Lawyer to Lawyer

Written by Craig D. Robins, Esq.

I was hoping, planning and expecting to write this month’s column as a profile on our newest Bankruptcy Court judge, Alan S. Trust, who was sworn in on April 2, 2008. I met Judge Trust two weeks ago while he was becoming acquainted with our local court practices and procedures. At the time he was sitting in on one of Chief Judge Craig’s calendars. However, he subsequently declined to be interviewed for this article. Chambers advised me that he may hold a “meet and greet” event in the future.

Some Info on Judge Trust. Here’s what little information we know about Judge Trust. He was born in 1960 in Monticello, New York and graduated Monticello High School in 1978. Thereafter he graduated summa cum laude from Syracuse University in 1981 with a B.A. in Political Philosophy. He attended New York University School of Law in 1984, graduating cum laude. He was a member of the Law Review.

In 1984 he became a member of the State Bar of Texas, where it appears he remained in private practice until taking the bench here. My understanding is that his practice primarily consisted of commercial Chapter 11 matters. His swearing-in actually occurred in Dallas by Fifth Circuit Court of Appeals Judge Patrick Higgenbotham.

I write this column (past deadline, mind you) at 30,000 feet on my way to a brief vacation in Tokyo, Japan, so I had no time to seek any additional information about the judge from any other sources.

Before leaving, in my quest to learn about more about Judge Trust, I inadvertently came across a highly intriguing, well-written and informative blog, entitled “A Texas Bankruptcy Lawyer’s Blog, prepared by Austin attorney, Stephen Sather. One of his entries contained a summary of a fascinating Texas case which almost comically illustrates how an attorney-debtor should not act.

Accordingly, this month’s column is about that case, which is be somewhat timely as my recent column in the March issue of the Suffolk Lawyer was about attorneys who, themselves, seek bankruptcy relief. In that article I discussed attorneys who have debt problems and then file for bankruptcy in good faith to discharge their debts.

The Start of a Bad-Faith Filing. In January 2005, Texan attorney, David Ortiz, filed a consumer Chapter 7 petition to avoid being evicted from his law office. Based on the story to follow, this filing was not in good faith.

The stay didn’t last long as the landlord quickly lifted it. Then, once the eviction began to move forward again, the debtor lost interest in his case and he failed to appear for his 341 meeting. Soon thereafter the judge dismissed his case, with prejudice, for having failed to appear for the meeting. As is usual practice in such situations, the order precluded the debtor from refiling another petition for 180 days.

Nevertheless, the debtor filed another petition just one month later, apparently to stop another eviction. The U.S. Trustee promptly moved for sanctions. The debtor appeared and pleaded ignorance, claiming that he never received a copy of the prior order as it was sent to his old address, despite his obligation to update his address with the Court clerk.

The First Sanctions Order. The judge was somewhat patient and agreed to abate the U.S. Trustee’s motion long enough to allow the debtor to make an application to modify the prior order. When the parties returned to Court, the judge found that the debtor had neglected to do so. The judge also determined that the debtor had failed to file accurate schedules and did not have a good reason for failing to appear at the 341 hearing in the first case. The Judge then sanctioned the debtor by ordering him to pay attorney’s fees of $1,875 to each of two landlords, and continued the matter to determine whether additional sanctions might be appropriate.

The debtor, realizing that the matter was turning serious, finally retained an attorney. At the continued hearing, the judge ordered the debtor to pay $1,000 in additional sanctions to the Court within 60 days and barred him from filing again for a year without prior permission.

Things Get Worse – the Bench Warrant(s). By the time of the first sanctions order, the debtor had angered the judge; however, his problems could have been solved by paying the $4,750 in sanctions. Unfortunately, the debtor didn’t get the message.

Four months later, the U.S. Trustee filed a Certificate of Non-Compliance indicating that the Clerk had not been paid. The judge then scheduled another hearing. However, neither the debtor nor his new attorney showed up. The debtor also failed to accept service from the U.S. Trustee’s process server, despite having previously agreed to do so. The judge, now quite angry, issued a bench warrant that day.

The debtor then had an attorney friend contact the U.S. Marshal who said that she was acting as an intermediary, and promised to inform the debtor about the bench warrant. Incredibly, she gave the Marshal a non-working phone number for the debtor.

When the Judge learned this, he grew even angrier, and after being unable to locate the debtor at his home or office, issued a bench warrant for the intermediary attorney.

This provided a degree of success as the “intermediary” appeared and testified that the debtor was aware that there was a bench warrant out for him, but wanted to meet with his attorney first. The judge then ordered the intermediary to check in with the U.S. Marshal twice a day until the debtor was apprehended.

The Judge Tries to Get the Debtor’s Attention with a Second Sanctions Order. The judge, who no doubt progressed from furious to livid, issued a second sanctions order which required the debtor to pay $500 per day for each day that he failed to surrender, and to pay $250 per day for each day that he failed to pay the previous $1,000 sanction to the Clerk. The Judge also ordered the debtor’s attorney to appear two days later to report whether he had informed the debtor of the second sanctions order.

Critical Mass – The Third Sanctions Order. Two days later the debtor appeared with a new attorney, apparently well-respected in the bar, and paid the $1,000 owing to the Clerk. The debtor claimed that while he was aware of the prior hearing, his attorney was scheduled to be out of the country and assured him that he would get the hearing re-scheduled, which was not done. The debtor also testified that when he learned of the bench warrant, he checked into a hotel to avoid being found.

