Lawyers as "Debt Relief Agencies" under the Bankruptcy Abuse Prevention and Consumer Protection Act: A Review of Milavetz, Gallop & Milavetz v. U.S.

Lawyers as "Debt Relief Agencies" under the Bankruptcy Abuse Prevention and Consumer Protection Act: A Review of Milavetz, Gallop & Milavetz v. U.S.

Professor Eli Wald examines the Supreme Court's decision on whether attorneys are "debt relief agencies" pursuant to the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), and if so, whether BAPCPA's provisions regarding advice to clients and requiring certain disclosures in advertisements violate the First Amendment commercial speech right of attorneys.

Excerpt:

In Milavetz, Gallop & Milavetz, P.A., v. US (hereinafter Milavetz), the Court explored whether attorneys are "debt relief agencies" pursuant to the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, 11 U.S.C. §§ 101(3), (12A) (hereinafter BAPCPA), and if so, whether BAPCPA's provisions regarding advice to clients and requiring certain disclosures in advertisements violate the First Amendment commercial speech right of attorneys. This Commentary, written by Professor Eli Wald, a legal ethics expert and member of the Colorado Supreme Court Standing Committee on the Colorado Rules of Professional Conduct and the Colorado Bar Association Ethics Committee, summarizes the pertinent legal issues decided by the Court.

Background

Congress enacted BAPCPA to address perceived abuses of the bankruptcy system, including misconduct by "debt relief agencies," defined as professionals who provide bankruptcy assistance to consumer debtors. Petitioners, a law firm and some of its constituencies, filed a pre-enforcement suit in federal district court asserting that attorneys are not "debt relief agencies" as the term is used in the BAPCPA, and, in the alternative, that some of the Act's provisions are unconstitutional as applied to attorneys. Milavetz, Gallop & Milavetz, P.A., v. US, 130 S. Ct. 1324, 1329-31(2010).

Procedural Background

The district court agreed with petitioners holding that the term "debt relief agency" did not include lawyers, and that some the Act's provisions applicable to debt relief agencies were unconstitutional. Id., at 1331. The Court of Appeals for the Eighth Circuit affirmed in part and reversed in part. Relying on the Act's plain language, it rejected the district court's finding that the term "debt relief agency" did not apply to lawyers. It also disagreed with the district court with regard to the constitutionality of the Act's disclosure requirements and upheld them as applied to attorneys. The Court of Appeals did, however, agree with the district court that a provision prohibiting a debt relief agency from advising a consumer to incur any additional debt when the consumer is contemplating bankruptcy was unconstitutional. The Supreme Court granted certiorari. Id.

The Pertinent Questions: (1) does the term "debt relief agency" include lawyers? (2) if so, does BAPCPA's provisions curtailing the scope of permissible advice and restricting advertisement violate lawyers' commercial free speech rights under the First Amendment?

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