Insolvency Law Committee – Business Law Section of the State Bar of California
Bankruptcy e-Bulletin
June 3, 2013
Dear constituency list members of the Insolvency Law Committee, the following is an update that may be of interest:
SUMMARY
The U.S. Bankruptcy Court for the Southern District of California has defined the minimum set of services debtor’s counsel must provide in a chapter 7 case. This rule became effective April 1, 2013.
DETAIL
After public comment and amendment to the initial proposal, the court has mandated a set of services to be provided by chapter 7 counsel. This is contained in the court’s General Order 180-A and new Rights and Responsibilities form. These can be found at http://www.casb.uscourts.gov/pdf/GO_180A.pdf. This court has had a similar rule for chapter 13 debtor representation and now has addressed chapter 7 practice in these materials.
The Rights and Responsibilities Agreement (“RARA”) defines what legal services must be bundled together by a chapter 7 attorney and prevents the exclusion of certain services from the minimum that must be offered at the initial fee. Lawyers are no longer allowed to contract in an unrestricted fashion; a minimum set of services is now defined and required. The RARA must be signed by counsel and client and must be filed in the case.
In Part I, the RARA requires that counsel provide the following services for the initial fee charged for representation:
* Meet with the debtor to review assets, liabilities and budget.
* Analyze the case and advise as to the merits of a bankruptcy filing under chapter 7 or chapter 13.
* Answer the debtor’s questions about the choice of chapters.
* Advise the debtor of the requirement to attend the 341 meeting and provide the date and time of it.
* Advise the debtor of the necessity to maintain proper insurance on leased or financed vehicles.
* Timely prepare and serve the petition, schedules and Statement of Financial Affairs and any amendment to Schedule C.
* Provide required and requested documents to the chapter 7 trustee.
* Give the debtor a copy of the executed RARA.
* Represent the debtor at the 341 meeting.
* File the certificate of Debtor Education if the class is taken.
* Return phone calls and email from the client and answer the client’s questions.
* Respond to and defend exemptions if challenges related to attorney errors.
In Part II, the RARA identifies services to be rendered subject to an additional fee, including amendments to schedules, opposing stay relief motions, working on reaffirmation agreements or redemption motions, negotiations with the chapter 7 trustee as to nonexempt assets and other matters.
In Part III, the RARA identifies services that do not have to be part of the flat fee agreement. A new fee agreement for these services is contemplated. They include nondischargeability or objection to discharge litigation, defending exemptions, levy releases, lien avoidance motions and most litigation matters.
Finally, in Part IV of the RARA, the debtor’s duties are spelled out. Seventeen duties are listed, including listing all assets and liabilities, communicating with counsel, appearing at the 341 meeting, bringing identification to the 341 meeting and the like. The one onerous duty for some challenged debtors may be timely fling all required tax returns.
The RARA contemplates that a fee agreement will be executed by attorney and client; the RARA does not replace this.
AUTHOR’S COMMENTS
1. It is unclear if the Part II services can be refused if an additional fee is demanded but not paid.
2. The list of debtor duties in Part IV is thorough and may a boon to debtor’s counsel, for the execution of the form will prevent the debtor claiming ignorance of the fundamental duties of a chapter 7 debtor.
3. The form appears to ban the practice of advising a debtor to file a chapter 7 petition without the intention of appearing at the 341 meeting, so that the case will be dismissed.
These materials were prepared by Michael T. O’Halloran (mto@debtsd.com) of the Law Office of Michael T. O’Halloran, in San Diego California, with editorial contributions from ILC member Monique Jewett-Brewster of Bryan Cave LLP, in San Francisco, California. Mr. O’Halloran is a member of the Insolvency Law Committee.
Thank you for your continued support of the Committee.
Best regards,
Insolvency Law Committee
James P. Hill, Co-Chair
Thomas R. Phinney, Co-Chair
Diana D. Herman, Co-Vice Chair
Uzzi O. Raanan, Co-Vice Chair
John Buelter, Business Law Section, Section Coordinator
