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Web posted and Copyright © 1/12/98, American Bankruptcy Institute.

The following abstract summarizes the text of submissions made to the National Bankruptcy Review Commission. The abstract is organized by NBRC working group and topic.

The Final Report of the NBRC can be viewed on-line. To obtain a copy of any document shown below, contact the Center for Legislative Archives, Room 205, National Archives Building, Washington, D.C. 20408. The telephone number is 202/501-5350. Mr. R. Michael McReynolds, Deputy Director, will be able to assist with specific inquiries. (The NBRC documents will be housed at this location until June, 1999. Thereafter, the records will be transferred to the Center's archives in College Park, MD.)

Service to the Estate and Ethics: Ethics
Problem ReferencedProposed Solutions
Kenneth P. Childs, on behalf of the Bankruptcy Review Committee of the Oregon State Bar Debtor-Creditor SectionAttorney
327(a)101(5)When determining whether a professional is "disinterested" under 11 USC § 327(a), every member of a firm should not be disqualified because one of its members is not "disinterested." Enlightened courts have held in a number of instances that a member of a firm may be retained under such circumstances where a "Chinese Wall" was created to screen out nondisinterested members.In recognition of the realities of modern practice, the definition of "disinterested" in 11 USC § 327(a) should be amended to recognize that a professional firm is not disqualified solely based on the disqualification of one of its members as long as a proper screening mechanism is applied.
Kenneth P. Childs, on behalf of the Bankruptcy Review Committee of the Oregon State Bar Debtor-Creditor SectionAttorney
327(a)101(14)Definition of a "disinterested person" in 11 USC § 327(a) should not necessarily disqualify professionals who have a claim against the estate. Often, the attorney who has been counseling the debtor prior to the bankruptcy filing, or an accountant who is most familiar with the debtor's books and records, has not been paid all of her or his pre-petition fees. Where the professional is unwilling to waive the claim for fees, most courts have held that he or she is prohibited from representing the DIP post-petition. However, the existence of this claim does not necessarily affect the professional's judgment, and the court should be allowed to evaluate whether a professional is "disinterested" on a case by case basis.11 USC § 327(a) should be amended to delete the requirement that professionals not be creditors, but professionals should still be required to disclose their status to the court when making application for employment. In order to screen out non-disinterested creditor professionals, this section could be amended to prohibit professionals from participating in the case as a creditors, other than to file proof of claim, and from voting on any proposed plans.
Richard C. BartelPrivate Investigator & DetectiveCopy of complaint sent to FBI

Author provides a copy of a complaint he sent to the FBI and presented as part of his testimony at the 12/96 Open Forum. In his complaint, he describes what he considers to be "the largest [b]ankruptcy fraud in U.S. history." According to the author, a bankruptcy trustee and other participants stole assets from a large corporate bankruptcy estate "in a pattern of activity violative of the racketeering laws..., through the unlawful disposition and transfer of assets of a bankruptcy estate at below market and without appraisals,...and by raw fictitious paper transfers to non-bankruptcy subsidiaries and affiliates, and now to the former [t]rustee's personal interests...."Author states that "it is incumbent upon the United States (DOJ, DOT IG) to assure a complete formal investigation of this case, particularly due to the actual involvement of the case [t]rustee."
James V. Stanton and Richard A. Steyer, on behalf of Natl. Assoc. of Bankruptcy TrusteesAttorneys and bankruptcy trusteesStatement by Saul Eisen, NABT's president

In the attached statement, the president of the National Association of Bankruptcy Trustees ("NABT") states that trustees should be allowed to retain themselves and their firms to represent the trustee. Otherwise, as a NABT study indicates, a majority of trustees could not afford to remain trustees if they did not receive payment for their professional services. This dilemma is especially true in areas where case volume is small, thereby diminishing profit from trustee work. The author concludes that "there is a cost savings to the [e]state to allowing [t]rustees to employ themselves or their firms."Bankruptcy Code should be amended to allow trustees to retain themselves and their firms to represent the trustee.
Mike SalemBankruptcy petitioner

Author alleges that the Bankruptcy Examiner in his chapter 11 case used his position to profit millions of dollars. Given that the author's case was filed in North Carolina, and that North Carolina is not under the jurisdiction of the U.S. Trustee system, the Inspector General's Office does not have authority to investigate his allegations of court officer self-dealing.Bankruptcy System should be revised so that an independent agency is authorized to investigate court officer self-dealing in North Carolina.
Lawrence B. GiesingPresident, St. Louis Postal Credit Union

Author encloses an advertisement sent to a large number of households in the St. Louis area from a law firm trying to drum up chapter 13 business. The ad reads "Bill Consolidation!!!," and states "No Credit Needed! Not a loan! Law says that no person should suffer hardship beause of debt!" The author of the submission inquires, "When did Chapter 13 become a bill consolidation loan Bankruptcy has become as easy as cutting out a coupon for Taco Bell."Bankruptcy system should be revised to prevent attorneys who are trying to attract chapter 13 business from actually encouraging frivilous chapter 13 filings by misrepresernting the purpose and process of this chapter.
American Bankruptcy InstituteAmerican Bankruptcy Institute ("ABI")