The judge, who was not amused, nevertheless showed considerable restraint by ordering the debtor to: a) write a letter of apology to the U.S. Marshal; b) contact the bar association assistance program to see if he would benefit from counseling; c) take 10 hours of continuing legal education; d) find other counsel for a client he was currently representing in a Chapter 7 case; and e) and either pay an additional sanction of $750 or write “I will respect the judicial system, and such respect includes obeying all court orders” 750 times. The judge gave the debtor five days to comply.

How Stupid Can You Get? The debtor did return five days later; however, he only tendered 700 sentences instead of 750, he had failed to pay the prior sanctions of $3,750 to his landlords, and he failed to find alternate counsel for his client. He did complete his C.L.E.

The judge, again showing extreme patience, gave the debtor one last chance. The debtor, finally learning his lesson, tendered the remaining 50 sentences and paid the sanctions to his landlords. As a final sanction, the Court wrote a lengthy opinion chronicling the debtor’s pattern of abuse.

Lessons to be Learned – Damage Control. Stephen Sather, in his blog about the case, suggested that attorneys make mistakes, but that the difference between a good attorney and a disgraced attorney is the ability to engage in damage control. The debtor in the above case certainly did not learn that lesson. Mr. Sather also suggested that this case be required reading in legal ethics courses.

Mr. Ortiz’s motivations in filing bankruptcy to avoid eviction were not pure. The debtor, in filing a second bankruptcy in violation of a court order that he arguably did not know about, was bad but not fatal.

At this stage, the debtor had a problem, but the court offered a way out. Failing to take advantage of this offer was a major mistake.

When the debtor missed the first opportunity to extricate himself, he could have begged or borrowed the money to pay the initial sanctions and limped away, humbled but not crushed. However, when he failed to appear in court, and then evaded the U.S. Marshall, he risked serious jail time. Perhaps the ultimate consequences were so light because the debtor retained a respected and competent bankruptcy attorney, again illustrating the advantages of retaining counsel. One thing is clear, though – things could have gotten much, much worse.

About the Author.  Long Island Bankruptcy Attorney Craig D. Robins, Esq., is a regular columnist for the Suffolk Lawyer, the official publication of the Suffolk County Bar Association in New York. This article appeared in the May 2008 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, please visit his Bankruptcy web site: http://www.BankruptcyCanHelp.com.

Written by Craig D. Robins, Esq.

At least once or twice a year, for the past twenty years, I have represented, as clients, debt-laden fellow attorneys with the filing of bankruptcy petitions. All jokes aside, attorneys are like everyone else - some have serious debt problems.

Typically, attorneys as clients ask me a number of particular questions. Can attorneys file for bankruptcy relief? Is doing so a violation of professional ethics? Can an attorney continue to practice law after filing?

Although all of my 80+ columns to date have dealt with providing you with information to help you assist your clients with their bankruptcy needs, this month’s column is devoted to those of my brethren attorneys who may have their own overwhelming debt issues and are considering bankruptcy as an option.

It Is Not Unethical for an Attorney to File for Bankruptcy. A Nassau County Bar Association Ethics Opinion directly addressed this issue and concluded that it is not unethical for an attorney to file for bankruptcy, and anyone who does may certainly continue to practice before the courts of the State of New York. Opinion 95-8 (1995).

A Lawyer Has a Constitutional Right to File for Bankruptcy. Article I, Section 8 of the United States Constitution provides that Congress shall have the power to establish uniform laws on the subject of bankruptcies throughout the United States. The Bankruptcy Code clearly provides that any person may voluntarily file a petition in bankruptcy. This means that anyone, even an attorney, can file for bankruptcy relief.

Law Students Can File, but Should Be Cautious. I have also represented a number of law students. With them, the concern is whether a bankruptcy would impede their admission to the Bar as they must be screened by the Character and Fitness Committee. Generally speaking, a bankruptcy filing does not, in and of itself, prevent admission to the Bar.

The New York Court of Appeals has addressed the issue of filing a petition for bankruptcy, as it reflects on the moral character of an applicant to the Bar. Matter of Anonymous, 74 N.Y.2D 938, 549 N.E.2d 472, 550 N.Y.S.2d. 270 (1989) aff’d 79 N.Y.2d 782, 587 N.E.2d 286, 579 N.Y.S.2d 648 (1991). In Anonymous, the Court affirmed the denial of the applicant’s admission. However, the decision was not based solely on the fact that the applicant had previously filed for bankruptcy. The Court held that, “A determination of unfitness must rest not on the fact of bankruptcy, but on conduct reasonably viewed as incompatible with a lawyer’s duties and responsibilities as a member of the bar.” (the Court concluded that the applicant therein lacked the “character necessary to discipline himself to control his standard of living and the amount of his indebtedness, thus showing a lack of financial responsibility necessary for an attorney”) - Anonymous, 74 N.Y.2d 938 at 939, 550 N.Y.S. 270 at 272.

It should also be noted that Bankruptcy Code section 525 provides protection against discriminatory treatment to debtors. It follows that barring attendant circumstances surrounding a bankruptcy, it would be violative of the Bankruptcy Code to deny an applicant admission to the bar based solely on the fact that the applicant had filed a petition for bankruptcy. This section provides that a governmental unit may not refuse to grant a license solely because the applicant is or has been a debtor in bankruptcy.

Assets Unique to Attorneys that a Trustee Will Scrutinize. In Chapter 7 cases, trustees are motivated to look for non-exempt assets that can be liquidated and distributed to creditors. Chapter 13 trustees look for the same assets, but to determine the percentage a debtor must repay his unsecured creditors.

