Is a Bankruptcy Attorney a Debt Relief Agency?

Back in the old days (prior to the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), many attorneys would advise their clients to incur debt in order to eliminate any possibility of having unexempt equity in an asset.  Whether this was right or wrong is not the focus of this article.  The focus instead is to simply state that this behavior existed.

To prevent this problem, the lawmakers implemented wording into Section 526(a)(4) of 11 USC when the BAPCPA law went into effect in 2005.  According to this Section, a debt relief agency shall not advise an assisted person or prospective assisted person to incur debt in contemplation of such person filing a case under this title . . . .

I am sure you agree that all this is well and good, but what does it have to do with the point of this article?  The point is that on March 8, 2010, the Supreme Court declared that attorneys for debtors are debt relief agencies pursuant to 11 USC Section 101(12A) of BAPCPA.  A Minnesota law firm by the name of Milavetz, Gallop and Milavetz filed a declaratory judgment action in the District Court against this ruling; but it was overturned.

What does this mean for your law firm? It could be a very good thing marketing wise.  The stigma most people have against the word bankruptcy is often one of depression and humility.  Therefore, if an attorney markets their law firm as a debt relief agency, it could have a more positive effect on consumers in that particular marketplace.

However, this is just my opinion.  Have a great week!

Victoria Ring
Certified Paralegal and Instructor

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