Guide-for-Nonprofit-Organizations-Bankruptcy-Issues-FINAL-with-ads

company must cut OPEB. In the interim, continue to timely pay all retiree benefitsunless and until they are modified under section 1114.ConclusionAs you might imagine, a bankruptcy filing can drastically alter a company’s treatment of itsretirees, in addition to its employees. As a distressed company prepares for, and files, abankruptcy petition, it should consider the foregoing issues, which address important legacyliability-related bankruptcy concerns.Treatment of RecordsAuthored by: Philip V. Martino and Sarah K. Baker, Quarles & Brady LLPClient and Donor DatabasesIn the Bankruptcy Code, Section 363(b)(1) specifically restricts a Chapter 7 trustee's ability to sellassets that may contain or constitute Personally Identifiable Information ("PII"). Among anonprofit business’ most valuable assets are its client and donor databases. These databases arelikely to contain the following types of information: (i) client and donor credit card and or bankaccount information; (ii) client and donor social security numbers; and (iii) client and donornames and addresses. These types of information are considered PII under the Code, and areafforded special protection in a bankruptcy sale.The Bankruptcy Code defines PII as any of the following types of information, if provided by anindividual to the Debtor in connection with obtaining a product or service from the Debtorprimarily for personal, family, or household purposes: (i) first name (or initial) and last name;(ii) geographical address; (iii) electronic (e-mail) address; (iv) telephone number associated withphysical place of residence; (v) social security number; and, (vi) credit card number.PII also includes each of the following items of information, if such item is connected to any ofitems (i) through (vi) above: (a) a birth date; (b) birth or adoption certificate number; (c) place ofbirth, or (d) any other information regarding an identified individual that, if disclosed, willresult in contacting or identifying that individual telephonically or electronically.To the extent a nonprofit corporation's client and/or donor databases contain informationconstituting PII, the nonprofit corporation may not be able to sell that information during itsbankruptcy proceedings. Section 363(b)(1) restricts the transfer of PII where: (i) Debtor had aprivacy policy in effect on the petition date; (ii) the policy prohibited the transfer of PII topersons not affiliated with the Debtor, and (iii) the policy was communicated to individuals notaffiliated with the Debtor. For instance, if the nonprofit company provided instructions formaking donations or procuring services on its website, and the website also contained languagestating that any information provided by the donor or client to the Debtor would not becommunicated, sold, or otherwise transferred to a third party, that language may be sufficientto constitute a privacy policy for purposes of Section 363(b)(1).If the nonprofit corporation did not have a privacy policy in effect prior to filing its bankruptcypetition, the information may be sold under the Code, so long as the sale complies with56