Opinion rules that a lawyer may undertake the representation of a debtor in a Chapter 13 bankruptcy, although the lender is lawyer's current client, if the lawyer reasonably believes that he will be able to provide competent and diligent representation to both clients and both clients give informed consent. Inquiry #1:
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Lawyer represented Debtor when Debtor filed a Chapter 11 bankruptcy and continued to represent Debtor while in Chapter 11. Later Lawyer filed for Debtor a Chapter 7 petition.
Someone who Owes me Money Filed for Bankruptcy; How Can I Get My Money? - Resnick Law, P.C. Someone who Owes me Money Filed for Bankruptcy; How Can I Get My Money? A person who owes you money is called a debtor. If your debtor files for bankruptcy protection, you may still be able to collect from them in certain circumstances.
This is a fact-intensive matter, in which a law firm attempted to be debtor’s counsel while at the same time representing a city, which had claims against the debtor, and against which the debtor might have a claim. The law firm had been sloppy in its conflicts checking and in complying with its disclosure obligations to the court.
A creditor involved in that dispute moved to disqualify the law firm ("Law Firm") that was attempting to represent both debtors. In this opinion the bankruptcy judge disqualified Law Firm as to the one count in question, because Law Firm had an "actual conflict."
When a debtor files for bankruptcy, you must stop all collection efforts immediately. If you continue to try and receive payment, you could be sued or fined. In order to get your money back, you'll have to go through the courts.
The following debts are not discharged if a creditor objects during the case. Creditors must prove the debt fits one of these categories: Debts from fraud. Certain debts for luxury goods or services bought 90 days before filing.
During bankruptcy, all the debtor's assets are realized. Some assets are exempt from this rule – such as clothes, furniture and other personal belongings. The purpose of the sale is to obtain money to pay those who have a claim against the debtor. A complete settlement does not occur very often.
Domestic support obligations and tax debt are common examples. You'll remain liable for many types of priority debt after a Chapter 7 bankruptcy case. Bills you can discharge usually fall into the "nonpriority unsecured" debt category. (Unsecured debt isn't guaranteed by collateral.
Nondischargeable debt is a type of debt that cannot be eliminated through a bankruptcy proceeding. Such debts include, but are not limited to, student loans; most federal, state, and local taxes; money borrowed on a credit card to pay those taxes; and child support and alimony.
8 Kinds of Debt You Can't Lose in BankruptcyMost back taxes and customs. ... Child support and alimony. ... Student loans. ... Home mortgage and other property liens. ... Debts from fraud, embezzlement, larceny, or from “willful and reckless acts” ... Your car loan, if you want to keep your car. ... Debt that doesn't belong to you.More items...
secured creditorsWhen a company goes bankrupt, secured creditors get paid first. This includes secured bondholders. These are creditors who offered loans secured by physical assets. Usually they get paid by reclaiming their property.
The bankruptcy trustees go about finding hidden assets by taking a close look at your debts, as well as doing public record searches, online analysis, tax returns, review reports from former spouses or friends, as well as payroll slips that may show deposits into banks or accounts that you have not listed in your ...
Houses, Cars, and Property Encumbered By a Secured Loan Your lender typically has a security interest in the property (this means that if you don't make your loan payments, it can repossess your car or furniture, or foreclose on your house). This security interest is not affected by bankruptcy in most cases.
Bankruptcy Can Wipe Out Credit Card Debt and Most Other Nonpriority Unsecured Debts. Bankruptcy is very good at erasing most nonpriority unsecured debts other than school loans. For instance, you can discharge unsecured credit card debt, medical bills, overdue utility payments, personal loans, gym contracts, and more.
There is no ceiling on the amount of debt with which you can file for Chapter 7 bankruptcy. Chapter 7 also is often preferred over Chapter 13 because it wipes out debt and doesn't involve repayment. The rules under Chapter 13 are more stringent, but Chapter 7 is open to any individual with any amount of debt.
Five Dischargeable Debts in a Chapter 7 BankruptcyCredit Card Debt. ... Personal Loans. ... Medical Bills. ... Vehicle Repossessions and Deficiency Balances. ... Mortgages and Foreclosure Balances. ... Seek Bankruptcy Debt Relief with a Qualified North Carolina Bankruptcy Lawyer.
