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Friday, September 05, 2008

Courts - More on: In question of first impression in the circuits, 8th Circuit holds "Attorneys who provide bankruptcy assistance to assisted persons are debt relief agencies under the Bankruptcy Code"

Updating this ILB entry from yesterday, reporting on the 8th Circuit decision in the case of In Milavetz, Gallop & Milavetz, P.A. v. U.S., Brent Kendall of the Wall Street Journal reports today under the headline "Court Finds Violation In Bankruptcy Law: Provision That Bans Advice to Add Debt Gets Struck Down." Some quotes:

WASHINGTON -- A federal appeals court in St. Louis ruled Thursday that a provision of a sweeping 2005 federal bankruptcy-overhaul law violates the free-speech rights of lawyers.

The 8th U.S. Circuit Court of Appeals struck down a provision of the Bankruptcy Abuse Prevention and Consumer Protection Act that barred attorneys from advising clients to take on more debt before they filed for bankruptcy protection.

The appeals court, in a 2-1 ruling, said the provision "prevents attorneys from fulfilling their duty to clients to give them appropriate and beneficial advice." * * *

Thursday's ruling was a victory for Minnesota law firm Milavetz, Gallop & Milavetz, which challenged the bankruptcy provision soon after the 2005 law went into effect.

"We have a right to help our clients put their affairs in order before they file for bankruptcy," said Barbara Nilva Nevin, a lawyer with the firm.

Similar legal challenges are making their way through other lower courts, but Thursday's ruling marked the first time that a federal appeals court weighed in on the validity of the provision.

A Justice Department representative said the department was reviewing the decision.

Constitutional law professor Erwin Chemerinsky, dean of the University of California-Irvine School of Law, said the invalidated provision was the most significant constitutional problem with the bankruptcy law.

"This is an issue that's going to make it to the Supreme Court," Mr. Chemerinsky said.

Posted by Marcia Oddi on September 5, 2008 09:17 AM
Posted to Courts in general