30 Oct The Case of the Disappearing Lawyers: How Congress Got Rid of Some Really Good Bankruptcy Attorneys
Let’s say you’re in a cabal of evil banking interests, and you’re cooking up ways to put the screws to bankruptcy debtors. You hire expensive lobbyists; you pour money into the right campaign coffers; you draft some Scrooge-like legislation; you give it a wonderful name; and lo! Congress gives birth to the miscreant law known as the Bankruptcy Reform Act of 2005.
This law contained a cynical provision requiring consumer bankruptcy lawyers to identify themselves as “Debt Relief Agencies.” Masquerading as consumer protection, the real intent of this rule was to prevent lawyers from big law firms from continuing to represent consumers in bankruptcy cases. Prior to 2005, some of the best and brightest consumer bankruptcy attorneys were employed by large law firms.
Although the overwhelming majority of consumer bankruptcy lawyers are sole practitioners or small firm lawyers, it was always true that “tall building” law firms had some excellent attorneys who helped shape the law. This was especially true at the appeals-court level.
However, this has changed since 2005. Now, there are virtually no large law firm attorneys who can do consumer bankruptcies. Why? Because their law partners will no longer let them!
If a lawyer at a large law firm represents a consumer in a bankruptcy case, under the Bankruptcy Reform Act the lawyer has just brought his entire law firm under that Act’s jurisdiction. This means that any advertisement made by that firm must contain the following “disclosure”:
We are a debt relief agency. We help people file for bankruptcy under the Bankruptcy Code.
Can you imagine that a large law firm, which might have numerous business or creditor clients, would want to place such a “disclosure” on its law firm brochure? Or on its website? Or on its Christmas cards? Or on any other written material which a court might later say constituted an “advertisement”? You know the answer already: no way. Even consumer bankruptcy law firms can barely swallow this absurd language; it was enough to make big law firms choke. Word promptly went out: no lawyers at our white shoe law firm will being doing any more consumer bankruptcies, lest we have to identify ourselves as “debt relief agents” to all of our clients.
Now, some of the best minds in consumer bankruptcy are relegated to the sidelines, demoted to the role of cheerleaders instead of playmakers. I should be the first to point out that the top consumer bankruptcy lawyers are still in the game, carrying on the struggle and winning big victories against the Justice Department in major bankruptcy litigation, from their positions in small and medium sized law firms, just as they always have. But we all know it hurts that some of our colleagues have effectively been booted out of consumer bankruptcy practice by a an Act of Congress.
You really have to hand it to the authors of the Bankruptcy Reform Act of 2005. They persuaded Congress to get rid of some of the creditors’ most pesky courtroom opponents, without having to say they were doing it. No doubt, this was the intended purpose of the “debt relief agency” provision of that Act. Now you know why those lawyers disappeared!
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