Lawyer regularly represents Lender in various matters. Lawyer is approached by Client to represent Client in an individual Chapter 13 bankruptcy. Lender has made a loan to Client. To secure the repayment of the loan, Lender holds a first priority deed of trust on Client's residence, a first priority deed of trust on Client's commercial building, and a first priority lien on Client's vehicle. Lawyer currently represents Lender in other matters, but not with regard to the indebtedness of Client to Lender.
As the lawyer for Client in the Chapter 13 bankruptcy, Lawyer will be responsible for reviewing documentation to determine whether Lender and other secured creditors have valid and enforceable security interests in or liens on Client's property. May Lawyer undertake the representation of Client in the Chapter 13 bankruptcy if Lender and Client consent?
Comment [6] to Rule 1.7 provides that "absent consent, a lawyer may not act as an advocate in one matter against a person the lawyer represents in some other matter, even when the matters are wholly unrelated." Consent is necessary because the client as to whom the representation is adverse may feel betrayed, and the resulting damage to the client-lawyer relationship could impair the lawyer's ability to represent the client effectively. On the other hand, the client on whose behalf the adverse representation is undertaken may fear that the lawyer will pursue that client's case less effectively out of deference to the other client.
Opinion rules that a lawyer may undertake the representation of a debtor in a Chapter 13 bankruptcy, although the lender is lawyer's current client, if the lawyer reasonably believes that he will be able to provide competent and diligent representation to both clients and both clients give informed consent.
To secure the repayment of the loan, Lender holds a first priority deed of trust on Client's residence, a first priority deed of trust on Client's commercial building, and a first priority lien on Client's vehicle. Lawyer currently represents Lender in other matters, but not with regard to the indebtedness of Client to Lender.
Lawyer may undertake the representation of Client if Lawyer reasonably believes that he will be able to provide competent and diligent representation to Client in the bankruptcy action, while adequately protecting Lender's interests in those actions or matters where Lawyer represents Lender. Both Client and Lender must give their informed consent to the representation, confirmed in writing.
Photo by Dan Moyle. A person who owes you money is called a debtor. If your debtor files for bankruptcy protection, you may still be able to collect from them in certain circumstances. First, identify how and why your debtor owes you money. Does your debtor owe you for a loan or a service that you provided to them?
Once a debtor files for bankruptcy, it is important that you develop an ongoing strategy in order to collect any funds legally available under the bankruptcy code as soon as possible. If you wait to take action, you might miss key deadlines, and your claim against your debtor’s bankruptcy estate may be barred by certain bankruptcy law. Even if your debtor is a business that files for bankruptcy protection, you may be able to collect your debt.
Working with a lawyer might give you leverage and show them that bankruptcy is on the table as an option if you’re facing creditor pressure. Many creditors are willing to negotiate if they know someone’s considering it — this way, their investment in loans can still be recovered somewhat even after lending money has been spent down by negotiating pay-offs at debt settlement negotiations which could end up costing pennies per dollar owed!
Even if it’s not , we can help with debt relief and discuss strategies that might work for you: including Consumer Proposal
When the company makes a bankruptcy filing, the court sends out a notice to the listed creditors. At this point, its absolutely critical to file what is called a proof of claim. Essentially, its a formal written statement that tells the court why youre owed money by the debtor business.
You can choose to appoint a particular trustee to manage the bankruptcy. For a full list of all trustees review the Registered trustees contact list.
People think that they should only see a LIT if they need to file for bankruptcy. Every LIT will give you a free 1 hour consultation, to go over your situation and offer you your available options. The topics the LIT will discuss with you are:
Before you determine what to do, you should learn what bankruptcy chapter under which the company filed. The two likely chapters are as follows:
Most Chapter 7 bankruptcy cases are what is called “no-asset” cases, which means everything the filer owns is protected through bankruptcy exemptions. Exemptions are specific to where cases are filed and vary by state law. Exempt property can’t be taken from the filer.
If you need to recover money from your past due accounts, hire a collection agency. Contact us.
