Third_Party_Exams Discovery CdThirdPartyExaminations
In addition to examining the debtor, in most states a creditor can also examine any third-parties that the creditor reasonably believes might have information about the debtor's assets.
Suffice it to say that third-party examinations may have the ancillary effect of putting pressure on a debtor, who might not want friends, family and business contacts to be subjected to interrogation by the creditor. I have had numerous cases where the case settled just because the debtor didn't want to see somebody else (usually a spouse) hauled into court and examined. My friend and colleague, creditors' rights attorney Richard Evanns, once famously had an excellent result in a case where he found out that the debtor had a mistress, and set the examinations of both the mistress and the debtor's wife at the courthouse on the same date and at the same time.
Here, the most susceptible debtors are when the debtor is a business. No business wants its customers, vendors, lenders, and other key relationships messed with by outsiders, particularly a creditor. About the time that a creditor starts to send out subpoenas to any of these folks, the business debtor will have to make the painful choice whether to settle with the creditor, or jump from the frying pan into the frier by declaring Chapter 11 bankruptcy.
Third-party examinations are actually just a different variety of a debtor's examination, with a key difference being that the debtor is already subject to the personal jurisdiction of the court, and thus the court can simply order the debtor to appear, whereas the court does not yet have personal jurisdiction over the third-party, and the creditor must establish that by way of a subpoena served on the third-party. Otherwise, the process is largely the same: The third-party is required to show up (and sometimes to bring documents as well), and if the third-party doesn't comply, then it is jail time.
If there are reasons why the third-party should not fully comply -- say the creditor asks for all sorts of records that unreasonably invade the third-party's privacy -- the third-party may attempt to quash the subpoena by filing a motion with the court in advance of the examination.