If you think you can get away with not being honest with your bankruptcy lawyer, think again. In a January 31 decision out of the Southern District of Mississippi, a bankruptcy attorney has been required to turn over his complete file to his client’s adversary and testify.
The case involved a Chapter 7 debtor who was a defendant in an Adversary Proceeding brought by Liberty Mutual. During his deposition, the debtor was asked questions about his schedules and about his decision to convert his case from Chapter 13 to Chapter 7. The debtor effectively stated that he relied on the advice of his attorney.
Liberty Mutual sought to compel the debtor’s counsel to produce the documents used to prepare the petition and schedules, and to testify concerning information given to him by the debtors that was used to prepare the petition and schedules (such as income, expenses, assets and liabilities). The attorney and the debtors argued that the information and testimony was protected by the attorney-client privilege. But the insurer countered, reminding the court that it was the debtor who claimed reliance on his attorney’s advice as a defense. It argued that the debtor could not use the shield of the attorney-client privilege if he has already used it as a sword.
The bankruptcy court agreed. Relying on the Federal Rules of Evidence and the Massachusetts case of In re Eddy, 304 B.R. 591 (Bankr.D.Mass.2004) the court noted that “[t]he privilege serves the purpose of promoting full and frank communications.” The court stressed:
Open and honest communication is the foundation of the relationship between attorneys and their clients. Without the privilege, clients would not divulge important confidential information to their attorneys, and therefore, their attorneys would not be able to provide adequate advice or representation.
But the court noted that the ruling in In re Eddy was that the debtor has no reasonable expectation that information will be kept confidential if it must be disclosed in documents that are filed in a bankruptcy.
The Mississippi court also pointed out an exception to the attorney-client privilege: there is no exception to the privilege if the lawyer’s services were sought or obtained to further a crime or fraud. If this debtor used his attorney to commit bankruptcy fraud, there is no privilege.
The lesson here should be obvious: be honest in the process and be honest with your bankruptcy lawyer.
Related posts:
- Honesty Goes A Long Way
- Honesty and Bankruptcy, Part III: The Reality Check and the Boy Scout
- Pro Se Perils
- A Discussion About “Professional Courtesy”
- Honesty and Bankruptcy, Part I: Day of the Living Dishonest
Tags: Adversary Proceedings, Bankruptcy
