Hon. Richard Schmidt Speaks on Transparency in the Bankruptcy Process

Hon. Richard S. Schmidt

If bankruptcy were a three legged stool, they would be notice, information and negotiation. The system would be hard pressed to work without all three. Judges and parties-in-interest have to make decisions at the speed of business, so the more the Judge knows the more helpful the Judge can be to the parties.

Ultimately, some disputes may have to get litigated but bankruptcy is a system which forces parties to negotiate, especially in big cases. The Judge has to be open to all possibilities. In the Asarco case, I visited the company’s mines and plants in Arizona, which gave me context for the decisions I made during the case.

You lose your financial right to privacy when you file for bankruptcy. It’s an open kimono. While company secrets need not be disclosed, debtors have to disclose all financial information. Same for creditors. Disclose everything that is relevant.

The first day hearings provide a lot of information to the Judge. In a free-fall bankruptcy, I take what each side says with a grain of salt. But if there’s been more pre-bankruptcy planning/negotiation with both creditors and debtors knowing the case, the information given to the judge is more helpful.