What is appointment of a trustee or examiner?

In certain circumstances, the bankruptcy court will appoint a bankruptcy trustee to supervise the actions or conduct of the debtor in possession (DIP). Generally, however, there is a strong presumption against appointment of a trustee. To overcome this presumption, creditors must show cause why the appointment is necessary. Cause includes situations involving fraud, dishonesty, incompetence, or gross mismanagement of the affairs of the debtor by current management, either before or after the commencement of the case. The bankruptcy court will look at the totality of the circumstances to determine the need for a trustee. An alternative to appointing a trustee is the appointment of a corporate examiner. The examiner serves a role similar to special counsel to the DIP. This action allows management to continue running the business while having activities monitored by the examiner.