Rule 2004 Examination in Bankruptcy

Bankruptcy Rule 2004 is the basic discovery device utilized in bankruptcy cases. In addition to appearing at the meeting of creditors and being examined under oath, the debtor may also be required to submit to examination under Rule 2004. Rule 2004(c) states that all entities may be compelled to attend the examination or produce documents in the manner provided in bankruptcy Rule 9016 for the attendance of witnesses at a hearing or trial. Rule 2004(d) provides that “the court may for cause shown and on terms as it may impose order the debtor to be examined under this rule at any time or place it designates, whether within or without the district wherein the case is pending.” Bankruptcy Rule 9016 incorporates Federal Rule of Civil Procedure 45 which allows issuance of a subpoena for witness or document production.

Rule 2004(b) limits the scope of the examination to the acts, conduct, or property or to the liabilities and financial condition of the debtor, or to any matter which may affect the administration of the debtor’s estate, or to the debtor’s right to a discharge. In a family farmer’s debt adjustment case under chapter 12, an individual’s debt adjustment case under chapter 13, or a reorganization case under chapter 11 . . . the examination may also relate to the operation of any business and the desirability of its continuance, the source of any money or property acquired or to be acquired by the debtor for purposes of consummating a plan and the consideration given or offered therefor, and any other matter relevant to the case or the formulation of a plan. Moreover, while Rule 2004 may be used to discover information about estate property, “it is not a proper means to inquire with respect to non-estate property.” See In re Hilsen, 2008 Bankr. LEXIS 2123, *12 (Bankr. S.D.N.Y. 2008).

While Rule 2004 covers a variety of aspects pertaining to the administration of the debtor’s estate, it is not limitless and the bankruptcy court has discretion to define the scope of the examination by limiting or conditioning its use. See Martin v. Schaap Moving Sys., 1998 U.S. App. LEXIS 15255, *6-7 (2d Cir. 1998); see also In re Duratech Indus., Inc., 241 B.R. 291, 296 (Bankr. E.D.N.Y. 1999) (finding that “however vigorous and broad discovery may be under a Rule 2004 examination, there are well-established limits” such as where discovery is oppressive, over-reaching, conducted in bad faith or for improper purposes). Courts regularly have noted that Rule 2004 cannot be used to avoid the limitations of the formal discovery rules. See In re Snyder, 52 F.3d 1067 (5th Cir. 1995) (unpublished) (affirming bankruptcy and district court’s denial of a Rule 2004 request based on the movant’s “motive” to develop personal litigation claims and avoid stricter discovery rules).