“Dabbling” in unfamiliar areas of practice is a risk which is not unexpected following economic downturns. Since our most recent OBLIC Alert warning about the dangers of dabbling, we have received inquiries and heard from several attorneys interested in entering bankruptcy practice. Bankruptcy is a prime example of an area of law in which you don’t know what you don’t know.
OBLIC has had significant experience with malpractice claims arising out of the practice of bankruptcy. Failure to fully investigate a client’s assets, debts, or creditors BEFORE FILING can have immediate and severe consequences, even in what is thought to be an average chapter 7 bankruptcy.
We have seen insureds make the following mistakes:
- fail to identify the date in which tax debt would have been discharged
- fail to identify the actual source of retirement income
- fail to identify an affirmative defense in an adversarial proceeding that would have avoided detrimental classification of an asset by the trustee
- fail to identify the full consequences to assets when converting from a chapter 13 to a chapter 7
- fail to take proper steps to discharge a judgment lien
The above types of mistakes and several others in the bankruptcy arena leave attorneys with few if any defenses to an allegation of the breach of the standard of care when a malpractice claim is asserted. With these types of malpractice claims the battle is usually over proximate cause and the appropriate calculation of damages. A unique issue with bankruptcy claims, however, is that the client may not need look very far for an attorney since errors that occurred pre-petition are usually owned and prosecuted by the bankruptcy trustee for the benefit of the creditors.
Before entering any new area of practice, remember to undertake the necessary study to become knowledgeable, and associate with a lawyer who is experienced and competent in the new area. Another risk of dabbling in this area of practice is that carrying low malpractice insurance policy limits may often not fully compensate a client or the bankrupt estate from the potential damages caused by a attorney’s mistake, thereby exposing the attorney to personal liability.
We urge you to avoid entering a new practice to capitalize on a perceived economic opportunity unless you do the homework necessary to achieve the level of competence expected of someone regularly practicing in that area. If you do, make sure you follow the guidance in Ohio Rule of Professional Conduct 1.1, associated comment 2.