San Francisco Attorney Michael Papuc represents debtors
and creditors in bankruptcy proceedings.
A debtor’s goal in filing for bankruptcy is to obtain a
discharge of his or her debts. It is
very important that the debtor be honest and forthright in completing
bankruptcy papers, including the Petition, Schedules of Property Owned or
Leased, Statement of Financial Affairs, including providing complete and
accurate information of all Income and Expenses. The Debtor will be questioned under oath at
the meeting of creditors. Failure to provide honest answers to questions posed
in writing or orally under oath may result in denial of discharge, and possible
criminal prosecution. Very often, the
debtor will rely on his or her attorney’s advice in providing answers. When doing so, the debtor must act in good
faith in dealing with his or her attorney, by providing complete information to
the attorney, so that the attorney may properly advise the debtor on how to
answer anticipated questions.
Under 11 U.S.C. § 727(a)(4), a debtor can be denied a
discharge if it is proven by a preponderance of the evidence that the debtor
made a false statement under penalty of perjury, that it was made knowingly and
fraudulently, and that it was with respect to a material fact.
Sometimes the debtor will rely on the defense of good
faith reliance on advice of counsel, in an attempt to negate the claim that the
debtor knowingly and fraudulently made false statement under penalty of
perjury. This is a high risk move,
because the entire file of the debtor’s attorney, including all confidential
communications between the attorney and client (debtor), becomes discoverable
by the trustee or creditor bringing the adversarial proceeding.
The case of In re Adeeb, 787 F.2d 1339, 1343 (9th
Cir. 1986) states:“Generally, a debtor who acts in reliance on the advice of
his attorney lacks the intent required to deny him a discharge . . . However,
the debtor’s reliance must be in good faith.”
Thus, for a debtor to prevail on this defense, he or she
must provide all information in debtor’s possession, custody or control which
would be sufficient for the attorney to provide appropriate advice on what to
write in the bankruptcy papers, or provide appropriate advice on what to
testify to during the course of proceedings.
If the debtor fails to provide complete information to his attorney, the
defense good faith reliance on advice of counsel will fail.
