Bankruptcy Attorneys are Debt Relief Agents, Says Court of Appeals

14 Sep Bankruptcy Attorneys are Debt Relief Agents, Says Court of Appeals

In March of this year, the United States Supreme Court ruled in Milavetz v. United States that provisions of the Bankruptcy Code regulating attorneys in bankruptcy cases are constitutional. The Court found that bankruptcy lawyers must make certain disclosures required by Congress and must include the specific language that the lawyer is a “Debt Relief Agent” and assists people in filing for bankruptcy. Last month, the Second Circuit Court of Appeals followed the Supreme Court case and dismissed an appeal brought by several attorneys and a consumer. In the interests of full disclosure, I am (was) one of the Plaintiffs in that case, and disagree with the decision. My client was also in the case, too.

Included in the Connecticut case were attorneys of all types, not just bankruptcy lawyers. There were attorneys that represent landlords, others that do probate or tax work. The Court dismissed the claims of the non-bankruptcy attorneys saying that since they did not practice bankruptcy law, the Debt Relief Agent language did not apply to them. This was not an issue in the Supreme Court case. Although the Supreme Court took a common sense interpretation of the Bankruptcy Code, they did not limit the extent that the Federal Government could regulate the activities of lawyers who do not practice bankruptcy law. The Supreme Court ruled that Congress was looking to prevent abuse of the bankruptcy laws when determining what lawyers can say to their clients about incurring debt and instead left it to common sense. They predicted that the government would never use these provisions against innocent lawyers advising their clients. Let’s hope the Court was right.

However, the 2nd Circuit Court of Appeals completely ignored the claims of my client. They did not determine whether she was entitled to full and complete representation by their lawyers. Until a court rules, some consumers will be deprived of needed information and some attorneys will feel compelled to push the limits of the law to fully represent their client’s best interests.

“ConnecticutGene Melchionne is a bankruptcy lawyer covering the entire State of Connecticut. He can often be found on Google+ and Twitter, where he shares information about consumer protection issues and personal finance.

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