Recommendations offered on new bankruptcy law

The ABA Ad Hoc Committee on Bankruptcy Court Structure and Insolvency Processes has appointed a Task Force on Attorney Discipline, which is working to discern how the new bankruptcy law will affect lawyers and their liability under section 707(b)(4).

The bankruptcy law, enacted in October 2005, imposes new certification standards directed at lawyers who represent debtors in Chapter 7 cases, whose debts are primarily consumer debts.

The Task Force has studied the new law and written a report [PDF] that provides recommendations in the interpretation of several key words and phrases in the law, including "reasonable investigation," "inquiry," "knowledge" and "not an abuse under Section 707(b)(1)." The Task Force made its recommendations based on existing case law interpreting language from Rule 9011 of the Federal Rules of Bankruptcy Procedure, which contains language that is the same or similar to the new Section 707(b)(4).

The Task Force did not make recommendations on several phrases, including "well grounded in fact" or "warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law" because it felt that these phrases needed to await judicial interpretation.

The views in the report have not been adopted by the ABA House of Delegates or Board of Governors and do not represent policy of the American Bar Association. The ad hoc committee is housed in the Business Law Section, and includes members from that section as well as the GP/Solo Division and the Judicial Division.

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