THE ETHICS OF REPRESENTING DEBTORS &
CREDITORS IN BANKRUPTCY

requirements.

C. Installment Retainers.

1. Absent informed consent of the client after full disclosure of all material facts, a lawyer cannot accept employment if the exercise of the lawyer's professional judgment will be or may reasonably be affected by her own financial interests. Any transaction with a client, including extended payment or lien arrangements, will be scrutinized to assure (a) it is fair and reasonable to the client, (b) the client is given a reasonable opportunity to seek the advice of independent counsel, and (c) the client consents.
2. A prepetition arrangement to pay a flat fee for prepetition services in installments postpetition has been held unenforceable because the obligation is discharged, and collection efforts are a violation of the automatic stay. Such an agreement also has been held to create a conflict of interest in an individual bankruptcy case. While installment arrangements do not per se create a conflict, upon the petition filing the attorney becomes a self-interested creditor in conflict with the debtor client, who is seeking discharge of prepetition obligations. Contractual remedies for nonpayment of installments and failure to advise the debtor client about caselaw holding such retainers dischargeable illustrate the conflict. There is a contrary minority view.

3. One circuit court has recognized the practical difficulty of paying attorneys' fees in small consumer cases, and held that postdated checks to pay for

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