Possible conflicts that could prevent a firm from representing a client in b/r:
1. Atty that is also a creditor. Ex. client owes atty 300k in fees. Under 327(a), Debtor can only employ attys that do not hold or rep an interest adverse to the estate. A creditor is someone who holds an interest that is adverse to the estate.
a. could try to get paid b/4 you file so that you are no longer a creditor, but this could be avoided as a pref. In any case, it needs to be in the disclosure statement.
b. Could try to get an SI or cash retainer to secure payment of bills—this could also be avoided as a pref. (Note that if the only concern is payment going forward, may be able to do this—won’t be avoided as a pref b/c not on account of antecedent debt.)
c. Could write of the debt or sell the claim so that you are no longer a creditor.
2. Atty reps the company that is going b/r and its owner. If you rep the individual in his own capacity, there is almost a presumption that you rep for benefit of equity instead of benefit of the corp—that is problem. It is possible to get a waiver to fix this, but the court may want a waiver from the DIP, owner and all the creditors. If you have to get out b/c of this conflict, do it early or judge may prevent you from representing either one.
3. 327(c)—the fact that you have represented a creditor of this debtor doesn’t by itself disqualify you—only disqualify if there is an actual conflict of interest.
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