A trustee will therefore inquire about uncollected accounts receivable owed by clients, uncollected referral fees owed by other attorneys, and pending personal injury cases with potentially large recoveries. If an attorney-debtor has his own practice, the trustee may inquire about the value of office equipment and any assets owned by the practice. If the attorney is a partner, the trustee will look at the value of the partnership interest. Depending on the situation, the trustee might want to also examine the attorney-debtor’s financial books and records, which is something a trustee might do with any consumer filer who has his own business.

If the attorney-debtor is employed by a firm, the trustee might inquire about the likelihood of receiving bonuses.

Attorneys Who File for Bankruptcy Should Be Able to Continue Their Practices. Although a law practice is technically a non-exempt asset, it is a personal services business bound by ethics laws that a trustee could not realistically sell. Thus, sole practitioners filing for bankruptcy relief are usually able to continue their practices without any problem.

Unique Issues Attorney-Debtors May Encounter. Since attorneys have the potential for earning substantial income, both the case trustee and the Office of the United States Trustee, which is the governmental agency that oversees bankruptcies, may want to make sure that an attorney who files for Chapter 7 relief is doing so in good faith. In other words, they want to make sure the attorney-debtor will not be in a position to earn a hefty salary after filing that could have enabled him to make some payments to creditors. If that was the case, the attorney-debtor can still file for bankruptcy, but he would have to consider a case under Chapter 13 instead, which would involve a payment plan. Incidentally, almost all of the filings I have made representing other attorneys were cases under Chapter 7.

Attorney-Debtors Should Not File Pro-Se. One trustee suggested that although an attorney-debtor can obviously represent himself, it would be much more advisable to be represented by counsel. Knowledgeable and experienced bankruptcy counsel will know the laws, practices, procedures and customs and would be in the best position to facilitate the case to a beneficial conclusion.

Will Attorneys Who File for Bankruptcy Be Treated Any Differently in Court? In my experience, trustees treat attorney-debtors the same way as any other debtor. Attorney-debtors do not receive any special treatment, nor are they disparaged or made to feel embarrassed in any way. If anything, trustees are able to communicate better with attorney-debtors because they both understand concepts and terminology pertaining to the practice of law.

Conclusion: Attorneys in Dire Financial Condition Should Consider their Bankruptcy Options. As long as there are no issues of dishonesty, fraud or deceit in filing a bankruptcy petition, attorneys with debtor problems should consider bankruptcy as an option.

About the Author.  Long Island Bankruptcy Attorney Craig D. Robins, Esq., is a regular columnist for the Suffolk Lawyer, the official publication of the Suffolk County Bar Association in New York. This article appeared in the March 2008 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, please visit his Bankruptcy web site: http://www.BankruptcyCanHelp.com.

Written by Craig D. Robins, Esq.

Perhaps the biggest concern that most consumer bankruptcy attorneys have about the new bankruptcy laws is that they impose a tremendous responsibility and potential liability on the practitioner. It now appears that a resolution adopted by the American Bar Association may create even greater attorney liability as it seeks to have the Federal Rules of Bankruptcy Procedure amended to make it easier for the Bankruptcy Court to discipline attorneys.

Proponents of the New Laws Previously Asserted that Attorneys Were Guilty of Misconduct

The proponents of the Bankruptcy Amendment Act of 2005 (“BAPCPA”) argued that consumer bankruptcy attorneys were guilty of misconduct by neglecting to take reasonable steps to ensure the accuracy of the information that was filed in the petitions. They also asserted that both the bankruptcy bar and bench failed to address this alleged attorney misconduct. Consequently, the new bankruptcy laws impose strict requirements on counsel to certify the accuracy and propriety of their clients’ bankruptcy petitions and schedules.

In particular, the 2005 Act requires that the attorney conduct a reasonable investigation to verify the accuracy of the information provided by the client. In addition, the attorney must determine that the petition and all other information provided to the court and the trustee is well-grounded in fact. Finally, the attorney must certify that the petition is not an abusive filing.

These highly controversial new requirements initially led to some attorney anxiety as the penalties for violating the new liability provisions appeared to be strict, and included fee disgorgement, actual damages, attorney’s fees and costs, and possible civil penalties.

ABA Proposes Attorney Disciplinary Program

However, it now appears that the lobbyists and proponents of the new laws may have been influential in persuading the American Bar Association to create an ad hoc Committee to address how bankruptcy attorneys are disciplined. Apparently, the Bankruptcy Courts are supposed to police the new law’s requirements on counsel. However, most Bankruptcy Courts do not have local bankruptcy rules or general orders establishing bankruptcy attorney disciplinary processes and procedures. The ABA has sought to address this supposed problem.

ABA Conclusions

The ABA’s task force committee reached several conclusions. First, they believe that state bar disciplinary procedures are not designed to police the kinds of attorney due diligence obligations that BAPCPA imposes, nor address such problems in the context of high volume consumer bankruptcy practices.

Second, the task force concluded that Bankruptcy Courts have not established separate attorney disciplinary rules and procedures. Third, the only reports of systematic and effective disciplinary proceedings came from those few Bankruptcy Courts that had in fact implemented their own disciplinary procedures with the blessing of their respective District Courts. The ABA is also concerned that bankruptcy attorneys practice before the Bankruptcy Court, while it is the United States District Court which handles attorney admissions and certain disciplinary matters.

