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Thursday, September 04, 2008
Courts - 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"
In Milavetz, Gallop & Milavetz, P.A. v. U.S., a 24-page opinion, the Court of Appeals for the 8th Circuit holds on p. 18:
In sum, attorneys who provide bankruptcy assistance to assisted persons are debt relief agencies under the Bankruptcy Code, and § 526(a)(4) is unconstitutional as applied to these attorneys, but §§ 528(a)(4) and (b)(2) are constitutional. Accordingly, we affirm in part and reverse in part.More from the opinion:
Milavetz, Gallop & Milavetz, P.A., a law firm that practices bankruptcy law, the firm's president, a bankruptcy attorney within the firm, and two clients who
sought bankruptcy advice from the firm brought suit against the United States seeking a declaratory judgment that certain provisions of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA)—11 U.S.C. §§ 526(a)(4) and 528(a)(4) and (b)(2)—did not apply to attorneys and law firms and are unconstitutional as applied to attorneys. * * *One BAPCPA amendment added a new term, "debt relief agency," which is defined in § 101(12A) of the Code. 11 U.S.C. § 101(12A). The amended Code restricts some actions of debt relief agencies, while requiring them to do others. See 11 U.S.C. § 526 ("Restrictions on debt relief agencies"); 11 U.S.C. § 528 ("Requirements for debt relief agencies"). For example, § 526(a)(4) bars a debt relief agency from advising a client "to incur more debt in contemplation" of a bankruptcy filing, 11 U.S.C. § 526(a)(4), while §§ 528(a)(4) and (b)(2) require debt relief agencies to include a disclosure in their bankruptcy-related advertisements directed to the general public declaring: "'We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code[,]'or a substantially similar statement." 11 U.S.C. § 528(a)(4), (b)(2). * * *
Initially, we address whether attorneys fall within the Code's definition of debt relief agencies. * * *
Whether attorneys fall within the Code's definition of debt relief agencies is an issue of first impression among the Courts of Appeals. * * *
Because attorneys were not specifically excluded from the definition of debt relief agencies, we hold that attorneys that provide "bankruptcy assistance" to "assisted persons" are "debt relief agencies" as that term is defined by the Code. Interpreting the definition of "debt relief agency" to exclude bankruptcy attorneys would be contrary to Congress's intent.
Posted by Marcia Oddi on September 4, 2008 12:59 PM
Posted to Courts in general