Based on the article below what is consider to be the most difficult ethical challenge for paralegals in a

bankruptcy practice.

A PARALEGAL'S GUIDE TO BANKRUPTCY: Ethical Considerations for Paralegals By Mark A. Castillo, Curtis | Castillo PC It is advisable for both paralegals and attorneys to be familiar with ethical considerations governing each of the other so that each professional knows the bounds of what may be tasked to anonlawyer, and what must not. This is even more true within the bankruptcy world, where clients almost necessarily are insolvent and sceking legal advice as efficiently as possible. The below cited cases offer excellent reading for understanding not only the rules and mandates, but also the public policy and practical reasoning behind the decisions and rules governing paralegals. I. Avoiding \"Legal Advice\" First and foremost, a paralegal must not give the client legal advice. Even if the paralegal asserts that he is merely relaying information available in the law library, it still may constitute giving legal advice because the paralegal necessarily is choosing and filtering what information is important and should be given to the client. In other words, the paralegal cannot apply statutes, rules, and information to the particular facts. Pursuant to 11 U.S.C. 110(G)}2), a court may permanently enjoin a paralegal from participating in any manner, including in the capacity as a bankruptcy preparer or otherwise. See In re McDaniel, 232 B.R. 674, 678 (Bankr. N.D.Tex. 1999). (For ease of reference, a copy of Bankruptey Code section 110 is appended to this paper and should be read in its entirety!) Pursuant to 11 U.S.C. 110, a paralegal \"shall inform the [client] in simple language that Pursuant to 11 U.S.C. 110, a paralegal \"shall inform the [client] in simple language that the [paralegal] is not an attorney and may not practice law or give legal advice . . . \" and \"if a [paralegal] violates this section . . . the court shall order the [paralegal] to pay the [client] the [client's] actual damages; the greater of $2,000 or twice the amount paid by the [client] . . . reasonable attorney's fees and costs incurred.\" Under certain circumstances, the \"court shall triple the amount of a fine.\" Examples of activities that may constitute the practice of law: 1) Determining whether to file the bankruptcy case. In re Arthur, 15 B.R. 541 {Bankr.E.D.Pa. 1981). 2) Determining when to file a bankruptcy case. re Herren, 138 B.R. 989, 995 (Bankr.D.Wyo. 1992). 3) Solicitation of financial information. In re Grimes, 115 B.R. 639, 643 (Bankr.D.S.D. 1990). 4) Providing clients with legal definitions. Herren, 138 B.R. at 995. 5) Assisting the client in filling out forms or schedules. In re McCarthy, 149 B.R. 162, 166 (Bankr.S.D.Cal. 1992). 6) Correcting an error in legal forms and information. re Calzadilla, 151 B.R. 622, 625 (Bankr.S.D.Fla.1993) 7) Advising the client which exemptions the client should claim. Herren, 138 B.R. at 995. 8) Preparing motions or answers to motions. McCarthy, 149 B.R. at 166. 9) Advising clients on matters such as dischargeability, automatic stay, various remedies, or other bankruptcy matters. Arthur, 15 B.R. at 543. 10) Advising a client you cannot give legal advice, and then giving legal advice! See Matter of Bright, 171 B.R. 799, 802 (Bankr. E.D. Mich. 1994). Activities that are generally not defined as the practice of law include: selling printed materials purporting to explain legal practice and procedure; selling sample legal forms with appropriate notices, disclosures, and disclaimers; and typing bankruptcy forms for clients, provided the typist only copies the information furnished by the clients. See Matter of Bright, 171 B.R. at 803. \"Legal advice includes advising the debtor 1) whether to commence a case under the Bankruptcy Code; 2) whether filing under Chapter 7 or 13 is appropriate; 3) whether the debtor Bankruptcy Code; 2) whether filing under Chapter 7 or 13 is appropriate; 3) whether the debtor will be allowed to retain his or her home after filing for bankruptcy; 4) how to characterize the debtor's property interests or debts; and 5) about bankruptcy procedures and rights.\" Matter of Bright, 171 B.R. 799. The paralegal is restricted to \"only the modest service of transcribing or typing bankruptcy forms that the debtors alone must prepare without assistance\" of the paralegal. In re Rojero, 399 B.R. 913 (Bankr. D.N.M. 2008). Disclaimers that the paralegal is providing \"scrivener\" or \"paralegal\" services are irrelevant. Even a client's signed waiver acknowledging that no legal advice has been given does not absolve the paralegal of liability. See Matter of Bright, 171 B.R. 799. A good review of the policy and importance of Section 110 (and consequences for its violations) can be found in the ironically titled In re Cash, 2013 WL 1191745 (Bankr. N.D. Tex. Judge Jernigan, March 21, 2013). II. Requirements for Attorney Supervision The work done by a paralegal can create issues for the supervising or affiliated attorney as well. Attorneys are governed by the Disciplinary Rules in all instances. In matters of bankruptcy or debt collections, law firms often employ nonlawyers such as paralegals, collectors, investigators, and skip tracers. The attorney has to \"make reasonable efforts to ensure\" that the actions of these debt collectors are consistent with the professional guidelines a lawyer normally adheres to.! Failure to fix a nonlawyer's misconduct could make the attorney subject to disciplinary action.