Clark & Washington Sued – Class Action Lawsuit
Yesterday’s post “Chapter 7 Bankruptcy – How Do Lawyers Get Paid” contained a link to the class action lawsuit filed against Clark & Washington. I wanted to follow-up that post with a link to an Order by Judge Michael Williamson from the Middle District of Florida. That Order explains the legal and ethical implications of paying for chapter 7 legal services AFTER the case is filed. Judge Williamson found that the practice of accepting post-dated checks violates the automatic stay and discharge injunction.
On the one hand, I understand WHY Clark & Washington opted to accept post-petition post-dated checks from their clients. Section 362(b)(11) states that it’s NOT a violation of the stay to “[present] a negotiable instrument [i.e., a check].”
Any attorney that has attended one of Judge Paul W. Bonapfel’s ethics lectures knows that it is completely unethical to put a client into a chapter 13 wage-earner plan simply because that client can’t afford the $1,300+ chapter 7 fee. (Note: a chapter 13 case only costs the $274 filing fee to start.) The problem arises when a client NEEDS a chapter 7 IMMEDIATELY, but doesn’t have any available money.
But, on the other hand, it’s hard to deny the fact that “financing” a chapter 7 case, and accepting payments AFTER the case is filed, creates an unethical conflict of interest (see yesterday’s blog).
The Lundquist class action is an intersting case that has generated much discussion in the bankuptcy legal community.
The Plantiff’s attorney is Terry Haygood, a very good friend of mine, and tenacious advocate. The managing partner of the Defendant is Rich Thompson, whom I owe a debt of gratitude for helping me with various issues in the past. Rich is also a very well-known, and well-respected bankruptcy attorney in the Northern District of Georgia.
I’m not sure how the case will play-out, but a lot of consumer bankruptcy attorneys will be on the sidelines watching.