The Effect of Intercompany Debtor Claims on Retention Under § 327
January 2026
Publication| Bankruptcy & Corporate Restructuring
It is universal practice in large, complex, multi-debtor cases for the same professionals or group of professionals to be retained to represent all debtors in a jointly administered case. Common representation of the debtors makes sense because in most cases, affiliated and related debtors all share a common interest as it relates to the treatment of their estates and stakeholders. Further, from an efficiency and economic standpoint, it would be overly complicated, disorganized and extremely costly to have multiple professionals or groups of professionals retained in a case to represent each individual debtor.
As a result, case law and discussions regarding retention of professionals under § 327 of the Bankruptcy Code largely focuses on concurrent or past representations of a debtor and creditor. However, it is common in multi-debtor cases for one debtor to be a creditor of another debtor because of the nature of the business, the corporate structure or the intercompany relationships among the entities. This article explores issues related to common representation of affiliated debtors and specifically focuses on what rises to an actual conflict of interest when intercompany claims exist between debtors.