Adopted September 15, 1961

It has been called to the attention of the Central Committee that the following practice is occurring in a city of this state.

A member of the Bar in private practice represents a finance company. The company, upon ascertaining that one of its debtors desires to avail himself of the Bankruptcy Act, directs its attorney to contact the debtor and arrange to finance the bankruptcy proceeding either through the use of its own attorney or paying the bankrupt’s lawyer directly. The finance company procures a new note subsequent to the filing of the bankruptcy proceeding so that neither its original debt nor the expenses it incurs are discharged by the bankruptcy proceedings.

INQUIRY

(1) Is the action of the attorney for the finance company improper?

(2) Is the action of the bankrupt’s own attorney (if other than the finance company attorney) improper?

OPINION

While no direct precedent could be located, the foregoing is such that a violation of Canon 6 which prohibits the representation of adverse interests would certainly be indicated. This is obviously true if the attorney for the finance company attempts to represent the debtor. By accepting direct payment from the finance company, the bankrupt’s attorney is likewise placing himself in a position where he would be unlikely to give his client proper advice. In the latter instance the finance company’s own attorney’s being a party to this procedure is likewise, in our opinion, guilty of unethical conduct as he not only condones but actually instigates such conduct. We express no opinion as to whether or not the principals or their attorneys are in violation of the Bankruptcy Act.