The Attorney Client Confidentiality Privilege in Bankruptcy is one of the very few relationships where you can even confess a crime and have the information kept secret. If you confess the abuse of a child to your doctor, minister or psychologist they must report the information. But your attorney must not reveal the information. This privacy allows the attorney to help you in legal matters and without this privacy the attorney could not do his work. The Court system depends on this relationship to remain private. Without it the client couldn’t talk openly with the attorney.
Being a corporation does not remove the attorney client privilege. Even death does not eliminate the confidentiality of information. What creates a problem is that the schedules and petition must be accurate in a bankruptcy. The attorney cannot make himself part of a fraud or show you how to commit fraud. The attorney must withdraw from the case, when the client steps over the line, commits fraud, and tries to make the attorney part of the fraud. In withdrawing from the case he may have to let the court know of any errors or mistakes on his part.
The attorney has many duties to the court including being truthful and accurate in the petition filed. The attorney must adequately inform his client about the process. A bankruptcy case is special. In a bankruptcy case, after the petition is filed, the information used to prepare the petition belongs to the court and to the trustee. But only the information used to prepare the petition and business records are discoverable.
It is in the best interest of the client to honestly prepare the bankruptcy petition and work with his attorney if the client wants to safe guard information. When the Debtor tries to defraud or manipulate the bankruptcy court then the attorney-client privedge no longer applies. The information used to prepare the petition becomes an open book for the court, the panel trustee, US Trustee and the Department of Justice. When the Debtor accuses the attorney of misconduct confidentiality is stripped away. The attorney may divulge the clients confidential information to prove the attorney is innocent of wrong doing.
There may be no attorney client privledge If the client:
1 Sold property for less than a reasonable amount
2 Attempted to hide assets
3 Failed to keep books or improperly prepared the company books.
Only information shared privately and directly with the attorney is protected. Information is like toothpaste once it is out of the tube you can’t put it back into the tube easily. When information is shared or when it becomes public the information is no longer private. The do it yourself petition preparers and the online services leave your information unprotected and discoverable. Information from a 3rd party is generally discoverable, since it is not from the client who is filing. You can give away these rights and whenever a client files bankruptcy a small part of his rights are waived. In filing the bankruptcy you must divulge information which you guarantee is accurate in exchange for the right to file bankruptcy. Without this information the Trustee and Judge cannot do their jobs.