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13. Sanctions which can now be imposed on debtor's counsel.
Section 707(b) is amended to add several new duties and liabilities of debtor's counsel:
- Subparagraph (4)(A) allows the court to award costs and fees to a trustee who successfully pursues a § 707(b) motion, payable to the debtor's counsel, if it finds that the Chapter 7 filing violated Fed. R. Bankr. P. 9011.
- Subparagraph (4)(B) specifies that if the court finds any violation of Rule 9011by the debtor's attorney, it may award a civil penalty against the attorney, payable to the trustee, U.S. trustee or bankruptcy administrator. Pursuant to § 103(b) of the Code, this provision would apply only in Chapter 7 cases.
- Subparagraphs (4)(C) and (D) set out a statutory parallel to Fed. R. Civ. P.11, providing that the signature of a debtor's attorney constitutes a certification that the attorney has "performed a reasonable investigation" and determined that signed documents is well grounded in fact, that any Chapter 7 petition is not an abuse under § 707(b), and that "the attorney has no knowledge after an inquiry that the information in the schedules filed with [the] petition is incorrect." This statutory restatement of Rule 11 includes no provision for sanctions in the event that its signature certification is incorrect.
Under new § 526, debtor's counsel are subject to loss of fees, damages, injunctive remedies, and imposition of costs for any failure to meet new disclosure and record-keeping requirements imposed on "debt relief agencies" in new § 527 and 528. This adds a new layer of recordkeeping to the pre-existing requirements set forth by the applicable state bar organization. "Debt relief agency" is defined in new § 101(12A) as "any person who provides any bankruptcy assistance to an assisted person in return for the payment of money or other valuable consideration." "Assisted person" is defined in new § 101(3) as "any person whose debts consist primarily of consumer debts and the value of whose nonexempt property is less than $150,000." Accordingly, bankruptcy lawyers who represent only nonpaying debtors or owners of businesses and other relatively wealthy individuals would not be covered. Among the new provisions are an obligation to retain for two years a copy of each of several notices required to be given to any "assisted person" (§ 527). It is clear that these new requirements will result in increased attorney fees as substantially more scrutiny is required before filing new petitions least the attorney involved be subject to the noted sanctions.
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