent of the data subject or other legal authority.
  6. The Principle of Security provides that personal data should be protected by reasonable security safeguards against such risks as loss, unauthorized access, destruction, use, modification or disclosure.
  7. The Principle of Accountability provides that record-keepers should be accountable for complying with fair information practices.

The U.S. Trustee Program will adapt these principles to develop policies to guide the trustees' compilation, dissemination and protection of information collected from the bankruptcy cases they administer. While adaptation of these principles will be a difficult task, the preliminary work done so far suggests that the principles offer one way out of the apparent dilemma posed by consumer bankruptcy case information: the need to permit access to information by parties in interest while protecting the privacy interests of the debtors who provide this information. Protecting privacy need not choke off legitimate access; permitting access need not undermine the debtor's legitimate interest in protecting sensitive financial information.


1 The views expressed in this article are those of the author personally and do not necessarily represent the views of, and should not be attributed to, the U.S. Department of Justice or the U.S. Trustee Program. Return to article

2 The Clinton-Gore Plan to Enhance Consumers' Financial Privacy: Protecting Core Values in the Information Age, Return to article

3 Id. Return to article

4 Id. Return to article

5 Fair Credit Reporting Act, 15 U.S.C. §1681; Right to Financial Privacy Act of 1978, 12 U.S.C. §3401. Return to article

6 Among the bankruptcy courts that provide information case files over the Internet are the Southern District of New York (, Eastern District of Virginia (, Northern District of Georgia (, District of Arizona (, and the Southern District of California ( This is not a complete list, but the links listed will provide some idea of the bankruptcy court files available online. Return to article

7 An excellent discussion of the judiciary's policies governing access to case files is contained in Office of Judges Programs of the Administrative Office of the U.S. Courts, Privacy and Access to Electronic Case Files in the Federal Courts (1999) at Much of the following discussion is based on this paper. Return to article

8 11 U.S.C. §107(a). Return to article

9 In another context—public access to computerized rap sheet information compiled by law enforcement agencies—the U.S. Supreme Court noted that the information contained in court files was protected to some extent by the "practical obscurity" of the information in courthouse files—the burden of going to the courthouse and collecting the information on an individual. U.S. Department of Justice v. Reporters Committee for Freedom of the Press, 489 U.S. 749, 764, 780 (1989). Return to article

10 Generic Code of Fair Information Practices, Center for Democracy and Technology, This formulation of a code of fair information practices is derived from several sources, including codes developed by the Department of Health, Education and Welfare (1973), the Organization for Economic Cooperation and Development (1981) and the Council of Europe (1981). Return to article

Journal Date: 
Thursday, June 1, 2000