Exceptions To Being A Debt Relief Agency
By Andy Miofsky, Illinois Bankruptcy Attorney on Feb 27, 2007 in General Bankruptcy Information, Illinois
Until two years ago, I never heard the term “debt relief agency”. Now, I see it on letterheads, in yellow page ads, on websites and even on business cards. It is becoming ubiquitous as the morning dew. What gives?
The statutory definition of “debt relief agency” can be found at Title 11 U.S.C. 101(12A) of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 [The Act] and on the Bankruptcy Law Network website in the article, “What Is A Debt Relief Agency?”. The term, which first appeared in this new bankruptcy legislation, includes anyone who provides any bankruptcy assistance to an assisted person in return for the payment of money or other valuable consideration, or who is a bankruptcy petition preparer. The Act does not include variations on the word “agency” in the definition; hence, the full statutory term “debt relief agency” is used in print and throughout this discussion. Often, when the word agent or agencies may seem more appropriate, the acronym DRA appears in context.
Not everyone is a debt relief agency and not every debt relief agency is always a debt relief agency. Section 101(12A) provides five exceptions to the definition of debt relief agency for certain classes of people or organizations. These exceptions include:
1) An officer, director, employee or agent of a debt relief agency;
2) A 501(C) (3) tax exempt nonprofit organization;
3) A creditor helping an assisted person restructure debt;
4) A bank or credit union meeting FDIC or Federal Credit Union Act (FCUA) guidelines, including subsidiaries and affiliates;
5) An author, publisher, distributor or seller of works subject to copyright protection.
Anyone who meets the definition of debt relief agency must timely provide a written contract to an assisted person and also must disclose both its status as a debt relief agency in any advertisement of bankruptcy services, and must disclose that the services relate to bankruptcy. The statute requires the use of certain magic words, such as: “We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.” While these particular words are specified, these exact words are not required, and it is permissible to use “a substantially similar statement”. This DRA disclaimer frequently appears on letterhead and in telephone book or internet advertisements. While some persons are acting as a debt relief agency in some positions, they may not always be a debt relief agency in other situations. For example, a lawyer who files bankruptcy petitions is a debt relief agency, but that same lawyer, who writes copyrightable material about bankruptcy, appears to fall under one of the five exceptions. Precisely when the debt relief agency light bulb turns on and off is a mystery, and for that reason, many publish the disclaimer in a variety of locations, such as business cards, internet websites and even this Bankruptcy Law Network blog.
For a thought provoking extension of this subject, see the article, “Is My Bill Collector A Debt Relief Agency”?
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Chip Parker | Feb 27, 2007 | Reply
Recently, Judge A. Jay Cristol of the Southern District of Florida ruled that attorneys are not debt relief agencies. You can see a copy of the decision at http://www.jaxbkybar.com/PDF/cristol_order.pdf
Andy Miofsky, Attorney at Law | Feb 27, 2007 | Reply
Thanks for pointing out this case, Chip. Upon review, it is clear the decision is limited to attorneys who do not charge a fee for their services. In this Florida case, the attorney provided free legal services to an indigent client. This is called pro bono work. A necessary element of the DRA statute is the requirement of providing a service for the payment of money or other valuable consideration, hence the attorney was not a DRA in this instance. Although the Judge comments in dicta that he believes the law is unconstitutional, he does not decide the case on that issue. I suspect a for-profit lawyer will soon present a similar motion to this Judge in an effort to have the law declared unconstitutional on the broader issue.