In a bankruptcy, people or companies who can no longer pay their debts give all of their non-exempt property to a Licensed Insolvency Trustee who then sells it and distributes the money to creditors. Bankruptcy can be voluntary or forced by a creditor through the Courts.
A key provision in the bankruptcy law relating to lawyers is 11 U.S.C. § 327 (a), which provides that certain lawyers (primarily debtor's counsel and lawyer for the creditors' committee) must "not hold or represent an interest adverse to the estate, and that are disinterested persons.".
The law firms petitioned for fees. Debtor's former husband objected, in part because the law firms had a conflict of interest in keeping the Chapter 11 going so long.
Debtor's Counsel Denied Fees for Failure to Disclose Intent to Invest in Debtor. In re West Delta Oil Co., Inc., Debtor, 432 F.3d 347 (5th Cir. 2005). Debtor’s special counsel had, at some point, considered being part of an investor group to put money into debtor. That apparently never happened. They did not disclose this relationship to the court when they were retained to represent the debtor. Nevertheless, and over the objection of one of the parties, the Bankruptcy Court allowed their fees. The district judge affirmed, pointing out that a conflict does not mandate denial of fees and that the Bankruptcy Court did not abuse its discretion in allowing the fees. In this opinion the Fifth Circuit reversed. The opinion contains a lengthy analysis of the conflict rules as they apply to debtor’s counsel.
2004). This is a very large Chapter 11 Bankruptcy proceeding. The bankruptcy court appointed an examiner, one of whose tasks was to see if he could resolve disputes among the creditors and other parties. The examiner, a lawyer, identified ways to enhance the estate, and, according to the court, he was successful. But, he secretly attempted to cut a deal with three creditors for a percentage of any recovery they might realize from the estate. Two creditors rebuffed his overture. A third ultimately agreed. The opinion (and the story) is a long one. The Sixth Circuit affirmed the district court’s ruling that the examiner must forfeit his entire fee of approximately $1 million. The opinion is a comprehensive discussion of the role and obligations of bankruptcy examiners, including, importantly, his/her obligation to remain “disinterested.”
That rule provides that in connection with a motion to retain a lawyer, that lawyer must disclose all that lawyer's "connections with the debtor, creditors, any other party in interest . . ." The courts' attitude regarding non-compliance with that rule can best be described as humorless. When the court is informed about a potentially troublesome relationship of a lawyer by someone or something other than a timely disclosure under Rule 2014, the offending lawyer can very possibly expect a disqualification, fee disgorgement order, or worse. Do a word search on this page for "Rule 2014."
This Bankruptcy page was created in May 2000. We changed the introductory material above in September 2020. What follows are those cases we found after May 2000. We may have missed some, but not many. With a few exceptions the items below were added consecutively by date.
Creditors' Committee Allowed to Sue Derivatively. In re Cybergenics Corp ., 330 F.3d 548 (3d Cir. 2003). The court held that a creditors' committee could bring fraudulent conveyance proceedings for the estate where the debtor in possession declined to do so. The court distinguished Hartford Underwriters Ins. Co. v. Union Planters Bank, N.A., 530 U.S. 1 (2000), which disallowed such an action in a Chapter 7 case. The court noted that both the Second and Seventh Circuits have reached the same result.
If the debtor files for bankruptcy, the creditors have certain rights and entitlements. For example, a creditor is entitled to share in any distribution from the bankruptcy estate. They are also allowed to be heard by the court in matters concerning the debtor’s repayment plan when Chapter 13 has been filed. Finally, a creditor is entitled to challenge an individual debtor’s right to discharge a particular debt.
When a debtor fails to make payments, whether it’s for credit card bills, medical bills, or a mortgage, the creditor has the right to seek compensation. This typically starts with notices and phone calls to the debtor. If the creditor does not receive contact or payment from the debtor, they can send the owed amount to collections.
Essentially, a creditor is an entity or person that lends money or extends credit to another party. The debtor is the person that receives that money. Both parties agree to a lending arrangement that involves how repayment should occur. When a debtor defaults on the repayment plan, the creditor has the right to take legal action against them. When a debtor is completely unable to repay the debt, bankruptcy may be an option.