ABA Believes that Federal Rules of Bankruptcy Procedure Should Contain Disciplinary Provisions

The ABA believes that an effective bankruptcy attorney disciplinary process requires an amendment to the Federal Rules of Bankruptcy Procedure to clarify the authority of Bankruptcy Courts to discipline attorneys engaging in a pattern of misconduct. The ABA believes that this is necessary because there is usually no adversary to raise the issue before the Bankruptcy Court. However, this conclusion does not appear to be correct as the case trustee and the Office of the United States Trustee are both charged with the obligation of bringing attorney misconduct to the attention of the Court. The ABA also points out that most consumer debtors lack the resources and sophistication to protect their rights and that many disciplinary issues arise in connection with large volume practices.

ABA’s Proposed Attorney Discipline Amendments to the Bankruptcy Rules

Several months ago, the ABA drafted proposed amendments to the Federal Rules of Bankruptcy Procedure. Some of the key provisions are as follows.

Rule 9029 would be amended to provide that the Court may commence disciplinary proceedings at its own request or at the request of an aggrieved person. Cause would include diversion or failure to account for client or estate property; failure to avoid conflicts of interest; lack of diligence; lack of competence; lack of candor; false statements, fraud or misrepresentation; abuse of the legal process; discipline by other courts; incapacity; unauthorized practice; or other violations of the Rules of Professional Conduct adopted by the highest court of the state in which the Bankruptcy Court sits.

Rule 9011 would be amended to provide that the Court may on its own initiative or at the request of an aggrieved person, enter an order describing the specific conduct that appears to be part of a pattern of misconduct in multiple bankruptcy cases.

Investigation would be done by counsel designated by the Court, or the Court can appoint the state bar’s disciplinary agency. If counsel recommends a formal disciplinary hearing, then the Court shall designate up to three bankruptcy judges in the district to serve on a disciplinary panel.

With regard to the disciplinary hearing, the United States Trustee would have the right to appear and participate in the presentation of the case. Discipline shall only be imposed upon clear and convincing evidence.

Determination of discipline would require findings of fact, conclusions of law, and recommendations for the imposition of private or public discipline as may be appropriate under the circumstances after due consideration of the profession duty violated, the lawyer’s mental state, the potential or actual injury caused by the lawyer’s misconduct, and the existence of aggravating or mitigating factors. Discipline may include disbarment or suspension from practice before the Bankruptcy Court, reprimand, admonition, probation, monetary sanctions or restitution, limitation upon practice, required completion of professional responsibility or other professional educational training, or any other sanction deemed appropriate.

There is a requirement that the Bankruptcy Court clerk maintain the files of all disciplinary proceedings conducted by the Bankruptcy Court and make them available to the public after a determination of probable cause exists. This sharply contrasts with the confidentiality maintained by the Grievance Committees in the State of New York.

Will the ABA Disciplinary Amendments Become Law?

At this time, the proposed amendments are merely a proposal from just another lobbying organization, albeit the American Bar Association. It is quite possible that they can be implemented in one way or another. Even if they do not make it into the official Bankruptcy Rules, it is quite possible that local jurisdictions, such as our Eastern District of New York, can adopt them into the local rules.

About the Author.  Long Island Bankruptcy Attorney Craig D. Robins, Esq., is a regular columnist for the Suffolk Lawyer, the official publication of the Suffolk County Bar Association in New York. This article appear in the February 2007 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, please visit his Bankruptcy web site: http://www.BankruptcyCanHelp.com.

Written by Craig D. Robins, Esq.

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), which went into effect on October 17, 2005, was the most comprehensive reform of the Bankruptcy Code in 25 years. BAPCPA makes important changes in lawyer responsibility and accountability. The new law contains various provisions which mandate that attorneys must now provide consumers with certain disclosures and must also place disclosures in their advertising. Many provisions of BAPCPA are poorly drafted, confusing and inconsistent, and the sections covering this area are no exception.

Legislative Background. The credit card industry lobbyists who essentially drafted BAPCPA had the ulterior motive of trying to scare away consumers from filing for bankruptcy. In trying to achieve this objective, they decided to put a label on those entities offering bankruptcy services and then came up with some unusual requirements that entities of this group had to adhere to. Accordingly, BAPCPA designates anyone who offers bankruptcy services as a “Debt Relief Agency,” and such entities have rigorous disclosure requirements, among other obligations.

Debt Relief Agencies. The official definitions are contained in Code section 101. A “Debt Relief Agency” is any person who provides “bankruptcy assistance” to an “assisted person” (any person whose debts consist primarily of consumer debts and the value of whose nonexempt property is less than $150,000) in return for the payment of money or other valuable consideration. Bankruptcy Assistance is defined as expressly or impliedly providing information, advice, counsel, document preparation, or filing, or attendance at a creditor’s meeting or appearing in a case or proceeding on behalf of another or providing legal representation with respect to such a case.

Debt Relief Agencies Have Many Obligations. Debt relief agencies are required to enter into written contracts with “assisted persons” and provide numerous written disclosures to “assisted persons.” In addition, they must adhere to various advertising requirements regarding any services that contemplate bankruptcy. See Code section 526.

Pro-Bono Services are Excluded. Non-profit organizations are excluded from being treated as Debt Relief Agencies. In addition, authors and publishers of books whose works are entitled to copyright protection are excluded.

Bankruptcy Attorneys in this District Are (So Far) Debt Relief Agencies. Very simply by definition, if you are a person, and you provide bankruptcy assistance to an assisted person for money, then, congratulations, you are a Debt Relief Agency.

Debt Relief Agency Advertisements. Code section 528 states that any attorney who fits the definition of a Debt Relief Agency and who advertises to the general public and includes a description of bankruptcy assistance, or uses language that could lead a reasonable consumer to believe that debt counseling is being offered when in fact the services are directed to providing bankruptcy assistance, or offers assistance with credit defaults, mortgage foreclosure, or eviction, excessive debt, debt collection pressure, or an inability to pay any consumer debt, then the attorney is required to disclose that the services relate to bankruptcy and to include the following statement clearly and conspicuously in the advertisement: “We are a Debt Relief Agency. We help people file for bankruptcy relief.” A substantially similar statement can be used as well, but basically, these are the magic words.

