Representation of Remaining Spouse After Filing Joint Chapter 13 Bankruptcy Petition
Opinion rules that a lawyer who represented a husband and wife in a joint Chapter 13 bankruptcy case may continue to represent one of the spouses after the other spouse disappears or becomes unresponsive, unless the attorney is aware of any fact or circumstance which would make the continued representation of the remaining spouse an actual conflict of interest with the prior representation of the other spouse.
Attorney represented Husband and Wife in filing a joint Chapter 13 bankruptcy petition. Husband disappeared, leaving Wife responsible for the entire Chapter 13 payment plan. Wife called Attorney to inform him that Husband had disappeared and Wife did not believe that she could make the payments alone. She asked Attorney for his advice. Attorney believes that it would be best for Wife if she stopped making the payments. The case would be put on for dismissal and notice sent by the court to both spouses. If Husband does not respond to the notice of dismissal, the court will dismiss the plan as to Husband. Attorney can then modify the plan for Wife to include only the debts for which Wife is liable. If Attorney cannot assist Wife in this way, Wife will have to hire another lawyer at an added expense to her. May Attorney continue to represent Wife?
Rule 1.7 (a) prohibits Attorney from representing a client if the representation of that client will be, or is likely to be, directly adverse to another client, unless Attorney reasonably believes the representation will not adversely affect the interest of the other client, and that client consents.
The mere fact that Attorney continues to represent Wife in the absence of Husband does not present an actual conflict. If the Chapter 13 case is dismissed because of the inability of Wife to comply with the current plan, there will not be a discharge and both parties will remain liable for individual and joint debts. If Husband does not get a discharge from the debts, he will remain liable on his debts. However, this outcome will not be changed by the fact that the Wife receives a discharge after a plan modification. In fact, to the extent Wife pays on joint debts in a modified Chapter 13 plan, Husband benefits from the reduction in the amount for which he remains liable.
There are circumstances under which representation of Wife to discharge (while Husband does not receive a discharge) is a conflict, such as instances in which Wife attempts to discharge marital debts, which are the subject of equitable distribution or alimony or child support claims. In addition, if Husband communicated confidential information to Attorney, Attorney may not use that information to the advantage of Wife or the disadvantage of Husband. Rule 1.9(c). If competent representation of Wife requires the use of the information, Attorney cannot continue to represent Wife.
Attorneys who undertake joint representation of a husband and wife in Chapter 13 cases should discuss with potential clients the potential conflicts that might arise in the three to five years of the plan's duration. Given the potential for conflicts, attorneys are encouraged to obtain a waiver of future conflicts from both spouses. See Rule 1.7(a)(2) and RPC 168 (waiver of objection to possible future conflict of interest). Waivers of future conflicts must be in writing. RPC 168. In the absence of such a waiver, the Bankruptcy Court, which has an ongoing supervisory role in the attorney-client relationship (11 U.S.C. Â§329; Rule 2016(b), F.R.Bkr.P.), may authorize the continued representation of Wife after notice and a hearing.
It should be recognized that if a potential conflict becomes an actual conflict, and the zealous representation of the remaining spouse requires acting contrary to the interest of the disappeared spouse, the Attorney would have to withdraw from the representation of Wife. Rule 1.7(c).
THE NORTH CAROLINA STATE BAR
217 E. Edenton Street • PO Box 25908 • Raleigh, NC 27611-5908 • 919.828.4620
Copyright© North Carolina State Bar. All rights reserved.