Conflicts of Interest in Bankruptcy

21 Sep Conflicts of Interest in Bankruptcy

As your bankruptcy lawyer, I owe you undivided loyalty. Sometimes, that is impossible. How can that be? My client taught me about this today.

I’ve been working on this man’s case for almost a month. He paid me a substantial fee in advance. No problem. He has a complicated financial situation. No problem, we’ve been working it through.

Suddenly, the stuff hit the fan. What happened? The fellow who referred my client to me – a former client at that – now has filed a lawsuit against my new client – the man on whose case I’ve been working for the past month. My new client and my old client are suing each other!

Because I had an attorney-client relationship with both parties to the same lawsuit, I certainly can’t represent either one of them any more. I certainly can’t represent one seeking to discharge debts to the other.

What lessons can be learned? You, the client, are entitled to the undivided loyalty of your attorney in your bankruptcy case. You should be sure that you disclose all creditors and anybody else with an interest opposed to yours. And you should be sure that your lawyer does a proper conflict check before taking on your bankruptcy case.

If a conflict of interest arises or is disclosed after you hire your attorney, you must be sure that the conflict is waived by all parties. Otherwise, you would be well advised to ask your lawyer to withdraw from your case.

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Jay S. Fleischman is a bankruptcy lawyer with offices in Los Angeles and New York. He can often be found on Google+ and Twitter, where he shares information about consumer protection issues and personal finance.
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