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Wednesday, December 17, 2008
Courts - More on what is a "debt relief agency" for purposes of the BAPCPA
Updating these two ILB entries from September on the 8th Circuit ruling on what constitutes a "debt relief agency," the just-released Jan. 2009 issue of the ABA Journal includes this article by David L. Hudson Jr. headed "A Debt-Defying Act: Courts say part of embattled bankruptcy law violates First Amendment." The article begins:
In these days of financial turmoil, bankruptcy lawyers seeking to advise clients on dealing with burdensome debt can take comfort: The first federal appeals court to rule on a controversial 2005 bankruptcy reform statute has shot down a provision that limits what lawyers may say.In Milavetz v. U.S., a divided panel of the 8th U.S. Circuit Court of Appeals at St. Louis last September invalidated a section of the Bankruptcy Abuse Prevention and Consumer Protection Act that prohibited “debt relief agencies”—which include attorneys—from advising clients to “incur more debt in contemplation” of filing bankruptcy.
Judge Lavenski R. Smith called that part of section 526(a)(4) “unconstitutionally overbroad” and a violation of the First Amendment. The provision “prevents attorneys from fulfilling their duty to clients to give them appropriate and beneficial advice,” Smith wrote in his majority opinion.
“If you have financial troubles and are contemplating bankruptcy, your attorney can now provide financial planning advice to assist in avoiding bankruptcy or prevent recidivism in the bankruptcy system,” says Robert J. Milavetz, president of the Edina, Minn., law firm Milavetz, Gallop & Milavetz, which filed the suit.
The 9th U.S. Circuit Court of Appeals at San Francisco is considering a similar case, and several federal bankruptcy courts also have ruled against the measure.
Posted by Marcia Oddi on December 17, 2008 01:17 PM
Posted to Courts in general