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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: Professionals
Problem ReferencedProposed Solutions
James GadsdenPractitioner; Carter, Ledyard & Milburn writing on behalf of United States Trust Company of New York

Amend § 503(b)(3) & (5) in order to permit an indenture trustee to be compensated for their activity in a bankruptcy case under a standard of "reasonable compensation for necessary services" rather than the present standard of "substantial contribution." *Statutory Language Provided.
Clarine Nardi RiddleSenior VP Gov't Affairs National Multi-Housing Council; Nat'l Apt. Ass'n
Bankruptcy Mills encourage filings by persons who only wish to retain possession of rental property post-petition without paying rent. "Bankruptcy Mills" solicit residents who are facing eviction proceedings. Bankruptcy Mills are now advertising over the internet.Legislation required addressing problem of unlawful detainer debtors and the bankruptcy mills that file bare bones plans.
Amy M. Tonti, on behalf of the Allegheny Co. Bar Assoc.'s Bankruptcy & Commericial Law SectionChair, Allegheny County Bar Assoc. (ACBA), Bankruptcy and Commerical Law SectionSummary of the ACBA's recommendations328(c)
Counsel employed on an interim basis should be compensated under § 328(c), as long as they can establish that employment requirements were met.Section 328(c) should be amended to authorize compensation of interim counsel "upon a good faith effort to make full disclosure and a good faith belief that employment requirements are met, despite later disqualifications."
A. Thomas DeWoskinAttorney
Out-of-town professionals should not be paid more than the rate paid to competent local professionals. Oftentimes, competent professionals are available in the city where the debtor files, but out-of-town professionals will be retained at twice the local rate merely because they are acquainted with the hiring entity.Bankruptcy Code should be amended to provide that out-of town professionals should be paid only a rate comparable to their customary rates or local rates, whichever is less, and should not be reimbursed for travel and long distance expenses. Thus, the hiring entity could employ whichever professional it desires, but creditors would be not be forced to "[foot] a large bill merely because the Committee chair wanted to hire his buddy from another city."
Robert S. ApfelbergManaging Director, Commerce Partners (Financial Restructuring and Business Reorganization)

Author suggests a number of areas of inquiry that effect bankruptcy "service providers": use of trustees, court officers and special masters to administer certain parts of bankruptcy proceedings; increased use of stipulations; advance review of law clerk and trustee "notes"; mandatory settlement conferences, mediation and arbitration; fast-tracking certain issues; minimum standards for professionals; increased level of legal protection for Board members and senior operating management; voluntary review board; and improved formats for Plan and Disclosure Statements.Author recommends that the NBRC consider these issues.
Cynthia A. BakerAssistant Professor, Emory University School of Law

The current system for compensating professionals, which relies largely on after-the-fact review by the court or the U.S. Trustee, is ineffective and costly. Under this system, clients have little or no incentive to rein in their professionals. The author attaches a copy of her article entitled "Other People's Money: The Problem of Professional Fees in Bankruptcy," which analyzes the flaws in the current system and proposes solutions for reforming the fee system. The central flaw is that chapter 11 permits committees and DIP's who are purchasing professional services to spend other peoples' money.The bankruptcy system should be reformed to realign costs and benefits, provide more information about costs, and leave the primary decisions about the reasonableness of professional costs to those parties who have an economic interest in the case outcome.
Andy Tela, Jr.Chapter 7 debtor

Bankruptcy petition preparers provide an important and useful service in the preparation of bankruptcy petitions. Their services are cost-effective, accurate and efficient.Bankruptcy petition preparers should be allowed to contiue providing their services to debtors.
Julie SawyerChapter 7 debtor

Bankruptcy petition preparers provide an important and useful service in the preparation of bankruptcy petitions. Their services are cost-effective, accurate and efficient.Bankruptcy petition preparers should be allowed to contiue providing their services to debtors.
Jeff FoustChapter 7 debtor

Bankruptcy petition preparers provide an important and useful service in the preparation of bankruptcy petitions. Their services are cost-effective, accurate and efficient.Bankruptcy petition preparers should be allowed to contiue providing their services to debtors.
Richard G. LugarU.S. Senator

Constituent of Senator Lugar (Larry Watson) wrote to complain of actions by the U.S. Bankruptcy Trustee to enforce provisions of the Bankruptcy Code relating to the assitance given to debtors by non-attorneys.Mr. Watson wants legislation passed which will allow non-attorneys to continue to assist debtors in filing bankruptcy.
Frank EichlerPrivate citizen

"This is to let you know that I disagree with the new regulations implemented under the Federal Bankruptcy Reform Act of 1994. It is obviously just away [sic] to scare people away from preparing petitions for people who cannot afford attorneys. The flat rate of fees for petition preparers while not doing it for attorneys is completely unfair."
Susan A. KaiserPresident, National Federation of Paralegal Associations, Inc. (NFPA)Preliminary Comments by the National Federation of Paralegal Associations to the National Bankruptcy Review Commission110
Author is forwarding the Preliminary Comments of the NFPA in conjunction with Section 110 of the Bankruptcy Code regarding Bankruptcy Petition Preparers. "NFPA would like to begin a dialogue with the Commission to exchange information and begin discussions concerning the activities of Preparers.""NFPA proposes that you consider adding a paralegal to the appropriate Working Group to specifically assist with the review and analysis of Section 110."
Jerry PatchanDirector, Executive Office for United States Trustees