In most cases, secured creditors have rights based on a deed of trust, a mortgage, a security agreement on personal property, or a judgment lien. Creditors with liens on property are entitled to receive value that is equal to the debt or the collateral.
Under Article I, Section 8 of the United States Constitution, Congress establishes the bankruptcy laws for the benefits of debtors who are United States citizens. The Bankruptcy Code is the uniform federal law that governs all bankruptcy cases. The Code helps people who can no longer pay their creditors get a fresh start by liquidating their assets or creating a repayment plan.
As mentioned, creditors have a right to be heard with regard to a debtor’s re payment plan under Chapter 13. The same goes for the liquidation of nonexempt assets in Chapter 7. It’s important to note that not all creditors are treated equally in a bankruptcy case. Entitlement to share in payment is based on the priority of the claim. Bankruptcy law tends to favor secured claims like alimony and child support.
In Maryland, debtors who file bankruptcy have the right to keep certain property. Under Maryland Code, Court & Judicial Proceedings 11-504, individuals who file bankruptcy can retain a portion of the value of their home, vehicles, money payable in the event of sickness, accident, injury, or death, professionally prescribed health aids, household furnishings and goods up to $1,000, qualified retirement plans, and $6,000 in any cash or property.
An attorney for the creditors' committee would have a reduced incentive to implement a successful reorganization plan in a bankruptcy court where the trustee employes the same attorney. A lucrative income stream can be assured by a failed reorganization, particularly in a com- plex case.
Recent Bankruptcy decisions reflect confusion in the standards to be applied in resolving conflicts of interest issues. The trend of these cases appears to be toward the development of standards distinct from those which have developed under the Model Code of Professional Responsibility [hereinafter Model Code] and the court decisions inter- preting it outside of the bankruptcy context. It is too early to deter- mine if these cases reflect a general revision of conflicts of interest standards or merely a development of special principles applicable only in bankruptcy. If the former is true, then an analysis of the issue in the limited context of bankruptcy will simplify understanding of the policies behind the changes. If the trend is confined to bankruptcy cases, a different problem is presented. The Model Code was drafted with every element of the legal pro- fession in mind. The very concept of a professional ethic precludes the varying of ethical principles when applied to different areas of the law.' "The Canons of this Association govern all its members, irrespec- tive of the nature of their practice, and the application of the Canons is not affected by statutes or regulations governing certain activities of lawyers which may prescribe less stringent standard^."^ Clearly, there is no room under the Code for a separate standard for bankruptcy. Congress intended to avoid the formulation of a separate bankruptcy bar when it reformed the Bankruptcy Act.' In any given bankruptcy case there is a plethora of potential con- flicts. The attorneys present may include: -the debtor's attorney -an attorney trustee acting as his own counsel -the trustee's attorney
1981). 20. See B.R.A. 8 547. A preference is a transfer by an insolvent to a creditor which will enable the creditor to receive a greater percentage of his debt than other creditors of the same class. Id. 21. 11 U.S.C. 4 547 (1982). 22. MODEL CODE OF PROFESSIONAL RESPONSIBILITY, DR 5-105 (1980) (An attorney must refuse to accept or continue employment if the interests of another client may impair the independent professional judgment of the lawyer). 23. "An attorney who has been closely related by professional, business and personal ties to those whose conduct may now be suspect is evidently in no position to make any objective appraisal of the nature and extent of their involvement." In re Bohack Corporation, 607 F.2d 258, 264 (2d Cir. 1979). But see Matter of Allied Artists Pictures Corp. 17 Bankr. 288 (Bankr. S.D.N.Y. 1982).
