Your bankruptcy case may be dismissed on the grounds of “abuse” (Part 2 of 2)


Your bankruptcy case may be dismissed on the grounds of “abuse” (Part 2 of 2)

Attorneys beware: There can be possible attorney liability and sanctions against you for the filing of a case that court finds is an abuse of Chapter 7! (Because this section is intended for lawyers to read, we have reproduced below the actual text of the statute, found in the new Bankruptcy Code at Section 707(4)(A):

`(4)(A) The court, on its own initiative or on the motion of a party in interest, in accordance with the procedures described in rule 9011 of the Federal Rules of Bankruptcy Procedure, may order the attorney for the debtor to reimburse the trustee for all reasonable costs in prosecuting a motion filed under section 707(b), including reasonable attorneys’ fees, if–

`(i) a trustee files a motion for dismissal or conversion under this subsection; and
`(ii) the court–

`(I) grants such motion; and
`(II) finds that the action of the attorney for the debtor in filing a case under this chapter violated rule 9011 of the Federal Rules of Bankruptcy Procedure.

`(B) If the court finds that the attorney for the debtor violated rule 9011 of the Federal Rules of Bankruptcy Procedure, the court, on its own initiative or on the motion of a party in interest, in accordance with such procedures, may order–

`(i) the assessment of an appropriate civil penalty against the attorney for the debtor; and
`(ii) the payment of such civil penalty to the trustee, the United States trustee (or the bankruptcy administrator, if any).

`(C) The signature of an attorney on a petition, pleading, or written motion shall constitute a certification that the attorney has–

`(i) performed a reasonable investigation into the circumstances that gave rise to the petition, pleading, or written motion; and
`(ii) determined that the petition, pleading, or written motion–

`(I) is well grounded in fact; and
`(II) is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law and does not constitute an abuse under paragraph (1).

`(D) The signature of an attorney on the petition shall constitute a certification that the attorney has no knowledge after an inquiry that the information in the schedules filed with such petition is incorrect.

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By | 2012-10-09T06:09:21+00:00 October 9th, 2012|bankruptcy-faq, Financial|0 Comments

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