\" An attorney must also be careful to remain in a position where he or she may exercise his or her professional judgment \"free of any compromising influences or loyalties.\" Most notably, attorneys must not engage or assist a nonlawyer in the unauthorized practice of law.> This does not forbid attorneys from employing nonlawyers and delegating certain legal tasks to them as long as attorney supervises the work and remains responsible for it, for then the attorney's actions fall within the authorized practice of law.* While an attorney might not be found liable under a private action, that attorney may still be disciplined under Disciplinary Rules 5.3, 5.4, and 5.5 (or their state corollaries), which then may play into the evidence of a legal malpractice suit. An attorney may be aiding the paralegal in the unauthorized practice of law if the attorney responds to the paralegal knowing the response will be passed on to the paralegal's customer. Matter of Bright, 171 B.R. at 805. \"[A] lawyer shall be responsible for conduct of such a person that would be a violation of the Rules of Professional Conduct if engaged in by a lawyer if: (1) the lawyer orders or, with the knowledge of the specific conduct, ratifies the conduct involved; or (2) the lawyer is a partner or has comparable managerial authority in the law firm in which the person is employed, or has direct supervisory authority over the person, and knows of the conduct at a time when its consequences can be avoided or mitigated but fails to take reasonable remedial action.\" ABA Model Rule 5.3. has comparable managerial authority in the law firm in which the person is employed, or has direct supervisory authority over the person, and knows of the conduct at a time when its consequences can be avoided or mitigated but fails to take reasonable remedial action.\" ABA Model Rule 5.3. An attorney may be inadequately supervising the paralegal if the attorney: (1) does not know about the contents of the meeting between the paralegal and the client; (2) relies solely on the paralegal, rather than meecting with the client; and (3) fails to use independent judgment to determine which documents prepared by the paralegal should be communicated outside the law firm. See Matter of Bright, 171 B.R. 799. Finally, paralegals shouid be cautious of indicating that they are the debt collector, as opposed to the lawyer or a law firm. Unless the statements are truthful, one must not: misrepresent ! ABA MODEL RULES OF PROF'L. CONDUCT 5.3; TEX. DISCIPLINARY RULES PROF'L. CONDUCT R. 5.03. 2 ABA MODEL RULES OF PROF'L, CONDUCT 5.4; TEX. DISCIPLINARY RULES PROF'L. CONDUCT R. 5.04 cmt, 3 ABA MODEL RULES OF PROF'L CONDUCT 5.5; TEX. DISCIPLINARY RULES PROF'L CONDUCT R. 5.05. * ABA MODEL RULES OF PROF'.. CONDUCT 5.5 emt 2; TEX. DISCIPLINARY RULES PROF'L CONDUCT R. 5.5 cmt 4. the debt's status in judicial or gov't proceeding; send correspondence implying an affiliation with a federal, state, or local government agency when there is no such connection; or indicate the debt is being collected by an attorney when no attorney or law firm is involved. III. Evaluating Conflicts of Interest \"An attorney may not represent a client if the representation involves a concurrent conflict of interest. Such interest exists if: (1) the representation of one client will be directly adverse to another client; or (2) there is a significant risk that the representation of one or more clients will be materially limited by the lawyer's responsibilities to another client, a former client or a third person or by a personal interest of the lawyer.\" ABA Model Rule 1.7. A common method used in evaluating conflicts is to send firm-wide emails to all attorneys, paralegals, and law clerks. The elements to include in the firm-wide email include the Potential Client, Issues, Opposing Party, and Other Parties in Interest. Best practices include (1) being familiar with Conflicts of Interest Rules that apply to lawyers, because they will also apply to you - ABA Model Guidelines 7; and (2) maintaining an organized filing system of your current and past clients to avoid inadvertent problems. IV. Managing Issues of Privilege, Confidentiality, and Personal Information A. Privilege What is privileged communication? Under ABA Model Rule 1.6, communications between the attorney and the client are privileged. Communications directly between a paralegal (acting on behalf of a lawyer) and a client appear to be privileged, as the paralegal is then acting as the lawyer's agent. Furthermore, Restatement (Third) of Law Governing Lawyers 70 cmt. g at 539 (1998) tells us that, "A lawyer may disclose privileged communications to other office lawyers and with appropriate nonlawyer staff -- secretaries, file clerks, computer operators, investigators, office managers, paralegal assistants, iclecommunications personnel, and similar law-office assistants.