Professional Ethics & Standards Flashcards

A bankruptcy administrator discovers that a trustee has been depositing estate funds into a personal account temporarily before transferring them. What is the administrator's primary ethical obligation?

Answer: Report the conduct to the appropriate supervising authority

Mishandling estate funds, even temporarily, constitutes a breach of fiduciary duty that must be reported to the supervising authority regardless of eventual correction.

Under the ABI Model Rules, a bankruptcy professional must avoid conduct that creates the appearance of impropriety primarily because:

Answer: Public confidence in the bankruptcy system depends on perceived integrity

The appearance-of-impropriety standard protects public trust in judicial administration, which is foundational to the bankruptcy system's legitimacy.

When a debtor's attorney also represents a creditor holding a claim against the estate, this situation is best described as a:

Answer: Conflict of interest requiring disclosure and likely disqualification

Representing both a debtor and a creditor in the same bankruptcy proceeding creates an actual conflict of interest that requires disclosure and typically disqualification.

A Chapter 7 trustee receives an offer from a buyer who is a former business associate. The trustee must:

Answer: Disclose the relationship to the court and seek guidance before proceeding

Trustees must disclose relationships with potential buyers to the court because such connections could compromise the trustee's duty to maximize estate value impartially.

Which standard governs the reasonableness of professional fees charged to a bankruptcy estate under 11 U.S.C. § 330?

Answer: The actual, necessary cost of services beneficial to the estate

Section 330 requires fees to reflect actual, necessary services that benefited the estate, evaluated by the court based on multiple factors including time, nature, and results.

A bankruptcy administrator who learns of potential fraud by a debtor during a 341 meeting is ethically required to:

Answer: Refer the matter to the U.S. Trustee or appropriate authorities

Suspected bankruptcy fraud must be referred to the U.S. Trustee or law enforcement authorities, as administrators have an overriding obligation to protect the integrity of the proceeding.

The duty of candor toward the tribunal requires a bankruptcy administrator to:

Answer: Correct false statements of fact or law made to the court, even if previously submitted

Candor to the tribunal is a paramount ethical duty requiring professionals to correct false or misleading statements, even those previously made to the court.