One of the statutory duties of the U.S. Trustee is to monitor employment applications filed under Section 327 of the Bankruptcy Code and to comment on those applications when appropriate. The U.S. Trustees are concerned about the proposal to change the bright-line rule for disinterest by professionals. Author outlines reasons why the current rule is good and should not be changed.The U.S. Trustees feel that the existing law of disinterestedness sets a reasonable threshold standard for all bankruptcy professionals and uphold the integrity of the system in the public's eye and should not be changed. If, however, the Commission remains convinced of the need for change in this area, the U.S. Trustees would urge minimal clarifying changes over a total redrafting of the statute.
Daniel H. BrunnerChapter 13 Trustee, Eastern District of Washington
Although §327(a) speaks of the trustee hiring professionals to pursue claims of the estate (e.g. lawyers to pursue tort claims, etc.), the trustee under §1306 and §1303 has neither custody nor control of the assets.It may be more appropriate to allow the debtor to hire his or her own professionals.
Robert W. AlbertsU.S. Bankruptcy Judge, Central District of California

No discussion."I also believe the recently-enacted provisions of the Code respecting "bankruptcy petition preparers" should be revised to require or provide for licensure."
Donald A. ManzulloMember of Congress, 16th District, IllinoisCopy of letter from Frederic E. Rachford, Woodstock, Illinois to Rep. Donald A. Manzullo dated 4/30/97; Copy of article entitled "Bar Abuses Bankruptcy Reform Act".

Author is forwarding copy of letter from constituent asking that laws allow for low cost paralegals to provide assistance to banktupts."Please include these with the rest of the public comments in preparation for the Nation Bankruptcy Review Commission's report to Congress due in October as required by the Bankruptcy Reform Act of 1994."
Martha L. DavisGeneral Counsel, Executive Office for United States Trustees
Author is forwarding a copy of a survey of all U.S. Trustees to ascertain their activitiy in regard to Section 110 and its application to bankruptcy petition preparers.n/a
John SnavelyAbsolutely Paralegal

Author writes to complain about the treatment of bankruptcy petition preparers.Author believes that the fees currently allowed for bankruptcy petition preparers is unrealistically low in light of the work they do. "In practice, I believe that a fee of at least two hundred dollars is reasonable." "Preparation of bankruptcy papers is not equivalent to performing brain surgery, as many attorneys would have you believe, but there should be regulations and licensing of non-attorney practitioners in order to make our legal system accessible and affordable to all and ensure that the work is performed in a proper and timely manner. Such regulation of non-attorney perparers, however, should be reasonable and appropriate, not merely an effort to ensure the high incomes of the legal profession."
R.E. CampbellParalegal, Legal Clerk I, Consumer Form Service

Author is a Bankruptcy Petition Preparer. He is angered that he was fined for failing to provide his name, address, social security number and signature, although the fine was stayed, and was also informed that his fee of $150 was too high, the maximum allowable being $120.None
Amy M. TontiChair, Bankruptcy and Commercial Law Section, The Allegheny County Bar AssociationRecommendations of the Allegheny County Bar Association's Bankruptcy and Commercial Law Section to the National Bankruptcy Review Commission.

Author submits the Recommendations of the Allegheny County Bar Association's Bankruptcy and Commercial Law Section to the National Bankruptcy Review Commission."a. The Section recommends that Bankruptcy Code Sections 327(a) and 1107(b) be amended to delete any suggestion that professionals employed by a debtor-in-possession must be disinterested, and to require instead that they not hold or represent an interest materially adverse to the estate....b. The Section recommends an amendment to Bankruptcy Code Section 328(c), authorizing compensation of counsel employed on an interim basis, upon a good faith effort to make full disclosure and a good faith belief that employment requirements are met, despite later disqualifications. c. The Section recommends that Bankruptcy Code Ssection 328(c) be amended to clarify that committee counsel need not be disinterested and may not have compensation denied on that basis. d. The Section recommends that Bankruptcy Code Section 1103(b) be amended [as per the text given in the letter]."
Diane HortonOwner/Operator, Bay Area Paralegal

Author operates a paralegal bankruptcy document preparation service in California. She was "invited" into court to explain charges of $375.00 for preparing a bankruptcy, which she had to resubmit three times due to changes by the customer. The judge did not fine her, or order her to refund any money, but told her that her company was to "immediately cease from perparing bankruptcies." Author feels that several wrongs were done here. First, the public is forced to have an attorney prepare their bankruptcy at high fees. "Second, this is supposed to be a 'free enterprise' country, but my right to stay in business has been denied without any wrong doing, fraud, or any other law being broken."None
Fred DomboLegislative Counsel, HALT: An Organization of Americans for Legal Reform

Independant paralegals should have more freedom to provide bankruptcy assistance to debtors.First, the word "unfair" in §110(i)(1) and (2) is overbroad and vague and should be dropped. "Second, the prohibition on the use of the word "legal" should be removed from [§110(f) of] The Act because it is an unconstitutional restraint on commercial free speech." Further, the caps on fees should be removed. Finally, "the state unauthorized practice of law rules that are being used to punish independent paralegals are invaarioably vague....Independant paralegals should not be prohibited from directing people to information, forms or software that are intended by the federal government for public use or in the public domain."
Vicki J. CohenParalegal/Manager, Hammurabi's Assistance WorkshopUndated letter from author to The Honorable Ed Pastor.

Author writes to voice her concerns about the restrictions placed on paralegal bankruptcy document preparers. Author feels that the specific restrictions and prohibitions set forth in §110 (f) discriminate against independent (self-employed) Paralegal and other non-lawyer document preparers.Section 110(f) should be repealed.


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