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Consumer Bankruptcy Law and Practice: 16.5.3 Consumer Protection Statutes

Also common, but all too often neglected, are opportunities in bankruptcy cases to bring actions under various consumer protection statutes providing for attorney fees. A thorough familiarity with debtors’ rights under these statutes can result in substantial, additional fees for bankruptcy attorneys, not to mention important benefits for their clients.

Consumer Bankruptcy Law and Practice: 16.5.5.1 Rule 9011

Fees may be awarded to debtor’s counsel when imposed as a sanction against an opposing party or counsel for violation of Federal Rule of Bankruptcy Procedure 9011. Rule 9011 does not function primarily as a fee-shifting provision.

Consumer Bankruptcy Law and Practice: 16.5.6 Other Fee-Shifting Provisions

Finally, it must be remembered that almost any type of action relating to the debtor’s affairs may be brought under the expanded jurisdiction of the bankruptcy forum.193 It is possible that any one of the wide array of other state and federal fee-shifting statutes could be applicable in a particular case.

Consumer Bankruptcy Law and Practice: 16.6 Services Provided by Petition Preparers and Other Non-Attorneys

It is not surprising, given the tremendous need for bankruptcy relief among many low-income debtors and the lack of pro bono or affordable bankruptcy attorneys in some areas, that various types of non-attorney operations have sprung up that purport to offer debtors assistance in filing bankruptcy cases. Typically dubbed “typing services,” “document preparation services,” or “independent paralegals,” these entities advertise that they can solve debt problems and prevent evictions and foreclosures without the necessity of an attorney.

Consumer Bankruptcy Law and Practice: 16.7.2.1 Costs and Attorney Fees for Successful Section 707(b) Motions—§ 707(b)(4)(A)

Under section 707(b)(4)(A) of the Bankruptcy Code, costs and attorney fees incurred in prosecuting a successful section 707(b) motion to dismiss the case may be assessed against the debtor’s attorney, but only in certain circumstances. Fees and costs may be awarded only if a debtor’s attorney violates Rule 9011 of the Federal Rules of Bankruptcy Procedure in filing the bankruptcy case itself.256 Moreover, the procedures contained in Bankruptcy Rule 9011 for awarding costs and fees must be followed.

Consumer Bankruptcy Law and Practice: 16.7.2.4 Attorney Certification As to Schedules—§ 707(b)(4)(D)

Section 707(b)(4)(D) provides that the signature of an attorney for the debtor also certifies that the attorney has no knowledge, after an inquiry, that the schedules are incorrect.269 This standard is a pretty low one, requiring actual knowledge, not just a belief or suspicion, that the schedules are inaccurate. It requires an inquiry, which should be no greater than for other pleadings, perhaps less, because it does not use the word “reasonable.”

Consumer Bankruptcy Law and Practice: 16.8.2 Restrictions on Debt Relief Agencies

Mostly, the debt relief agency restrictions prohibit practices already considered improper, such as failing to perform services as promised, making untrue or misleading statements, or advising clients to make statements that an agency should know are misleading.280 Although the latter restriction, by itself, might appear to be a strict liability provision for any untrue or misleading statements, the section’s remedy provisions speak of negligence or intentional misconduct,281 for which remedies

Consumer Bankruptcy Law and Practice: 16.8.3.3 Required Statement About Bankruptcy Assistance Services

A debt relief agency must also provide the assisted person with a statement about “bankruptcy assistance services.”297 This statement must be provided at the time the notice under section 527(a)(1) is given, but no time requirement is set in section 527(a)(1), which refers to the clerk’s notice under section 342(b)(1). The clerk is required to give this notice before commencement of the case.

Consumer Bankruptcy Law and Practice: 16.8.3.4 Disclosures Required of Non-Attorney Agencies That Prepare Bankruptcy Documents

Debt relief agencies, but not attorneys who prepare bankruptcy petitions, schedules, and statements for debtors, are required to provide clear and conspicuous written notice to an assisted person giving “reasonably sufficient information” on how to provide the information required to file for bankruptcy.300 To the extent that the debt relief agency does not provide the required information itself, the notice must explain such unsettled questions of law as:

Consumer Bankruptcy Law and Practice: 16.8.4 Written Contract Under Section 528(a)

A debt relief agency must execute a written contract with an assisted person within five days after the date the agency first provides bankruptcy assistance to the assisted person, and prior to filing a petition.302 Fulfilling this obligation may be impossible because the assisted person may not wish to sign a contract, and obviously there is no way to force the assisted person to sign. In such cases, the debt relief agency’s obligation should be satisfied by tendering the contract.

Consumer Bankruptcy Law and Practice: 16.8.5 Advertising Requirements Under Section 528(a)

If a debt relief agency advertises bankruptcy assistance services or the benefits of bankruptcy it must disclose that the services or benefits are with respect to bankruptcy relief under title 11.309 The agency must also clearly and conspicuously use the following statement, or a substantially similar statement, in such advertisements: “We are a debt relief agency. We help people file for relief under the Bankruptcy Code.”310

Consumer Arbitration Agreements: 4.10.1 TILA Rescission and Other Three-Day Rights to Cancel

The Truth in Lending Act (TILA) provides a right to rescind a special subset of credit agreements by sending a rescission notice within three days.294 In addition, a statute in every state and a Federal Trade Commission rule provide a three-day right to cancel certain door-to-door sales.295 There are other instances of state and federal laws providing consumers with the right to cancel contracts under specified conditions.

Access to Utility Service: 2.2.4.1 Generally

Sometimes a utility seeks to deny or terminate service to a customer for a debt that the customer has no connection with or requires as a condition of service that the customer pay the preexisting debt that is owed by a person who lives with the customer.