Law firm, which had previously represented the corporate and individual debtors, and was still owed fees by the corporation, was approved to represent debtors in their bankruptcy cases. The bankruptcy court raised the issue of conflict of interest for the first time in connection with law firm's fee application for work performed in the bankruptcies. Finding multiple conflicts of interest, the bankruptcy court denied all requested fees. The law firm appealed. The district court found no per se conflict of interest or appearance of impropriety in law firms' simultaneous representation of the individual debtors and their wholly owned business, despite the existence of debts owed between debtors. The court then considered whether law firm was eligible to be employed as debtor's counsel under 11 U.S.C. § 327(a). To be eligible under that provision, the law firm must be "disinterested" under 11 U.S.C. § 101(13). The court determined the existence of a serious issue with respect to law firm's qualification to serve as counsel for the corporation, based on the debt owed to it by that debtor. The court rejected law firm's argument that 11 U.S.C. § 1107(b) allowed its representation of the corporation, concluding that a law firm that is a prepetition creditor of the debtor is not "disinterested," and is therefore ineligible to be employed as counsel for that debtor. However, after considering the statutory history and, in particular, the recent but not applicable amendment of § 327(c), the district court concluded, with respect to law firm's representation of the individual debtors, that the need for attorney discipline was outweighed by the equities of the case, and reversed the bankruptcy court's order denying fees relating to law firm's representation of the individual debtors.