Ethical Rules of Bankruptcy Attorneys
Your attorney in a bankruptcy proceeding should always behave in a professional way, and keep your interests paramount. If your attorney has interests that conflict with yours, they may be violating rules of professional conduct. In order to avoid such conflicts, your attorney should not represent one of your creditors, and should not get money out of a deal he is advising you to consider.
In this case, a woman went to see an attorney about filing for bankruptcy. In order to take advantage of the homestead exemption, her attorney advised her to buy a home. This way, less money would go to her creditors.
Relying on his opinion, the woman trusted her attorney when he told her he would find her a house to buy. He told her that he knew of a home she could buy. In reality, the home was owned by one of his clients, and he represented the client in selling the home. When the woman bought the house, the attorney received money for representing her in the transaction, and also from the seller for selling the home.
Her attorney had advised her against an inspection. So when she discovered serious problems with the house, she filed suit against the attorney. The court agreed that he had violated ethical rules, and allowed her to get back the attorney’s fees she had paid him and force him to pay for repairs to the home.