THE ETHICS OF REPRESENTING DEBTORS AND CREDITORS IN BANKRUPTCY

bankruptcy to their clients to the extent reasonably necessary to permit informed decisions about the case.³⁹⁰ Attorneys are to render candid advice to their clients, referencing moral, economic and other factors relevant to the situation.³⁹¹ They must explain that bankruptcy in any of its forms has serious repercussions for any client. Credit agencies will be informed, and can disclose the fact of any filing as long as ten years after the order for relief is entered.³⁹² A debtor's post-bankruptcy insurers and lenders may consider a prior bankruptcy in evaluating the prospect of extending insurance coverage or a loan.³⁹³ The Code only protects against certain types of discriminatory treatment resulting from bankruptcy.³⁹⁴ The debtor must realize that in return for the protections of the bankruptcy laws, he must disclose his financial affairs in minute detail, fully and accurately, or he will be denied a discharge.³⁹⁵ The court may require conversion of a chapter 11 case to a chapter 7 liquidation, which the debtor cannot prevent through voluntary dismissal.³⁹⁶ Prospective debtors must be informed about the alternatives to bankruptcy, the options they have under various chapters of the Code, and what is required of them in each.³⁹⁷ Professional conduct rules require that a lawyer, not a paralegal, must undertake this counseling through direct client contact.³⁹⁸ Counsel has a duty to fully explain the scope and reach of terms used in bankruptcy schedules, such as "transfer."³⁹⁹

1. The 2005 Bankruptcy Code amendments define lawyers providing consumer bankruptcy assistance in return for compensation in certain circumstances as "debt relief agencies."⁴⁰⁰ The amendments impose restrictions on debt relief agencies that include specific requirements for advising clients about valuation of assets, compilation of creditor lists, determination of exemptions, determination of types of income, etc. and providing specific written notices.⁴⁰¹ The restrictions include not making untrue or misleading statements, or advising clients to make such statements, and not misrepresenting the services to be provided or the benefits and risks of filing bankruptcy.⁴⁰²
2. All too often, courts have dismissed bankruptcy filings on bad faith grounds, including those intended solely for delay, with no realistic possibility of reorganizing a debtor under Chapter 11, filings merely to resolve two-party disputes, and repeated filings. Sec