ABI presents this "Report on the State of the American Bankruptcy System," which is the capstone of ABI's three-year Bankruptcy Reform Study Project. The Project's efforts culminated with a 65-question survey covering a broad spectrum of possible areas of reform. The study indicates that: (1) in general, the Code of 1978 is working well; and (2) probelms of delay, excessive costs, unfairness, and abuse need to be addressed in the current round of reforms.ABI recommnds: (1) strict deadlines for dismissal or appointment of trustees to help combat abuse; (2) reorganization of chapter 11 policy to provide stricter time limits, elimination of non-viable debtors, and reduction of excessive professional fees; (3) relaxing eligibility requirements for consumer reorganizations under chapter 13, and providing time limits, limited discharge and uniform national exemptions; (4) high standards of integrity for all professionals; (5) a balance between creditors' and debtors' rights, and equality of distribution; and (6) not adopting priority classes of claimants.
Albert A. ThorntonBusinessmanCopy of letter to Senator Fred Thompson

Author of letter upset that debtor "got away". Letter refers to enclosed ad from local newspaper presumably by a lawyer who handles bankruptcy cases (the ad was not attached to the copy of the letter)"I think this lawyer should have to pay off all the cases that he handles and let the clients pay him all of the debt."
Murray S. Lubitz & Louis S. RobinPresident, Commercial Law League of America and Chair, CLLA Service, Ethics Subcommittee, respectivelyWorking Group Position Paper327(a)
If counsel need only disclose "materially adverse" interest, such professional, innocently or not, may not discern or disclose such an interest. To require all interests be disclosed takes discretion of disclosure out of the hands of the proposed counsel and provides the court and other parties with ample information about possible "materially adverse" interests.While agreeing that a lessening of the standard of disinterestedness to a requirement that the proposed counsel not hold an interest which is "materially adverse," authors nonetheless encourage the Commission to include a requirement that there be the disclosure of all interests by the professional.
Vincent GermanoPrivate citizenOne page Public Service Notice by author. Multi-page booklet by author outlining his case.

Author is displeased with the outcome of a bankruptcy proceeding in which he lost his business, a hotel."Although ourside of the duties of your Committee, we would appreciate a referral to an exceptional attorney to bring our legal action on a contingency fee basis." "Should your Committee's report fail to propose reforms to insure that the administrators of Bankrupted estates be without any hint of conflict of interests with the bankruptor involved parties. That, the report call for severe penalties for perjuring affidavits and applications for appointment to positions in control of the Bankruptcy proceeding-by other than colluding bar associations."
Richard L. HaeusslerAttorney

Rule 9011 seems to pit the client against the attorney. "The attorney relies on the information provided by the client to prepare the schedules. If the client gets into trouble because of the suppression of information, it is easy to say that the attorney did it or failed to do it.""I would suggest that there be stronger provisions aimed at the debtor for failing to disclose information. However, I do believe that there should be some lee way because in some cases, the debtor9s0 are under a great deal of pressure and that they may forget some items. I would suggest that tif the items were substantial, such as real property on which they have been making payments, etc, then it is not an items that should be forgotten Bit if the items are some debts, then I believe that the debtor should be able to amend."
Lloyd SchadeDebtor who filed bankruptcy

Author recently received a discharge in bankruptcy after four years. He writes to complain "The Alaskan Bankruptcy is extremely corrupt and controlled by the insiders without any check or balance. They harrass anyone connected with the debtor, expecially [sic] those with money which will make more work and income for them.""If there is anything to be done I will be glad to help but I am afraid of these people and need protection from them."
Joseph T. Hannigan, Jr.President, U-File Discount Document Centers of America, Inc.Statement of Objections of author to 11 U.S.C. §110.110
"As requested, I am forwarding you a brief statement of the objections that I, and others, have had pursuant to 11 U.S.C. §110. "Penalty for persons who negligently for fraudulently prepare bankruptcy petitions"."None
Joseph Fischercitizen

Author contends that there was corruption in the bankruptcy case in which he was involved.n/a
Maggie ReidcitizenComplaint filed by Maggie Reid in the Circuit Court of Greene County, Missouri against the trustee in her bankruptcy; Opinion letter from James R. Jarrow of Baker Sterchi Cowden & Rice, L.L.E. of Kansas City, Missouri concerning her case.

Author had a bad experience with the bankruptcy system, and submits a copy of a complaint she filed in the Circuit Court of Greene County, Missouri against the trustee in her bankruptcy, which outlines the wrongs she feels were committed, along with an opinion letter from James R. Jarrow of Baker Sterchi Cowden & Rice, L.L.E. of Kansas City, Missouri concerning her case.None.
Robert J. TashjianVeterinarian, President, American Chinese Veterinary Medical Frontiers, Inc.

Author writes to add points to the material he previously submitted to the Commission about his bankruptcy case. Author complains of actions by his attorney and the attorneys representing the creditors in his case, and the difficulty in getting another lawyer to represent him.N/A


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