\" B. Confidentiality Lawyer's duty of confidentiality (Model Rule 1.6) applies to those under the lawyer's supervision (Model Rule 5.3(a),(b)) this includes paralegals. Confidentiality requirements might also come from contract or general tort principles. Some examples of personal information that must be kept confidential include a client's Social Security Number, Date of Birth, Child Names/Addresses, Place of Employment, Medical Records, and Financial Account Numbers. C. Importance of Redaction The Bankruptcy Code and Rules enumerate information that must be redacted and information that is exempt from redaction. Federal Bankruptcy Rule 9037, entitled \"Privacy Protection for Filings Made with the Court\" provides that, with certain enumerated exceptions in subsection (b), and unless the court orders otherwise: [I]n an electronic or paper filing made with the court that contains an individual's social- security number, taxpayer-identification number, or birth date, the name of an individual, other than the debtor, known to be and identified as a minor, or a financial-account number, a party or nonparty making the filing may include only: (1) the last four digits of the social-security number and taxpayer-identification number; (2) the year of the individual's birth; (3) the minor's initials; and (4) the last four digits of the financial-account number. Fed. R. Bankr. P. 9037(a). (For ease of reference, a copy of Bankruptcy Rule 9037 is appended to this paper and should be read in its entirety.) In some circumstances, a filing by a protected person without redacting their protected information may waive future protection of the information. Fed. R. Bankr. P. 9037(g). In appropriate circumstances, paralegals should consider speaking with their supervising attorneys regarding seeking protective orders or orders to file documents under seal when clarity from the court is necessary. Lastly, it is very important to redact correctly. Always use redaction tools properly. Changing the font color or highlighting the information may not redact the information. Incorrect redaction may cause inadvertent disclosure of information. Even though the computer makes it look like the information is redacted, the information may not be redacted. It is advisable to always print the full set of redacted documents to proof them before filing and serving. {attachmeanta) Bankruptcy Code section 110 (11 U.S.C. 110) Penalty for persons who negligently or fraudulently prepare bankruptcey petitions (a) In this section (1) \"bankruptcy petition preparer\" means a person, other than an attorney for the debtor or an employee of such attorney under the direct supervision of such attorney, who prepares for compensation a document for filing; and (2) \"document for filing\" means a petition or any other document prepared for filing by a debtor in a United States bankruptey court or a United States district court in connection with a case under this title. (b) (1) A bankruptey petition preparer who prepares a document for filing shall sign the document and print on the document the preparer's name and address. 1f a bankruptey petition preparer is not an individual, then an officer, principal, responsible person, or partner of the bankruptcy petition preparer shall be required to (A) sign the document for filing; and (B) print on the document the name and address of that officer, principal, responsible person, or partner. (2) (A) Before preparing any document for filing or accepting any fees from or on behalf of a debtor, the bankruptey petition preparer shall provide to the debtor a written notice which shall be on an official form prescribed by the Judicial Conference of the United States in accordance with rule 9009 of the Federal Rules of Bankruptcy Procedure. (B) The notice under subparagraph (A) (i) shall inform the debtor in simple language that a bankruptey petition preparer is not an attorney and may not practice law or give legal advice; (ii) may contain a description of examples of legal advice that a bankruptey petition preparer is not authorized to give, in addition to any advice that the preparer may not give by reason of subsection (e)(2); and (iii) shall (1) be signed by the debtor and, under penalty of perjury, by the bankruptey petition preparer; and (I1) be filed with any document for filing. (c) (1) A bankruptey petition preparer who preparcs a document for filing shall place on the document, after the preparer's signature, an identifying number that identifics individuals who prepared the document. (2) (A) Subject to subparagraph (B), for purposes of this section, the identifying number of a bankruptey petition preparer shall be the Social Security account number of each individual who prepared the document or assisted in its preparation. (B) If a bankruptcy petition preparer is not an individual, the identifying number of the bankruptcy petition preparer shall be the Social Security account number of the officer, principal, responsible person, or partner of the bankruptey petition preparer. (d) A bankruptcy petition preparer shall, not later than the time at which a document for filing is presented for the debtor's signature, furnish to the debtor a copy of the document, (e) (1) A bankruptcy petition preparer shall not execute any document on behalf of a debtor. (2) (A) A bankruptcy petition preparer may not offer a potential bankruptcy debtor any legal advice, including