Denial of Discharge Defense – Advice of Counsel

A denial of discharge adversary proceeding seeks to take away your entire discharge.  If the trustee is successful, not only do you lose the discharge in this case but you cannot discharge any of these debts in a future bankruptcy.  As one lawyer put it, it makes you a financial dead man walking.  This is why it is so important to defend an trustee’s complaint to deny the bankruptcy discharge.

One of the first things you should examine is how you ended up in this situation.  Did you make a mistake or did your lawyer?  This is important because in some cases a bankruptcy lawyer’s mistake is a good defense.  You may be able to claim that you relied on advice of counsel.  If you think that the reason the trustee filed the complaint is something your attorney did, then you need to find a new attorney.   Your current bankruptcy attorney probably has a conflict of interest; in other words, he might not want to admit his mistakes.  That is why it is important to look for a bankruptcy lawyer who also handles adversary proceedings.

The advice of counsel defense is very appealing and it can be a complete defense; however, it cannot be used in every case.  There are two basic rules.  First, you must have relied on your counsel’s advice in good faith.  This means that you cannot been aware of information and then hide it from your lawyer.  Second, you cannot claim advice of counsel if the error should have been evident to you.   The rule is that you are presumed to have read the bankruptcy petition and to be familiar with its contents.  You sign the bankruptcy petition, in part, to verify that you read it and you will be asked to swear to the same thing at the 341 meeting.   If you have any question about how your attorney handled the case and you are unsure of what answer to give at your 341 meeting, it may be time to talk to another lawyer.

These cases are relatively rare, but every debtor needs to know that the possibility exists and how to handle it.  The most important thing to do is to read your petition carefully and ask questions if you do not understand the contents.  If you are facing an adversary proceeding to deny the discharge, you should seriously consider contacting a new bankruptcy lawyer to make sure that your are getting the best possible advice.

Comments are closed.