Are Bankruptcy Lawyers “Debt Relief Agencies”? Soon, the Supreme Court Will Let Us Know

When Congress passed bankruptcy “reform” in 2005, it included provisions requiring consumer bankruptcy lawyers to call themselves “Debt Relief Agencies,” restricting the information we could provide our clients, and adding all sorts of disclosures and disclaimers that did little more than generate lots and lots of paper.

These provisions were challenged as unconstitutional by a Minnesota bankruptcy law firm. The federal district court agreed, and ordered that attorneys in the District of Minnesota were not Debt Relief Agencies and that the challenged provisions were unconstitutional.

The Department of Justice appealed, and the U.S. Court of Appeals for the Eight Circuit reversed the District Court’s ruling, in part. It held that attorneys who provide “bankruptcy assistance” were included within the law’s definition of “debt relief agency.” However, it also held that provisions that prohibited a debt relief agency from advising clients to incur debt in contemplation of bankruptcy was overbroad, and thus unconstitutional.

The U.S. Supreme Court agreed to hear the appeal, and will examine three issues:

1) Did the Eight Circuit’s interpretation of attorneys as “debt relief agencies” contradict the plain meaning of the BAPCPA?

2) Does the BAPCPA, as applied to attorneys, restrict commercial speech by requiring mandatory disclosures in advertisements, and thus violate First Amendment free speech rights?

3) Does the BAPCPA’s disclosure requirements violate Fifth Amendment due process rights?

Oral argument is set for the Fall 2009 term.