any legal advice described in subparagraph (B). (B) The legal advice referred to in subparagraph (A) includes advising the debtor (i) whether (1) to file a petition under this title; or (I1) commencing a case under chapter 7, 11, 12, or 13 is appropriate; (i1) whether the debtor's debts will be discharged in a case under this title; (111) whether the debtor will be able to retain the debtor's home, car, or other property afier commencing a case under this title; (iv) concerning (1) the tax consequences of a case brought under this title; or (IT) the dischargeability of tax claims; (v) whether the debtor may or should promise to repay debts to a creditor or enter into a reaffirmation agreement with a creditor to reaffirm a debt; (vi) concerning how to characterize the nature of the debtor's interests in property or the debtor's debts; or (vii) concerning bankruptcy procedures and rights. (f) A bankruptey petition preparer shall not use the word \"legal\" or any similar term in any advertisements, or advertise under any category that includes the word \"legal\" or any similar term. (2) A bankruptcy petition preparer shall not collect or receive any payment from the debtor or on behalf of the debtor for the court fees in connection with filing the petition. (h) (1) The Supreme Court may promulgate rules under section 2075 of title 28, or the Judicial Conference of the United States may prescribe guidelines, for setting a maximum allowable fee chargeable by a bankruptey petition preparer. A bankruptcy petition preparer shall notify the debtor of any such maximum amount before preparing any document for filing for the debtor or accepting any fee from or on behalf of the debtor. (2) A declaration under penalty of perjury by the bankruptcy petition preparer shall be filed together with the petition, disclosing any fee received from or on behalf of the debtor within 12 months immediately prior to the filing of the case, and any unpaid fee charged to the debtor. If rules or guidelines setting a maximum fee for services have been promulgated or prescribed under paragraph (1), the declaration under this paragraph shall include a certification that the bankruptcy petition preparer complied with the notification requirement under paragraph (1). (3) (A) The court shall disallow and order the immediate turnover to the bankruptcy trustee any fee referred to in paragraph (2) (1) found to be in excess of the value of any services rendered by the bankruptcey petition preparer during the 12-month period immediately preceding the date of the filing of the petition; or (i1) found to be in violation of any rule or guideline promulgated or prescribed under paragraph (1). (B) All fees charged by a bankruptcy petition preparer may be forfeited in any case in which the bankruptcy petition preparer fails to comply with this subsection or subsection (b), (c), (d). (), (), or (). (C) An individual may exempt any funds recovered under this paragraph under section 522 (b). (4) The debtor, the trustee, a creditor, the United States trustee (or the bankruptcy administrator, if any) or the court, on the initiative of the court, may file a motion for an order under paragraph (3). (5) A bankruptey petition preparer shall be fined not more than $500 for each failure to comply with a court order to turn over funds within 30 days of service of such order. (1) (1) If a bankruptcy petition preparer violates this section or commits any act that the court finds to be fraudulent, unfair, or deceptive, on the motion of the debtor, trustee, United States trustee (or the bankruptey administrator, if any), and after notice and a hearing, the court shall order the bankruptcy petition preparer to pay to the debtor (A) the debtor's actual damages; (B) the greater of (i) $2,000; or (ii) twice the amount paid by the debtor to the bankruptcy petition preparer for the preparer's services; and (C) reasonable attorneys' fees and costs in moving for damages under this subsection. (2) If the trustee or creditor moves for damages on behalf of the debtor under this subsection, the bankruptey petition preparer shall be ordered to pay the movant the additional amount of $1,000 plus reasonable attorneys' fees and costs incurred. G) (1) A debtor for whom a bankruptey petition preparer has prepared a document for filing, the trustee, a creditor, or the United States trustee in the district in which the bankruptcy petition preparer resides, has conducted business, or the United States trustee in any other district in which the debtor resides may bring a civil action to enjoin a bankruptcy petition preparer from engaging in any conduct in violation of this section or from further acting as a bankruptcy petition preparer. (2) (A) In an action under paragraph (1), if the court finds that (i) a bankruptcy petition preparer has (1) engaged in conduct in violation of this section or of any provision of this title; (I1) misrepresented the preparer's experience or education as a bankruptey petition preparer; or (I11) engaged in any other fraudulent, unfair, or deceptive conduct; and (ii) injunctive relief is appropriate to prevent the recurrence of such conduct, the court may enjoin the bankruptcy petition preparer from engaging in such conduct. (B) If the court finds that a bankruptcy