Bankruptcy Proceedings 233 committee.2s- This line of cases reflects the prophylactic standard generally applied outside of bankruptcy. Judge Friendly admonished, "[tlhe conduct of bankruptcy proceedings not only should be right but must seem right."26 On the whole, conflict of interest issues at the creditors' committee level are governed by standards designed to prevent any potential manifestation of conflict. The Bankruptcy Code reinforces the spirit of the Model Code2' by denying compensation for services and reimbursement of expenses of a professional person employed under 1103(a) if at any time during such employment, the person is not disinterested or holds or represents an interest adverse to the estate's interest with respect to the matter for which the person is employed.28 The object of the B.R.A. is to ensure that an attorney employed by the creditors' committee does not have any interest which might impair his professional judgment in the case. In In re Combustion Equipment associate^,^^ the court established that even the appearance of conflict was to be avoided; thus the provi- sions of 11 U.S.C. 5 1103(b) cannot be waived by the parties in interest.'O If the court determines that there has been representation of an adverse interest it will deny compensation and reimbursement pursuant to sec- tion 328(c). The fee penalty is a prophylactic measure to prevent not only actual conflicts but also the mere possibility of divided 10yalty.~' Although these provisions do not extend so widely as Canons 4, 5 and 9, courts have generally found them sufficient to indicate that a stringent standard should be applied to conflict of interest questions for creditors' committee attorneys. The less restrictive text of Model Rules 1.6, 1.7 and 1.9 are more closely aligned with the B.R.A. provision but are unlikely to work any substantial change upon courts' construction of the Act.
Weighed against these conflicts or appearance of conflicts is the explicit legislative directive to utilize the trustee-attorney arrangement to save costs where possible. The courts can minimize unseemly behavior by wielding the power of section 328(c) to deny compensation if the pro- fessional person is not disinterested or has a conflicting interest.68 If the trustee employs the debtor's attorney, 11 U.S.C. $ 327(e) governs. The trustee may employ the debtor's attorney for a specified special purpose if the employment is in the best interest of the estate and the attorney is not adverse to the estate or does not represent an interest adverse to the estate with respect to the specific matter for which he is employed. This subsection is most often employed when the debtor is engaged in complex litigation at the time of the filing of the petition and changing of attorneys would be detrimental to the litigati~n.~~ The Bankruptcy Appellate Panel of the Ninth Circuit held that a creditor's attorney who was, himself, a defendant in a suit by the debtor, could nevertheless be a special counsel to the trustee under section 327(e).70 Analysis of section 327(e) by the court indicates that the section does not require that an attorney serving as the trustee's special counsel ceae representing the creditors in the case because special counsel has a limited role and is therefore less ad~erse.~'
In a Chapter 11 case, the creditors' committee is appointed by the court.9 Ordinarily, the creditors' committee will consist of those persons holding the seven largest claims against the debtor. If the creditors have formed a committee prior to the order for relief, the court may continue that committee.I0 The creditors' committee represents the creditors in the formulation and negotiations of a reorganization plan" and is empowered to engage an attorney to repre- sent it in investigating the acts, conduct, assets, liabilities, and finan- cial condition of the debtor.'* Under certain circumstances, a trustee may also be appointed in a Chapter 11 case.13 If a trustee is not ap- pointed, the debtor in posse~sion'~ will have most of the rights and duties of a trustee.Is The primary restriction upon the committee's selection of an attorney is 11 U.S.C. 5 1103(b)I6 which prohibits the creditors' com- mittee attorney from simultaneously representing any other entity in connection with the case." This section was enacted for the explicit purpose of reducing the potential for conflicts of interest.IS Critics of this revision argue that there is no conflict of interest in the represen- tation of one or more creditors concurrently with the creditors' com- mittee and that disqualification works a hardship upon creditors, par-
The trustee may employ the debtor's attorney for a specified special purpose if the employment is in the best interest of the estate and the attorney is not adverse to the estate or does not represent an interest adverse to the estate with respect to the specific matter for which he is employed.
A creditor receives a trial judgment by winning at trial. Once a creditor has a fraud judgment against you, the debt becomes nondischargeable. This potential outcome makes it important to speak with a debt relief attorney as soon as you’re served with a lawsuit.
If the creditor doesn’t, the debt is wiped out. While using your credit cards for luxury items 90 days before filing for bankruptcy is presumed fraudulent, you can use credit for the necessities of life.
Fraud happens in many different contexts when someone lies or manipulates someone else for gain. In bankruptcy, fraud usually occurs at the expense of a creditor.
A creditor who doesn’t already have a fraud judgment against you can file an adversary proceeding—a lawsuit in bankruptcy court—within 60 days of the first meeting of creditors. If the creditor doesn’t file the proceeding on time, the debt remains dischargeable and eventually goes away.