Attorneys Are Now Branded With a Scarlet Letter. One academic commented that this requirement reminds us of the “The Scarlet Letter.” According to Congress, sinful bankruptcy attorneys must be branded in order to warn society of their wicked ways.

Some Lucky Bankruptcy Attorneys Are Not Debt Relief Agencies. Judge W. Davis, Jr., a Georgia bankruptcy judge, issued a sua sponte ruling on October 17, 2005, the very day that BAPCPA went into effect, determining that attorneys are not “Debt Relief Agencies” as that term is used in BAPCPA. In re Attorneys at Law and Debt Relief Agencies, __ B.R. __, 2005 WL 2626199 (Bankr. S.D. Ga. 2005). His order held that attorneys in Georgia are not covered by the provisions of the Code regulating Debt Relief Agencies and are excused from compliance with any of the requirements or provisions governing Debt Relief Agencies, so long as their activities fall within the scope of the practice of law and do not constitute a separate commercial enterprise.

While acknowledging that the language of the relevant code sections could be interpreted otherwise (as well as the substantial legal commentaries concluding attorneys fell within the definition), Judge Davis held that §§ 101(12A) defining “Debt Relief Agency” did not include the word “attorney” or “lawyer” but included the term “bankruptcy petition preparer” which expressly excluded attorneys and their staffs. The term “attorney” is separately defined in §§101(4), which makes no reference to Debt Relief Agencies or to subsection (12A) . “Because the definition of “Debt Relief Agency” omits express reference to attorneys and includes a term which excludes attorneys, it is difficult to imagine that Congress meant otherwise.” Judge Davis concluded that the inclusion of the term “legal representation” in the definition of “bankruptcy assistance” was a reference to non-lawyers’ unauthorized practice of law and was Congress’s effort to empower the Bankruptcy Courts with authority to protect consumers coming before the court who may have been harmed by such practices.

Booby Traps for Non-Compliance. In addition to responding to the wrath of the United States Trustee’s Office, the Code also provides that your own client can seek a refund of legal fees (as well as actual damages, attorney’s fees and costs) based solely on a non-complying advertisement. To make matters more complicated, since the violation occurs before the filing of the petition, it becomes an asset of the bankruptcy estate, and the trustee is then obligated to administer and collect it.

Conclusion: Comply With this Silly Requirement. Regardless of the type of advertising that you may do, include the Scarlet Letter language and make sure your ad makes it clear that your services relate to bankruptcy. Obviously, we can expect a fair amount of litigation on this issue in the years to come. What is an advertisement? A business card? A Martindale-Hubbell listing? What is “clear and conspicuous”? What about First Amendment rights and free speech? In any event, for now, if you want to avoid trouble, play it safe and say: “We are a Debt Relief Agency. We help people file for bankruptcy relief.”

About the Author.  Long Island Bankruptcy Attorney Craig D. Robins, Esq., is a regular columnist for the Suffolk Lawyer, the official publication of the Suffolk County Bar Association in New York. This article appeared in the January 2006 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, please visit his Bankruptcy web site: http://www.BankruptcyCanHelp.com.

Written by Craig D. Robins, Esq.

While I prepare some future columns on tips for handling the new bankruptcy laws, I will review a fundamental bankruptcy issue: the discharge and protecting your clients from creditors who may abuse it.

The general objective in filing a consumer bankruptcy is to obtain a discharge which will free the debtor from personal liability. The concept of providing the debtor with a fresh new financial start is contained throughout the legislative history of the Bankruptcy Code. The new laws going into effect in October 2005 will not change that. In order to ensure that the slate is wiped clean of the problems of pre-petition debt, the Bankruptcy Code contains provisions to protect the debtor after discharge from creditors who ignore its protections.

What happens when a creditor ignores the discharge and continues to harass a debtor for a pre-petition debt that was discharged? Most abuses can be quickly stopped with a simple letter or phone call. Some recalcitrant creditors will nevertheless ignore the discharge as well as subsequent warnings from debtors’ counsel, and engage in outrageous conduct, requiring court intervention to finally protect the debtor.

When your bankruptcy client’s discharge rights are being violated, it is wise to take some type of protective action. In this column, I will briefly discuss the discharge and what steps a debtor’s attorney can take against creditors who ignore it.

The Bankruptcy Discharge. Bankruptcy Code section 524 (a) (2) provides that a discharge operates as an injunction against the commencement or continuation of an action, the employment of process, or an act to collect, recover or offset any such debt or claim as a personal liability of the Debtor.

The Code very broadly defines “claim” to include any right to payment or right to an equitable remedy if such remedy gives rise to a right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, legal, equitable, secured or unsecured. [Code sec. 101 (5)].

Post Petition Collection Suits. Although the C.P.L.R. provides that a bankruptcy discharge is an affirmative defense which must be pleaded, this is an antiquated argument which has been rendered unnecessary and superseded by Bankruptcy Code sec. 524. About thirty years ago, the legislature, intending to fully effectuate the discharge provisions of the new Bankruptcy Code, decided to make the discharge less subject to abuse by harassing creditors.

