Debtor’s Attorney Must Reimburse Trustee For 707(b) Motion

By: Craig W. Stewart

A Chapter 7 Trustee files a motion to dismiss debtor’s case after ascertaining debtor had
disposable income of $1,636.21 despite debtor’s Schedule J reflecting a deficit of $239.06. The debtor did not oppose the dismissal and the bankruptcy dismissed the case. The only question remaining was whether the debtor’s attorney sufficiently conducted due diligence, and if not whether he should be required to reimburse the Trustee for fees and costs.

The Court held that a reasonable investigation requires more than just relying on the information provided by the debtor. “The attorney must independently verify publicly available facts to determine whether the client’s representations are objectively reasonable … by asking questions and obtaining additional documents or by some other means.” The attorney was required to reimburse the Trustee because he did not perform a satisfactory investigation on his own prior to the filing of the case.

The above case shall warn debtor’s attorneys in their initial and follow-up consultations with clients. The Trustee will be able to recover fees and costs if attention to detail is not part and parcel to each and every client’s case.

If you are caught in an endless cycle of debt and are struggling to break free, please call us for a free consultation. The attorneys at the law firm of Laura Margulies & Associates, LLC have assisted thousands of clients through the bankruptcy process and are sensitive to their needs. Please call us for a free consultation today. Laura Margulies is a principal and Craig Stewart is also a principal in the law firm of Laura Margulies & Associates, LLC. We represent consumers in bankruptcy and litigation matters in Maryland and the District of Columbia. To learn more about our firm visit our web site at http://www.law-margulies.com.