Accuracy and timing are key components to become a successful debtor’s attorney, experts say
Thousands of people file bankruptcy each month because they lose their home, must pay medical expenses or lose their job. For a debtor’s lawyer, it is critical to understand the scope of the client’s financial history and verify it for accuracy in order to file in a timely manner to avoid malpractice suits, fines and other legal consequences, experts said during an American Bar Association webinar on “Ethics and Bankruptcy: Tips and Traps for New Lawyers and Non-Bankruptcy Practitioners.”
“I want to avoid a malpractice action. At one time, malpractice insurers considered consumer debtors' attorneys to be very high risk because they fail to get all the information before filing a bankruptcy case,” said Samuel J. Zusmann Jr., a partner at Holland & Knight.
Under most jurisdictions’ professional conduct rules, lawyers have a duty to report any false information or allegations to the court.
“In disciplinary cases, we pretty much see that the problem begins when a lawyer puts his or her own interests ahead of the client’s interests somehow.”
“The ethical rules require you to reasonably examine the information your client includes and explore with them its accuracy,” said John E. Waites, chief judge of the United States Bankruptcy Court for the District of South Carolina.
One of the first steps is to understand the reason a client wants to file for bankruptcy.
Lawyers need to know if there is a pending foreclosure on the client’s home, a relative is asking for repayment for a loan or if the client is being sued by a former employer.
“How can I give advice if I don’t understand the motivation behind wanting to file bankruptcy?” Zusmann asked.
In most cases, experts advise that lawyers go a step further and conduct their own research on a client’s finances.
“What I’ve seen consumer debtors' lawyers do is to go as far as running independent credit reports on their clients for two purposes: to ensure that they have complete information and often to assist their clients in reminding them of information that they may have overlooked,” Waites said.
Lawyers should make sure clients understand which properties they may or may not be able to keep as result of filing bankruptcy.
“The applicable exemptions in your state need to be reviewed with the client,” Zusmann said. “In one case, I had a client who said to me, ‘You mean if I file bankruptcy, I’ll have to give up my Maserati and my airplane?’ As it developed, he didn’t get to keep either one because he was in the federal penitentiary.”
During the initial meeting with clients, lawyers should gather information in person instead of giving the task to nonlawyer staff in the firm.
“It is crucial that that interview takes place between an attorney and your client so that you have a good understanding that the correct questions were asked, the client has an understanding of what information you are seeking and why you are seeking it,” said Paige A. Greenlee, an attorney at Sivyer Barlow & Watson PA.
When it comes to bankruptcy cases, timing is important if a client needs to seek an automatic stay on the seizure of property.
“Right now one of the things we are seeing with individual debtors is that they are trying to prevent a foreclosure sale from moving forward,” Greenlee said. “If that is one of their goals, you need to make sure you get that petition filed before the foreclosure sale is set.”
Timing can also affect the client’s ability to accomplish his or her goals.
“There may be other litigation procedures that are taking place that the client is attempting to have stayed by virtue of filing the petition in operation of the automatic stay,” Greenlee said. “You need to be familiar with that and find out what the clients’ objectives are for the bankruptcy and whether there are any timing triggers that require that the petition be filed tomorrow as opposed to next week.”
This program was sponsored by the ABA Young Lawyers Division and Center for Professional Development.
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