Proving fraud at trial isn’t easy. Your creditor must prove that: 1 you knowingly made a fraudulent representation (you lied or were misleading about something, like the amount of your income or what you did with company profits) 2 the creditor relied on the misrepresentation (they believed your misrepresentation), and 3 the creditor lost money as a result.
Certain kinds of debt—called nondischargeable debts —remain your responsibility even after your bankruptcy is over. Debts resulting from fraud fall into this category. However, for a debt to be declared nondischargeable, a creditor must ask a court for a fraud determination. If the creditor doesn’t, the debt is wiped out.
Sometimes a creditor files a civil lawsuit in state court and the complaint (the first legal paper filed in a lawsuit) alleging fraud before you even file for bankruptcy. (Being served with a complaint is often what starts people thinking about bankruptcy.) Here are the two types of judgment creditors can get:
The Second Circuit has defined “adverse interest” to mean: “(1) to possess or assert any economic interest that would tend to lessen the value of the bankruptcy estate or that would create either an actual or potential dispute in which the estate is a rival claimant; or (2) to possess a predisposition under circumstances that render such a bias against the estate.” In re Enron Corp., 2002 WL 32034346, at *8 (quoting In re Arachem Corp., 176 F.3d 610, 623 (2d Cir. 1999)); In re MF Global Inc.,464 B.R. 594, 600 (Bankr. S.D.N.Y. 2011) (citing Bank Brussels Lambert v. Coan(In re AroChem Corp.) 176 F.3d 610, 623 (2d Cir. 1999)).
§707(b)(4)(C) states as follows: “[t]he signature of an attorney on a petition, pleading, or written motion shall constitute a certification that the attorney has – (i) performed a reasonable investigation into the circumstances that gave rise to the petition, pleading or written motion ; and (ii) determined that the petition, pleading, or written motion – (I) is well grounded in fact; and (II) is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law and does not constitute an abuse under paragraph (1), [i.e., an abuse of the provisions of Chapter 7 of the Bankruptcy Code]”. (Emphasis added).
The Seventh Circuit affirmed the jury’s rejection of the defense asserted by the debtor as no defense at all in the case. Nevertheless, the Court closed its decision with the following acts and observations:
It provides as follows: “A lawyer shall not counsel a client to engage, or assist a client, in conduct that the lawyer knows is illegal or fraudulent, except that the lawyer may discuss the legal consequences of any proposed course of conduct with a client.”
Attorneys must supplement any disclosure in a timely fashion if and when additional conflicts, connections are discovered. See, e.g.¸ Rome, 19 F.3d at 57-58 (explaining that because the court is empowered “to deter inappropriate influences upon the undivided loyalty of court- appointed professionals throughout their tenure, the need for professional self-scrutiny and avoidance of conflicts ... does not end upon appointment.”) (emphasis added).
in the debtor's schedules) is not likely to ameliorate a court's reaction to incomplete disclosure.
One issue that often arises is the nature of advice that an attorney may provide regarding converting non- exempt assets to exempt assets lawfully versus a fraudulent conveyance. There seems to be little consistent case law on this, and bankruptcy attorneys may often be unsure as to what is permissible advice. The Tenth Circuit not too long ago recognized that “[o]ne of the more difficult issues in bankruptcy law is deciding when, if ever, an intent to defraud creditors can be shown by the conversion of nonexempt assets to exempt debtor’s assets.” Mathai v. Warren (In re Warren), 512 F.3d 1241, 1249 (10th Cir. 2008). By definition, any such “conversion” causes harm to creditors, but a “debtor’s right to make full use of statutory exemptions is fundamental to bankruptcy law.” Norwest Bank Nebraska, N.A. v. Tveten, 848 F.2d 871, 877 (8th Cir. 1988) (Arnold, J. dissenting). For that reason, Judge Arnold of the Eighth Circuit has opined that a debtor’s desire simply to place his assets beyond the reach of creditors cannot amount to fraudulent intent as a matter of law. See Hanson v. First Nat’l Bank, 848 F.2d 866, 870 (8th Cir. 1988) (Arnold, J. concurring).