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69 Am. Bankr. L.J. 1 (1995)
Consumer Bankruptcy Fraud and the Reliance on Advice of Counsel Argument

handle is hein.journals/ambank69 and id is 29 raw text is: Consumer Bankruptcy Fraud And The Reliance on Advice of Counsel Argument by Gregory E. Maggs* When sued or prosecuted for committing bankruptcy fraud, consumer bank- ruptcy debtors sometimes argue they should not be punished because they acted with the advice of counsel. For example, they may assert that even though they concealed certain assets or made false statements, their lawyers told them that the law permitted these actions. Despite considerable litigation on the subject, there is little agreement as to whether courts must accept this reliance argument in bankruptcy fraud cases. The federal courts of appeals have taken different positions on whether reliance on advice of counsel can excuse bankruptcy fraud. The Courts of Appeals for the Eighth and Ninth Circuits agree that advice of counsel may excuse some kinds of fraud, but disagree about exactly what a debtor must show.' The Court of Appeals for the First Circuit has taken a somewhat different position, rejecting the reliance argument in circumstances in which the other courts have not.2 Many lower courts also have weighed in with different views.' This Article seeks to clarify the existing law and recommend changes to the governing statutes. The first three Parts of the Article serve a descriptive function. Part Iprovides an overview of consumer bankruptcy fraud and describes how debtors perpetrate fraud and how attorneys may be assisting them. It also explains how the Bankruptcy Code and the Federal Criminal Code currently seek to deter fraud and to punish debtors who commit it. *Associate Professor of Law, The George Washington University National Law Center. The Regents Re- search Professorship in Bankruptcy Law and Practice at the University of Texas provided generous financial sup- port for the researchandwritingofthis articlewhile theauthorwas an Assistant Professor ofLaw at the University of Texas School of Law. The author is grateful to his colleagues at the National Law Center for giving him helpful suggestions at a Works in Progress discussion. The author especially also would like to thank the Hon. Steven W. Rhodes for his careful editorial work and Steve Feldman for providing detailed comments on an earlier draft. 'See Norwest Bank Nebraska v. Tveten (In re Tveten), 848 F.2d 871 (8th Cir. 1988); First Beverly Bank v. Adeeb (In re Adeeb), 787 F.2d 1339 (9th Cir. 1986); City Nat'l Bank v. Bateman (In re Bateman), 646 F.2d 1220 (8th Cir. 1981). For a detailed description of these cases, see infra Part III.B. 'See Boroffv. Tully (In re Tully), 818 F.2d 106 (1st Cir. 1987). For more explanation, see infra Part III.B. 3See infra Part IILB.