The discharge automatically voids any judgment at any time obtained to the extent such judgment is a determination of the personal liability of the debtor on a discharged debt. Thus, should a creditor institute suit in a state court after the discharge, and obtain a judgment against the debtor, the judgment is rendered null and void ab initio, even if no affirmative defense was interposed. The purpose of these provisions is to make it absolutely unnecessary for the debtor to do anything at all in the state court action.

The Uninformed Collection Attorney. Often a creditor will send its file to a collection attorney to commence litigation. However, the creditor does not notify the collection attorney of the bankruptcy, and the collection then commences a suit or obtains a default judgment in an existing suit. If you suspect an uninformed attorney has commenced litigation or taken a judgment, then contacting the other attorney and advising him or her of the bankruptcy should be sufficient to resolve the problem. If a judgment was already obtained, it is the other attorney’s responsibility to vacate it by preparing a stipulation vacating judgment and then filing them in the court.

The Bureaucratic Creditor. Frequently a large credit card company or bank has so many departments, some of which are in different states, that news of the bankruptcy filing does not reach all channels. Thus, it is not uncommon for a debtor to continue to receive collection letters and collection calls long after the petition is filed. It is usually simple to put a quick stop to this kind of activity by merely informing the creditor that a bankruptcy was filed and by providing the creditor with the filing information.

The Ignorant Collection Attorney. Some attorneys simply do not have sufficient knowledge of the Bankruptcy Code and the effects of filing for bankruptcy. They may be unaware of the effects of the automatic stay and discharge. Usually, telephoning these attorneys and diplomatically advising them of the provisions of the bankruptcy Code is sufficient to educate them that their litigation actions are improper.

Remember That Some Debts are Non-Dischargeable. Some debts are excepted from discharge regardless of whether a creditor seeks a determination of dischargeability. These debts include, among others, most taxes and obligations to governmental entities, maintenance and support, student loans, and debts for certain condominium or co-op expenses. Accordingly, the order of discharge will not bar these types of creditors.

Extreme Discharge Violations. There are always some creditors or attorneys who will remain ignorant, stubborn, thick-headed and arrogant, and who will disregard your repeated letters that they are violating the very sanctity of the bankruptcy process by continuing to litigate in violation of the order of discharge. At this point, it may be necessary to haul them into bankruptcy court. Should a creditor violate the provisions of the discharge order, the creditor will also have violated the bankruptcy court injunction against collection efforts. The creditor will thus be subject to citation for contempt in the bankruptcy court upon application of the debtor.

When creditors receive a copy of the order of discharge, they are put on notice that they violate the injunction provisions at their own risk. Such violation is an invitation to contempt proceedings. Violation of the order of discharge is considered contempt of court.

The bankruptcy court has the inherent power to punish for contemptuous conduct. [Code sec. 105 (a) and Rule 9020 (b)]. It is often best to litigate such matters in the bankruptcy court as this forum is most familiar with bankruptcy law and not sympathetic to creditors who choose to ignore it. Case law is replete with references that violations of the discharge injunction are not to be taken lightly and will not be tolerated.

The Contempt Motion. A regular motion brought in the bankruptcy court against the creditor is sufficient to seek contempt. If the debtor’s bankruptcy case was closed, it will also be necessary to seek re-opening of the case pursuant to Code sec. 350 (b). If it is necessary to immediately seek an injunction to stop a creditor from executing on a judgment, an order to show cause can be brought.

Sanctions, Punitive Awards and Attorneys Fees. Bankruptcy case law provides that a debtor may collect costs, reasonable attorneys fees, sanctions, punitive damages, and compensatory damages against creditors and their attorneys who violate the order of discharge.

Courts have held that a collection attorney has a continuing obligation to review and reevaluate his pleadings upon discovery that they may be without merit or in violation of the law. Thus, it is imperative to put the other attorney on notice by certified mail that he is violating the Bankruptcy Code to establish his duty of inquiry.

There are many cases were sanctions and punitive damages have been awarded in the thousands of dollars against creditors and their attorneys for violating the order of discharge.

Therefore, if you are a collection attorney, take heed of the power of the discharge. If you are a debtor’s attorney, you can rely on the bankruptcy forum to protect your client’s rights against creditors who ignore your client’s discharge rights.

About the Author.  Long Island Bankruptcy Attorney Craig D. Robins, Esq., is a regular columnist for the Suffolk Lawyer, the official publication of the Suffolk County Bar Association in New York. This article appeared in the June 2005 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, please visit his Bankruptcy web site: http://www.BankruptcyCanHelp.com.

Written by Craig D. Robins, Esq.

The Old Laws Are Now History. If you have bankruptcy petitions that you have not yet filed, you are out of luck. The new laws that all consumer bankruptcy attorneys have dreaded for quite some time are now upon us. On October 17, 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), this country’s most sweeping bankruptcy legislation in decades, became effective. During the past month, the Bankruptcy Court saw a record number of filings by debtors trying to get in under the old laws.

The New Laws Are Extremely Complex. To prepare for the rough road ahead in handling BAPCPA, I recently attended a symposium and workshop in Orlando, Florida sponsored by the National Association of Consumer Bankruptcy Attorneys. BAPCPA contains so many new and complex provisions that several days of morning to evening seminars and workshops seemed to barely skim the surface. The Nassau and Suffolk Bar Associations both offered recent one-evening C.L.E. seminars. However, they merely provided an overview of just a few of the new provisions. The CLE’s were nevertheless very informative as our local judges and trustees gave their input as to how they were planning to address the changeover.

