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

On Behalf of | Jul 5, 2017 | Bankruptcy |

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.

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