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*This outline is adapted from Chapter 27, Ethical Responsibilities,
Norton Bankruptcy Law & Practice 2d (Thomson-West 2005)
being "nonfrivolous."421 Bankruptcy Rule 9011 may also be amended to expressly extend its reach to all documents, including schedules, submitted to the court or a trustee, even if the lawyer does not sign them, to comply with the "sense of Congress" in the 2005 Bankruptcy Code amendments.422 Counsel should check bankruptcy records by PACER or otherwise to confirm that the debtor's statements about prior bankruptcy cases are accurate.423
2. The duty to disclose assets on schedules includes disclosure of all potential causes of action.424 The attorney likewise must take care not to file a disclosure statement overlooking known assets, or a plan counsel knows the debtor cannot fund or that counsel knows is unconfirmable.425 On the other hand, the creditors should not have to pay more for an incompetent or deceptive debtor through increased counsel fees.426 Two courts have suggested guidelines for counsel working with debtors on disclosure to resolve this tension.427 Another has cautioned that DIP counsel should take heed of objections and motions by creditors, which may disclose serious problems and concerns with the DIP's operations and representations to counsel.428
3. It is not uncommon, unfortunately, for prospective chapter 11 clients to seek counsel just before a foreclosure or other deadline requiring immediate action. That situation has been held not to excuse the attorney from asking probing questions and demanding
full and reasonably corroborated responses.429 As the Ninth Circuit BAP stated: The importunities of a desperate client do not relieve an attorney of the affirmative duty of reasonable inquiry imposed by Rule 9011. The evident warning flags and the inadequate time available to make such inquiry should have impelled [the attorney] to consider the ever-present option of declining a questionable engagement.430
4. The attorney is to explain legal requirements to the extent reasonably necessary to permit the client to make informed decisions.431 But the lawyer may not follow client instructions if they would operate to defraud,432 and may not knowingly make or affirm a false statement of material fact or law to others or fail to disclose a material fact necessary to avoid defrauding others.433 A disclosure statement, motion to approve a settlement or sale, or the like
