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Attorney Caught Cheating on Credit Counseling Requirement

Attorney Caught Cheating on BAPCPA Bankruptcy Credit Counseling Requirement in Long Island Bankruptcy Court.  Attorney is suspended and must pay $40,000 bankruptcy court sanctionWritten by Craig D. Robins, Esq.

$40,000 Sanction Against Local Bankruptcy Attorney Who Tried to Bypass Rules

Although attorneys are supposed to be smart, every now and then, I come across a practitioner whose stupidity truly baffles me. 
 
This happened last year when a consumer debtor in a pending Chapter 7 bankruptcy proceeding contacted me to take over his case from his existing attorney.  As it turned out, the attorney tried to pull a fast one and paid dearly for it by being sanctioned and losing his ability to practice in the bankruptcy court.
 
No One Likes the Credit Counseling Requirement
 
When Congress overhauled the bankruptcy laws in 2005, it imposed a credit counseling requirement as a prerequisite to filing a bankruptcy petition.  The new law requires any consumer debtor seeking bankruptcy relief to take a credit counseling session from a non-profit, court-approved credit counseling agency prior to filing.
 
I previously wrote many columns about this controversial requirement.  The only reason we have it is because the credit card and banking industry spent tens of millions of dollars lobbying for it. 
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My opinion remains that credit counseling is a waste of consumers’ money and time, and an unnecessary nuisance.
 
No one likes credit counseling – not debtors; not judges; and certainly not bankruptcy attorneys.  By all accounts, the law is an abysmal failure which is not doing what the lobbyists led Congress to believe it would do. 
 
The Law is the Law
 
In a number of decisions across the country, judges have lambasted the credit counseling requirement, but have indicated that they are constrained to enforce it because it is the law.  Accordingly, virtually all bankruptcy courts have insisted that debtors strictly comply with their credit counseling statutory obligations.
 
Credit Counseling is a Pain in the Neck for Debtors and Attorneys
 
As a Long Island bankruptcy attorney, I have to deal with the credit counseling requirement on a daily basis.  That means advising clients how to do it; reminding clients to do it, and yelling at clients because they were supposed to do it and haven’t done it yet.
Nevertheless, the law is the law, and every client must undergo credit counseling prior to filing.
 
One Attorney Tries to Cheat The System
 
Last year a client came to me after attending his meeting of creditors in the Central Islip Bankruptcy Court before trustee Andrew Thaler.  The trustee refused to close the meeting.  The debtor told me that he thought there were a number of “irregularities” with his case and that he did not get good legal advice from his attorney, E. Peter Shin, Esq.
 
Apparently, the attorney never told the debtor about the credit counseling requirement and this came to light at the meeting of creditors.
 
It later came out that the attorney tried to circumvent the credit counseling requirement by having his secretary, instead of the debtor, engage in the credit counseling over the internet.  Shin never even bothered to tell the debtor about the credit counseling requirement. The attorney thought that doing so would be easier for the client and easier for himself.
 
However, this misconduct was grossly improper. By filing the credit counseling certificate at the time the petition was filed, the attorney made an implicit representation to the Court that the debtor had properly complied with the statutory credit counseling requirement.
 
The Case Never Should Have Been Filed
 
Upon reviewing the debtor’s facts, I learned that, for reasons I will not get into here, the case never should have been filed in the first place. 
 
Thus, not only did Shin mess up with the credit counseling requirement, but he also neglected to adequately review the facts.  If he had, he would have ascertained that it was not in the debtor’s best interest to file at the time that he did.
 
I Persuaded the Prior Attorney to Refund Fees
 
I called and wrote Shin and told him that he was in hot water.  Although he actually denied any wrongdoing, I persuaded him to not only refund the debtor’s legal fee and the court filing fee, but to also pay the debtor $700 for his inconvenience, and pay me $1,000 for my legal work in having to undo the mess.  This was all before the U.S. Trustee got involved.
 
The Motion to Dismiss
 
The U.S. Trustee then brought a motion to dismiss the bankruptcy case for various reasons, and also sought my cooperation, as the debtor’s new attorney, to have the debtor help the U.S. Trustee with its investigation of Shin.
 
Since I decided that it was actually in the debtor’s best interest to have his case dismissed, I filed an affirmation in partial support of the trustee’s motion.  Last month, the judge dismissed the case.
          
The U.S. Trustee Aggressively Pursues Debtor’s Prior Attorney
 
The U.S. Trustee’s Office took this matter extremely seriously and sought to intensively investigate Shin and his staff.  It learned that Shin circumvented the means test — not only for this debtor — but for a number of other debtors whose cases he filed in the Eastern District of New York.
 
The U.S. Trustee’s case against Shin was so strong that Shin agreed to a settlement prior to being deposed.  The settlement, which was filed just last month,  called for Shin to pay a sanction of $40,000, be suspended from practicing in the Bankruptcy Court for a year, and take 12 hours of continuing legal education in bankruptcy law and ethics.
 
The U.S. Trustee then brought a separate miscellaneous proceeding in U.S. District Court seeking disciplinary action against Shin to enforce the terms of the stipulation.  (In re: E. Peter Shin, Esq., 1:09-mc-00066-bmc; EDNY 2009).  Last week, Shin paid the first installment of $30,000, with the balance to be paid over the next six months.
 
The lesson here is obvious.  Whether we like them or not – we must abide by the bankruptcy laws.
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About the Author.  Long Island Bankruptcy Attorney Craig D. Robins, Esq., [1]is a regular columnist for the Suffolk Lawyer [2], the official publication of the Suffolk County Bar Association [3]in New York. This article appeared in the April 2009 issue of the Suffolk Lawyer. Mr. Robins is a bankruptcy lawyer who has represented thousands of consumer and business clients during the past twenty years. He has offices in Medford, Commack, Woodbury and Valley Stream. (516) 496-0800. For information about filing bankruptcy on Long Island [4], please visit his Bankruptcy web site: http://www.BankruptcyCanHelp.com [4].
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