2006 NORTON BANKRUPTCY LAW SEMINAR MATERIALS

THE ETHICS OF REPRESENTING DEBTORS AND CREDITORS IN BANKRUPTCY

By Susan M. Freeman

*This outline is adapted from Chapter 27, Ethical Responsibilities,
Norton Bankruptcy Law & Practice 2d (Thomson-West 2005)

1. Apart from duties to disaffirm misleading documents or reveal misrepresentations of former clients,⁵²⁴counsel may learn of misconduct by non-clients, including what may be bankruptcy crimes.⁵²⁵The U.S. Trustee's duties include notifying the appropriate U.S. Attorney of matters which may constitute bankruptcy crimes.⁵²⁶Any judge, receiver or trustee having reasonable grounds for believing a bankruptcy crime has been committed, or an investigation in connection with such a belief should be undertaken, must report to the appropriate U.S. Attorney.⁵²⁷Any known or suspected criminal violation committed against a national bank or involving a financial transaction conducted through a national bank must be reported by the bank to the Office of the Comptroller of Currency, and the bank is strongly encouraged to report to the appropriate law enforcement authorities as well, where the facts provide a reasonable basis for concluding any violation of law has occurred.⁵²⁸When a sanctioned lawyer's conduct is illegal or violates the ethical rules governing his practice of law in a manner that raises a substantial question as to the lawyer's honesty, trustworthiness or fitness as a lawyer in other respects, that lawyer and other lawyers knowing of it are obligated to report that conduct to the applicable state bar disciplinary authorities.⁵²⁹That obligation to report confers standing on counsel for other parties in a bankruptcy case to object to actions taken by an attorney with apparent conflicts.⁵³⁰Judges have a comparable reporting obligation.⁵³¹

D. Judicial Disqualification.

A bankruptcy judge is disqualified from presiding over the adversary proceeding or contested matter in which a disqualifying circumstance arises, or if appropriate, is disqualified from presiding over the entire bankruptcy case.⁵³²There are two categories of disqualifying circumstances: (a) any proceeding in which the judge's impartiality might reasonably be questioned;⁵³³and those matters specifically enumerated in 28 U.S.C. § 455(b).⁵³⁴Only the first category of disqualifying circumstances may be waived by the parties.⁵³⁵
The ability of courts to limit disqualification just to a contested bankruptcy proceeding as distinguished from the entire bankruptcy case recognizes the unique nature of a

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