FAILURE TO DISCLOSE POTENTIAL CONFLICT OF INTEREST DOES NOT AUTOMATICALLY RESULT IN DISQUALIFICATION OF COUNSEL IN RE NORTHWESTERN CORPORATION, (Del. 2004) Inadequate disclosure does not mandate disqualification of Counsel. The appropriate remedy is left to the broad discretion of the Court. See, e.g., In re Best Craft Gen. Contractor and Design Cabinet, Inc., 239 B.R. 462 (Bankr. E.D.N.Y. 1999). In this case, the disclosure was made at the outset of the case to the United States Trustee and formal disclosure was later made. Also, as noted, the prior disclosure to the United States Trustee is indicative of a lack of intent to conceal. Further, as discussed in the next session, this is not a case where full disclosure would have revealed an actual conflict. Rather, full disclosure would have alerted all parties to facts that should have been known but which, in the end, do not bear upon Paul Hastings' qualification to serve as Counsel. For these reasons, the Court will not now disqualify Paul Hastings for its previous failure to disclose. _____________________ DEBTOR'S PREPETITION DEPOSIT FOR KIDS COLLEGE TUITION IS NOT PROPERTY OF THE ESTATEIn re Cheatham (Bkrtcy.MD 2004) Alabama Debtors invested $14,636 in their son's and daughter's prepaid tuition program. Because the payments were characterized as "prepaid" tuition, the funds belonged to the children, not the Debtors when the Debtors filed Bankruptcy. _____________________ COURT INVALIDATES DEBTORS' MORTGAGE FOR TILA VIOLATION; DEBTOR MAY PAY LOAN THROUGH CHAPTER 13 PLAN In re Bell, Bell v. Parkway Mortage (Bkrtcy.E.D.Pa. 2004) Truth In Lending Act, 15 USC § 1601 et seq. Debtors allowed to rescind their mortgage under the Truth in Lending Act for alleged prepetition predatory lending practices. The Debtors may repay the remaining allowed unsecured claim owed to the lender through their Plan. The Court found that the Debtor is entitled to rescind the loan because she was not given notice of her right to rescind as required by the Truth in Lending Act. Debtor was also awarded damages and Attorney's Fees for violations of that Act as well as other statutes. ______________________ ATTY MUST DISGORGE CHAPTER 7 FEES PAID BY HIS CHAPTER 13 CLIENTLewis v. Mozelle S. (Bkrtcy.N.D.Okla. 2004) Chapter 13 Debtor was mother of a daughter and son-in-law in Chapter 7. The Mother paid Attorney the fees for their Chapter 7. Attorney failed to disclose receipt and source of payment of the Chapter 7 fees. Attorney must disgorge the undisclosed fees.