The days of the general practitioner grabbing a Blumberg bankruptcy form are over. In order to effectively represent your clients (and avoid being sanctioned), taking a thorough course on the new laws is an absolute prerequisite. The National Association of Consumer Bankruptcy Attorneys announced that it will be offering some additional symposiums in the near future. Over 1,500 attorneys attended the one in Orlando. Before that, 1,700 attorneys attended their symposium in Chicago. Various organizations will certainly be offering full-day seminars in the near future.

Electronic Filing and Computer Petition Preparation Are Now Mandatory. With the advent of the new laws, combined with the local court requirement that attorneys file petitions electronically, it is inconceivable that a practitioner can prepare a bankruptcy petition without using a computer together with specialized and current bankruptcy petition preparation software. If you plan to practice consumer bankruptcy, then you must make this investment. All of the leading petition preparation software publishers have rushed to prepare updated versions of their software. The software will be especially important in assisting you with the numerous calculations required by the means test. The software should also include all necessary databases regarding the IRS standardized expense tables and the state median income.

The Bankruptcy Law Has Changed Considerably. Discussing the provisions of the new law could easily fill a thousand of these columns. The means test is a major component. Its ostensible purpose is to determine, after a series of calculations, whether a debtor who seeks to file for Chapter 7, would be abusing the bankruptcy laws if that debtor could afford to pay something back to his creditors. In addition to this totally new procedure, there are new provisions for determining property of the estate and calculating exemptions. There are new procedures for valuing assets. There are new laws concerning the automatic stay, which will not be so automatic in some instances. Treatment of secured claims has changed and debtors will likely have to reaffirm all secured debts, a procedure that had been mostly done away with in this jurisdiction during the past decade. Matrimonial obligations are now treated totally differently in a way to designed to protect the innocent spouse. There are new exceptions to discharge. There are also greater limitations upon re-filing after a previous petition has been filed. And don’t forget, debtors must receive credit counseling as a condition to filing for bankruptcy relief, and budget counseling as a condition to receiving a discharge, and you will certainly need to assist them with this.

You Must Read the New Laws. Let me repeat that. You must read the new laws. If you file a petition after October 17, 2005 without having a thorough understanding of the new laws, you will be inviting sanctions, embarrassment and malpractice suits. Although the new laws are several hundred pages, you must read them and you must understand them. At the bankruptcy CLE at the Suffolk Bar Association earlier this month, one of the speakers suggested that all attorneys read the new section 521, concerning debtor’s duties, at least ten times.

The Most Significant Change is the Means Test: A Potential Nightmare. The essence of the new law is the means test, a six-page, fifty-five line item, computational form that makes the most complicated tax return form look like a walk in the park. This form alone will intimidate the most seasoned practitioner and will likely have the effect, intended or not, of preventing many people from filing for bankruptcy for various reasons. If you fail to properly prepare the means test, you will be looking at sanctions. Even though your software will assist you with the computations, you must still understand the appropriate figures and definitions that the new law requires.

Attorneys Now Face Tough New Responsibilities and Liabilities. At the CLE at the Suffolk Bar Association earlier this month, speaker Sal LaMonica suggested that “as a result of this law, you have to look at each new client as a potential liability.” The number one concern that most consumer bankruptcy attorneys probably have about the new law is that it imposes a tremendous responsibility and potential liability on the attorney.

The attorney must now conduct a reasonable investigation to verify the accuracy of the information provided by the client. In addition, the attorney must determine that the petition and all other information provided to the court and the trustee is well-grounded in fact. Finally, the attorney must certify that a Chapter 7 petition is not an abusive filing. At the same CLE, Judge Cyganowski suggested that a debtor’s attorney will now have the obligation to examine every bill and every utility statement to ascertain the accuracy of the debtor’s budget.

The penalties for violating any of the new liability provisions can be strict and can include fee disgorgement, actual damages, attorney’s fees and costs, and possible civil penalties. These new responsibilities, combined with attorney liability, will likely cause many lawyers to leave the consumer bankruptcy practice, and will result in an increase in fees charged by those who stay.

New Mandatory Disclosures and Advertising. As a debtor’s attorney, you are now required to make numerous disclosures about the nature of legal services offered, the consequences of filing for bankruptcy, and the obligation to provide truthful information in the petition, with such disclosures being made no later than three days after you first offer legal services to the client. Failure to do so can mean additional sanctions.

If you advertise bankruptcy legal services you must now identify yourself as a “Debt Relief Agency” in any advertisement and contain a disclosure essentially stating that you help people file for bankruptcy.

Revising Your Legal Fees. As a result of the additional amount of time that you will need to spend with each bankruptcy matter, combined with the added potential attorney liability, many attorneys are anticipating that they will end up doubling their existing fees. Legal fees of $2,000 to $3,000 for Chapter 7 cases and $3,500 to $5,000 for Chapter 13 cases may become the norm, although it is too early to determine. In addition, many bankruptcy attorneys will probably charge two separate fees: one to cover the several hours worth of work that will be involved with the means test, and another to cover the remainder of the bankruptcy including preparation of the petition and representation in court. After all, it will often be difficult to recommend filing Chapter 7 until a substantial amount of time is devoted to reviewing all aspects of the case and then performing the means test.

Are You Ready for All of This? If all of the above does not sound intimidating enough, even the most experienced attorneys, trustees and judges are experiencing high degrees of angst because no one seems to know how the new laws will pan out. Finally, if you decide to continue your bankruptcy practice, be prepared to spend a substantial amount of time reviewing the new laws, attending seminars and workshops, and re-adjusting your perspective as to how bankruptcy works. As Judge Bernstein stated, “It will be an evolutionary process for everyone.”

