Bankruptcy attorneys to have additional responsibility when it comes

(This article originally ran in Wisconsin Law Journal, Milwaukee, WI, another Dolan Media publication).

Under the new bankruptcy act, bankruptcy attorneys will have additional responsibility when it comes to their clients' filings. An attorney's signature on a bankruptcy petition certifies the accuracy of the petition and related schedules.

Attorneys will be held responsible for investigating the circumstances that gave rise to the petition, determining the petition is well-grounded in fact and is warranted by existing law. They also will be held accountable for the accuracy of the information contained in the filing.

The new law also requires attorneys to certify a debtor's ability to make payments under a reaffirmation agreement.

Chief Bankruptcy Judge Margaret Dee McGarity, of the Eastern District of Wisconsin, explained the impact that will have when it comes to filing bankruptcy petitions for clients.

The debtor's attorney has to make some inquiry of his or her own client to make sure that what is being filed with the court or given to the trustee is the truth, McGarity said.

I equate it to requiring a criminal attorney to make an investigation and make sure their client did not do the deed before they can plead them not guilty, she continued. Most of us would say, well, that's absolutely ridiculous. So is this. But, nevertheless, it is the sense of Congress that bankruptcy attorneys be responsible for their own clients.

Other panelists pointed to the increased time and costs associated with making those kinds of inquiries. They questioned whether lawyers would be expected to visit clients' homes and confirm the information contained within the filings. The costs of those inquiries will result in lawyers charging more for handling bankruptcy cases.

McGarity pointed to another new area where bankruptcy attorneys may have additional responsibilities. She pointed to a provision regarding people who are classified as debt relief agencies. She noted that any person who provides any bankruptcy assistance to an assisted person in return for payment could fall within that definition.

So many attorneys or other individuals may turn out to be debt relief agencies, and they didn't know they were being debt relief agencies, McGarity said. They could be attorneys in other totally unrelated practices who have a client who has a customer who filed for bankruptcy or something of that nature, and they end up being under the definition of debt relief agency.

Anyone who is characterized as a debt relief agency is required to make a variety of disclosures.

You have to make all sorts of disclosures, including that you are, in fact, a debt relief agency, McGarity explained. And you have to have a written contract. You have to show in the contract how much the attorney will charge, or the bankruptcy petition preparer will charge, what the schedules require, what the filing fee is.

She noted the expansive nature of the disclosure and warned that failure to make those disclosures could result in the loss of fees or possible sanctions.

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