What Happens When an Attorney Files Inaccurate Paperwork

An attorney signing any bankruptcy petition, schedules, or motions and filing them with the Court certifies that he or she has performed a reasonable investigation into the circumstances of their client’s situation. Recently, such a filing was challenged by the Court in a Chapter 7 bankruptcy case. The Schedule C paperwork, which claimed that a homestead exemption was warranted, didn’t align with other facts of the case.

For instance:

1) The debtor did not live on the real estate,
2) The debtor didn’t have a dependent living on the property.

Therefore, there was no good faith basis for the attorney to claim the homestead exemption for his client. This prompted the Chapter 7 Trustee to request that the Court sanction the attorney for violating Section 707(b)(4)(D) of the Code and Bankruptcy Rule 9011(b).

The Court reviewed the pleadings, related documents, and testimony from both the attorney and the debtor. It concluded that the attorney knew —or should have known— that the exemption was unavailable to the debtor under existing law. The Court also found that the attorney was unable to identify any factual basis for an extension of existing law to entitle the debtor to take the exemption.

The Court will set a separate hearing on sanctions for the attorney’s violation. The Chapter 7 Trustee requests the Court to require the attorney to pay back the attorneys fees he received in the case, and the Trustee’s considerable costs.

At Molleur Law, we are sensitive to our client’s energy and time. For sure, the process of filing for bankruptcy takes an emotional toll. To help ease your burden, we spend extra time with you up front to make sure we thoroughly understand the specifics of your situation. After all, paperwork should never be a barrier to your peace of mind. 

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In re Gistis, (Bankr. D. Me. 3/24/20) Case No. 18-10710.