Professional Ethics & Standards Flashcards

A debtor's attorney who files schedules knowing they contain false information may face all of the following EXCEPT:

Answer: Automatic denial of all future bankruptcy filings by their clients

While attorneys face criminal liability, Rule 9011 sanctions, and bar discipline for filing false schedules, there is no automatic blanket prohibition on their future clients' filings.

Under the ethical standards governing bankruptcy trustees, 'surcharge' is a remedy that:

Answer: Requires a trustee to personally compensate the estate for losses caused by the trustee's breach of fiduciary duty

Surcharge is a remedy holding a trustee personally liable for estate losses proximately caused by the trustee's failure to meet fiduciary obligations.

A newly appointed Chapter 11 trustee discovers the debtor-in-possession's management engaged in pre-petition fraud. The trustee's ethical obligation is to:

Answer: Investigate and disclose the fraud to the court, creditors' committee, and appropriate authorities

Trustees have an affirmative duty to investigate, disclose fraud to the court and creditors, and refer criminal conduct to appropriate authorities regardless of when it occurred.

The concept of 'disinterestedness' required of estate professionals under § 327 means that the professional must NOT:

Answer: Hold or represent an interest adverse to the estate or have a materially adverse connection to the case

Disinterestedness under § 327 prohibits holding interests adverse to the estate or having materially adverse connections, not merely any prior relationship with case parties.

An attorney representing a creditors' committee has a duty to act in the interests of:

Answer: All unsecured creditors as a class, not any single committee member

Committee counsel represents the entire class of similarly situated unsecured creditors, not individual committee members, and must prioritize collective interests over those of any single creditor.

When two clients of the same bankruptcy professional develop conflicting interests mid-case, the professional must:

Answer: Withdraw from one or both representations if the conflict is non-waivable

If a conflict is non-waivable — typically where representation of one client would directly harm the other — withdrawal from one or both representations is required regardless of case stage.

A bankruptcy administrator's ethical duty of diligence requires completing work:

Answer: Promptly and without unnecessary delay, even absent specific court deadlines

Diligence requires prompt action without unnecessary delay as an independent professional obligation, not merely compliance with externally imposed deadlines.