The Risk Manager, Winter 2012

The 2011 Amendments are available on the U.S. Bankruptcy Court, Western District of Kentucky website. While all are important, we especially alert you to the extensive changes in the Bankruptcy Court Miscellaneous Fee Schedule. They include:

Part B. Initial Filing Fees
Part C. Fees for Splitting Cases
Part D. Fees for Converting Cases
Part E. Fees for Interdistrict Transfer
Part F. Miscellaneous Contested Proceedings Fees
Part G. Fees for Complaints/Adversary Proceedings
Part H. Filing Fees for Appeals and Cross Appeals
Part I. Fees Due Upon Dismissal
Part J. Fee for Reopening Cases
Part K. Miscellaneous Administrative Fees
Part L. Fee Schedule for Electronic Public Access

Missing a required fee payment risks missing a time limitation that could lead to a malpractice claim. Go to the Western District of Kentucky website for all the details at (last viewed on 12/13/2011)

With the promulgation of the new Bankruptcy Rules, it is timely to review our bankruptcy practice risk management advice. This advice was encapsulated in the KBA Bench & Bar article “Hard Economic Times Mean More Malpractice Claims” (Vol. 73, No. 1, 1/2009). The article reported on the ABA program “The Unique Perils of Representing Parties in Bankruptcy” that included these significant risks of bankruptcy practice:

  • Certification by attorney – the signature of a debtor’s lawyer certifies that a bankruptcy filing is not an abuse.
  • Mandatory advice – bankruptcy law requires that a client be given certain advice.
  • Major bankruptcy deadlines in unlikely places – e.g., filing proof of claims; real estate lease assumptions; deadlines for filing Plans of Reorganization.
  • Risks of collusion with other bidders in bankruptcy auctions.
  • Jurisdictional risks – filing proof of a claim may give unwanted jurisdiction to the bankruptcy court over counterclaims brought by the debtor.
  • Violations of Automatic Stay.
  • Transfers and Consequences – voidable preferences; fraudulent transfers; fees paid by the wrong entity; “asset planning”; attorney holding funds; and violation of security agreements.
  • Potential plaintiffs are increasing in number:
    • Debtor-in-Possession – 11 U.S.C. §1107
    • Chapter 7 Trustee – 11 U.S.C. §§701-2
    • Chapter 11 Trustee – 11U.S.C. §1104
    • Creditors’ Committee
    • Chapter 11 Plan Trustee or Administrator – 11U.S.C. §1123(b)(3)
    • Individual Creditors
    • State Receivers

The ABA granted permission to post the program materials on Lawyers Mutual’s website. It is a good review of the malpractice risks of practicing bankruptcy law and recommended professional reading for all lawyers. Go to, click on Resources, Subject Index, and look for the article The Elevated Risks Associated with Insolvent Clients under Bankruptcy.

An overriding risk of practicing law in hard economic times is that lawyers are tempted to accept matters outside their competence. With more clients and potential clients facing insolvency there is a temptation to dabble in bankruptcy. If you are not a well-qualified bankruptcy lawyer, do not give in to this temptation unless you are prepared to make the intense effort required to competently represent your client. If a current client needs advice on insolvency, do not hesitate to associate with a lawyer with bankruptcy law experience. Overcome your fear that you will lose the client. The pitfalls of bankruptcy law are just too great for on-the-job training.