 Long Island Bankruptcy Attorney Craig D. Robins, Esq., is a regular columnist for the Suffolk Lawyer, the official publication of the Suffolk County Bar Association in New York. This article appeared in te October 2004 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, please visit his Bankruptcy web site: http://www.BankruptcyCanHelp.com

Written by Craig D. Robins, Esq.

What the Meeting of Creditors Is All About. With most bankruptcies, the Meeting of Creditors is the only real “event” of any importance during the entire case, and it is generally the first and only time that you and your client will have to appear in Court. As creditors rarely show up, it is primarily an opportunity for the trustee to examine the debtor.

Ideally, the actual hearing goes smoothly and routinely, lasting just a few minutes, and then you and your client are happily on your way. However, there are a myriad of things that can go wrong at the meeting much to everyone’s consternation and dismay. Fortunately, most problems can be avoided with proper planning and preparation.

Since every bankruptcy case involves a Meeting of Creditors, and since I regularly witness so many problems that other attorneys are having while waiting for my cases to be called, I will devote the year’s three remaining columns to such problems and how to prevent or handle them.

Problem No. 1: Debtor Brings Insufficient Identification. The Office of the United States Trustee has a policy that requires all debtors to identify themselves with picture identification (typically a driver’s license) and proof of correct Social Security number (typically a Social Security card). What happens if your client fails to have these forms of identification at the hearing?

Trustees should also accept the following items as acceptable photographic identification: passport, legal resident alien card, military identification, or state-issued photo identification card. Trustees should accept the following as satisfactory proof of Social Security number: pay stub, health care card, any correspondence from the Social Security Administration, or a current W-2.

If the debtor fails to have proof of Social Security number, most trustees will examine the debtor but will require counsel to immediately fax a copy of acceptable proof. If the debtor does not have picture identification, most trustees will examine the debtor, but will require the debtor to personally appear later at the trustee’s office with photo identification in hand. However, some trustees may simply refuse to examine the debtor without the satisfactory identification documents and adjourn the meeting.

In my practice, I require all clients to provide me with their driver’s license and Social Security card at the initial intake. I then make a legible photocopy and place it in the file. On numerous occasions these copies have saved the day. Also, by reviewing the debtor’s identification early on, you have time to have debtor obtain satisfactory identification if the debtor does not immediately have it available.

Problem No. 2: The Trustee Sends the Debtor Away For Failing To Read the Trustee Information Sheet. The Bankruptcy Amendment Act of 1994 imposed an obligation on all trustees to make sure that debtors know certain bankruptcy fundamentals, now codified in Code section 341(d). Trustees now meet this obligation by asking each debtor at the beginning of their examination if they read the U.S. Trustee’s Information Sheet which is posted on the wall outside the hearing room. If the debtor states that he has not yet read it, the trustee will refuse to examine the debtor. I give each client a copy of this information sheet when they retain me and I also make it a part of their petition, which I have them sign. Thus all my clients have read this in advance. Nevertheless, I prepare them for this question so that they answer it properly.

Problem No. 3: You Learn that Creditors Were Inadvertently Omitted From the Petition. A debtor will frequently approach his attorney in the minutes before the hearing to advise the attorney that there is a creditor or other information missing from the petition. Sometimes this will come out while the debtor is being examined. You can easily amend the schedules of the petition prior to the closing of the case to add any inadvertently omitted creditors. At the meeting, however, you should immediately respond to one of the trustee’s first questions to the debtor, which is, “Are there any changes or additions that you would like to make to the petition?” Advise the trustee that a creditor was inadvertently omitted and that you will be amending the petition.

Problem No. 4: There Is a Discrepancy with the Social Security Number. If there is any problem with the correctness of the Social Security number as it appears in Court documents, it will probably surface at the Meeting of Creditors. If it turns out that the number on the petition is incorrect, then counsel must prepare and file an application and order correcting the caption to reflect the correct Social Security number. Remember that now, only the last four digits of the Social Security Number can appear in any document that will become part of the Court file. In your application, indicate that you will be sending a hard copy Amended Form 21 (Proof of Social Security Number) directly to the Clerk’s office.

Problem No. 5: You Are Running Late and Will Not Make it to the Hearing on Time (Or At All). The trustee may tell the debtor to call their attorney from the pay phone at the end of the hall. A few trustees may even ask the debtor if they mind being examined without their attorney present If the case seems rather simple. Otherwise, the trustee will adjourn the case for about two weeks. In any event, you should communicate with the trustee as soon as possible.

Problem No. 6: The Debtor Has Young Children Who Are Getting Very Impatient. Most trustees (not all) are understanding and will call certain cases out of order if the situation calls for it. Consider approaching the trustee in between cases and quickly discuss the special courtesy requested.

Problem No. 7: Your Client Fails to Show Up. I observe that this is a constant problem with many attorneys. To ensure that your client appears, always remind them a few days beforehand. I also send them directions and a photograph of the building so that they do not confuse it with the other court buildings nearby. I remind them not to bring cell phones into the building which may cause the U.S. Marshal to send them back to their car. I tell them to be there at least 30 minutes before their hearing, and to sit in the hearing room. If you still don’t see your client, they may be sitting in the wrong room as there are two meeting rooms next to each other. Consider using the pay phone at the end of the hall to call your client or have your office track them down. If all else fails, ask the trustee for an adjournment and then charge your client for having to make a second appearance if the client forgot to go.

About the Author.  Long Island Bankruptcy Attorney Craig D. Robins, Esq., is a regular columnist for the Suffolk Lawyer, the official publication of the Suffolk County Bar Association in New York. This article appeared in the April 2004 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, please visit his Bankruptcy web site: http://www.BankruptcyCanHelp.com.