Draft internal practice rule · August 2026
The Bankruptcy + AI Operating Rule
Courts are applying existing duties to AI-assisted legal work. Here is the memo behind our approach — and the operating rule we hold ourselves to.
Executive summary
Courts are applying existing duties—especially Bankruptcy Rule 9011, Federal Rule of Civil Procedure 11, attorney-supervision duties, confidentiality obligations, and local filing rules—to AI-assisted legal work. The emerging rule is simple: lawyers may use AI, but they remain responsible for every filing they sign.
Bankruptcy adds special sensitivity because cases move quickly, filings contain high-volume financial data, and errors can affect automatic-stay relief, cash collateral, financing, sales, claims, plan confirmation, and cross-border recognition. AI also creates a new asset category: models, training data, software, patents, customer contracts, and licenses may become central assets in an insolvency sale.
Key legal issues
1. Existing signing duties remain controlling
Bankruptcy Rule 9011 requires reasonable inquiry before presenting a petition, pleading, written motion, or other paper. AI does not change the signer's certification. A lawyer cannot avoid responsibility by saying that a chatbot or legal-research platform supplied the citation.
2. Court-specific rules must be checked
The exact obligation varies by district and judge. Some courts require disclosure or certification when generative AI materially assisted preparation of a filing. A case-opening checklist should identify the court, district, judge, local rules, standing orders, and current AI orders.
3. AI assets require specialized diligence
An AI company's value may lie in model weights, training data, data-use permissions, customer contracts, cloud credits, patents, trade secrets, and employees. A sale requires review of IP ownership, training-data provenance, privacy restrictions, open-source licenses, cloud/API agreements, customer contracts, export controls, and trade secrets.
4. AI companies may fail for ordinary insolvency reasons
Builder.ai, Alt, Lovo, and Luminar show that AI companies remain exposed to liquidity problems, creditor action, accounting issues, litigation, and failed business models. "AI" is not a legal category that determines valuation, privacy rights, ownership, or sale treatment.
AI may support bankruptcy practice, but it cannot replace independent judgment, source verification, confidentiality controls, or filing responsibility. The strongest response is a documented human-review process that becomes stricter as work approaches a court filing, legal conclusion, client advice, evidence, or irreversible deadline.
The rule
AI may assist with low-risk administrative, organizational, research, drafting, and review tasks only when a responsible lawyer or authorized professional independently verifies the result before it is relied upon, shared with a client, or filed with a court.
No AI output is authoritative merely because it cites a case, statute, docket number, quotation, rule, court order, fact, or calculation.
Mandatory controls
- 1.
No unverified filing. Check every citation, quotation, legal proposition, docket reference, factual assertion, calculation, and exhibit description against the primary source or reliable official database.
- 2.
Human sign-off. The lawyer whose name appears on the filing remains responsible for Rule 9011, Rule 11, local rules, and professional duties.
- 3.
Source hierarchy. Prefer the court docket, official court/government source, authenticated reporter, reputable legal database, and only then secondary commentary. AI summaries are never final sources.
- 4.
Confidentiality. Do not place client names, nonpublic financial information, personally identifiable information, trade secrets, privileged communications, work product, or sealed materials into an unapproved AI system.
- 5.
Bankruptcy-specific review. Verify petition data, schedules, claims, priority, collateral, executory contracts, sale terms, plan treatment, voting classifications, preference calculations, fraudulent-transfer allegations, jurisdictional facts, and deadlines.
- 6.
No invented authority. If a source cannot be located, treat it as nonexistent until proven otherwise.
- 7.
Disclosure and certification. Follow the assigned court's AI order, local rule, standing order, judge's procedures, and required disclosure or certification.
- 8.
Tool validation. A second AI tool is not independent verification.
- 9.
Incident response. Preserve the prompt/output and version history; notify supervising counsel; assess correction, withdrawal, disclosure, fee reimbursement, and sanctions issues.
- 10.
Client communication. Explain material AI use when required by ethics rules, engagement terms, court orders, or informed-consent obligations.
Prohibited uses
- Filing AI-generated text without human review.
- Relying on AI to determine whether a case, statute, quote, or docket entry exists.
- Uploading confidential bankruptcy materials to an unapproved public model.
- Using AI to generate or alter evidence, declarations, signatures, service proofs, claims, financial schedules, or court forms without controlled review.
- Treating an AI-generated valuation, solvency conclusion, preference analysis, or plan projection as expert work without qualified human validation.
Minimum documentation
For material AI-assisted work product, retain the tool used, date, purpose, source materials, responsible reviewer, primary sources checked, material corrections, and final approval decision.
Practical standard
Use AI as an assistant, not as an authority, expert, witness, or signer. The closer the work is to a court filing, legal conclusion, client advice, evidence, or bankruptcy deadline, the more complete the human verification must be.