petition preparer has continually engaged in conduct described in subelause (1), (11), or (11T) of clause (i) and that an injunction prohibiting such conduct would not be sufficient to prevent such person's interference with the proper administration of this title, has not paid a penalty imposed under this section, or failed to disgorge all fees ordered by the court the court may enjoin the person from acting as a bankruptcy petition preparer. (3) The court, as part of its contempt power, may enjoin a bankruptcy petition preparer that has failed to comply with a previous order issued under this section. The injunction under this paragraph may be issued on the motion of the court, the trustee, or the United States trustee (or the bankruptcy administrator, if any). (4) The court shall award to a debtor, trustee, or creditor that brings a successful action under this subsection reasonable attorneys' fees and costs of the action, to be paid by the bankruptcy petition preparer. (k) Nothing in this section shall be construed to permit activities that are otherwise prohibited by law, including rules and laws that prohibit the unauthorized practice of law. (M (1) A bankruptcy petition preparer who fails to comply with any provision of subsection (b), (), (d), (e), (), (g), or (h) may be fined not more than $500 for each such failure. (2) The court shall triple the amount of a fine assessed under paragraph (1) in any case in which the court finds that a bankruptcy petition preparer (A) advised the debtor to exclude assets or income that should have been included on applicable schedules; (B) advised the debtor to use a false Social Security account number; (C) failed to inform the debtor that the debtor was filing for relicf under this title; or (D) prepared a document for filing in a manner that failed to disclose the identity of the bankruptcy petition preparer. (3) A debtor, trustee, creditor, or United States trustee (or the bankruptcy administrator, if any) may file a motion for an order imposing a fine on the bankruptey petition preparer for any violation of this section. (4) (A) Fines imposed under this subsection in judicial districts served by United States trustees shall be paid to the United States trustees, who shall deposit an amount equal to such fines in the United States Trustee Fund. (B) Fines imposed under this subsection in judicial districts served by bankruptcy administrators shall be deposited as offsetting receipts to the fund established under section 1931 of title 28, and shall remain available until expended to reimburse any appropriation for the amount paid out of such appropriation for expenses of the operation and maintenance of the courts of the United States. Bankruptcy Rule 9037 (Fed. R. Bankr. P. 9037). Privacy Protection For Filings Made with the Court (a) REDACTED FILINGS. Unless the court orders otherwise, in an electronic or paper filing made with the court that contains an individual's social-security number, taxpayer-identification number, or birth date, the name of an individual, other than the debtor, known to be and identified as a minor, or a financial-account number, a party or nonparty making the filing may include only: (1) the last four digits of the social-security number and taxpayer-identification number; (2) the year of the individual's birth; (3) the minor's initials; and (4) the last four digits of the financial-account number. (b) EXEMPTIONS FROM THE REDACTION REQUIREMENT, The redaction requirement does not apply to the following: (1) a financial-account number that identifies the property allegedly subject to forfeiture in a forfeiture proceeding; (2) the record of an administrative or agency proceeding unless filed with a proof of claim; (3) the official record of a state-court proceeding; (4) the record of a court or tribunal, if that record was not subject to the redaction requirement when originally filed; (5) a filing covered by subdivision (c) of this rule; and (6) a filing that is subject to 110 of the Code. () FILINGS MADE UNDER SEAL. The court may order that a filing be made under seal without redaction. The court may later unseal the filing or order the entity that made the filing to file a redacted version for the public record. (d) PROTECTIVE ORDERS. For cause, the court may by order in a case under the Code: (1) require redaction of additional information; or (2) limit or prohibit a nonparty's remote electronic access to a document filed with the court. () OPTION FOR ADDITIONAL UNREDACTED FILING UNDER SEAL. An entity making a redacted filing may also file an unredacted copy under seal. The court must retain the unredacted copy as part of the record. (f) OPTION FOR FILING A REFERENCE LIST. A filing that contains redacted information may be filed together with a reference list that identifies each item of redacted information and specifies an appropriate identifier that uniquely corresponds to each item listed. The list must be filed under seal and may be amended as of right. Any reference in the case o a listed identifier will be construed to refer to the corresponding item of information. (g) WAIVER OF PROTECTION OF IDENTIFIERS. An entity waives the protection of subdivision (a) as to the entity's own information by filing it without redaction and not under seal