Will Your Attorney Need an Attorney? Attorney Verification

Attorneys are now personally liable for the validity of the information contained within a bankruptcy petition. Opponents of the law became concerned of the increasing legal fees attorneys may need to charge. To perform the required due diligence mandated by the law attorneys must allocated additional time and resources, with the cost being absorbed by the client. Already disputed, the attorney obligations under the new bankruptcy laws have spurned lawsuits by attorneys stating the act violates the First and Fifth Amendments of the United States Constitution.

Contested is the actual role, by description and the differences between credit counseling agencies and attorneys. More specifically in a lawsuit brought forth in the U.S. District Court, attorneys stipulate that the comingling of definitions for credit counseling agencies and attorneys have created an impasse whereby the act prohibits practitioners from advising prospective bankruptcy petitioners against incurring more debt while contemplating bankruptcy.

The basis of the claim illustrates the contradiction, that while the act mandates all bankruptcy petitioners seek the services of these professionals, it prohibits these professionals from seeking payment for services render, or structuring a payment plan because it would create a new debt.

The First Amendment argument stated the right to free speech was violated, while the Fifth Amendment argument stated that the right to prevent a loss of property without due process was also violated.

Under the new bankruptcy law, Attorneys are required to:

  • Validate the merit of a bankruptcy petition, and the financial information contained within.
  • All attorneys representing bankruptcy petitioners must stipulate in writing that the petitioner have been legally advised of all potential consequences pertaining to filing for bankruptcy, along with the implications of any-and-all subsequent agreements because of the bankruptcy proceedings.
  • Furthermore, all attorneys must certify that the bankruptcy petitioner has been fully informed of all of their legal rights, and that the petitioner has voluntarily agreed to all terms and conditions.
  • Attorneys are also required by law to advise prospective bankruptcy petitioner of other alternatives in lieu of actually filing for bankruptcy.

Failure to comply with any of the measures could result in legal and financial proceedings against attorneys. The attorney is required to affix their signature indicating compliance with the law and its provisions have been met.

Fraudulent transfers

The law requires that a bankruptcy petitioner may not exclude any assets from creditors wherein the ownership of these assets was transferred less than 2 years prior to the filing of the bankruptcy petition. Your attorney will be required to investigate the potential of sheltering assets against creditors under fraudulent intentions.

If found guilty of fraud, your attorney could face civil action (provided they were not a party to the transaction, or otherwise were not involved, or did not advise). You could face both civil and criminal action for bankruptcy fraud. Criminal penalties also apply to destroying, altering, or concealing documents or records.

Bankruptcy crimes are covered in sections 151 . 158 of Title 18 of the United States Code. Many attorneys have decided against representing bankruptcy petitioners due to the personal liability clause in the new bankruptcy law.

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