Aprofessional can spend years— even decades—in the trenches with a client, safeguarding
against misfortune. The professional
knows the client’s business best. The
client believes in the professional,
who dutifully fulfills the heavy and
critical role of trusted advisor.
Why would a client turn anywhere
else? More importantly, why
would he or she need to?
However, this cozy relationship
between a client and a professional
can sour when the client files for
bankruptcy. Even the best of clients
can fall upon hard times, and
advisors wish they could assist in
any bankruptcy case immediately
and help clients emerge stronger and
healthier. But generally, they can’t.
Clients (and even professionals) are
regularly surprised to learn that a court
may deny allowance of compensation
for services and reimbursement of
expenses of professionals—attorneys,
accountants, appraisers, auctioneers,
or others—employed by an estate if,
during the professional’s employment,
he or she is not a disinterested person,
or represents or holds an interest
adverse to the interest of the estate. 1
When a client owes a professional
money, the professional is considered
a creditor and accordingly holds
an interest adverse to the estate.
Generally, unless the professional is
willing to waive the client’s entire
receivable, he or she can no longer act
as the client’s fiduciary. In short, the
professional’s and the client’s respective
interests are no longer aligned. More
succinctly, various rules of professional
responsibility simply don’t allow it. 2
For example, even the most full-service
of law firms generally cannot represent
a client with past-due receivables
during a bankruptcy. (“Aren’t there
very capable bankruptcy practitioners
just down the hall?” clients will ask.)
Understandably disappointed that
their longstanding advisors cannot
continue to act in that capacity, clients
typically solicit a recommendation for
other professionals. The professional,
constrained by applicable rules,
must send clients out the door to
advisors the client may not know—
or worse, to the competition.
How can a client prevent the severance
of ties (even temporarily) with its
chosen professionals? Clients can:
• Make a habit of paying advisors on
time. One should not be more than
60 days behind on fees for services.
• Talk to the professional’s firm about
waiving prepetition fees. This isn’t
as far-fetched as it may sound. If
the potential fees to be earned by
the professional in the bankruptcy
significantly outweigh amounts due
and owing, or if the fees at issue
continued on page 30
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