ABA Passes Resolution Opposing BAPCPA “Debt Relief Agency” Provisions

[Guest post by JD Supra contributor Robert Richards, regarding the recent Resolution by the ABA House of Delegates, co-drafted by another JD Supra member, bankruptcy attorney Marc Stern]

Today the ABA House of Delegates unanimously approved a resolution opposing the speech restrictions and advertising requirements imposed by the "debt relief agency" provisions of the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA). JD Supra contributor Marc S. Stern chaired the working group of the Joint Ad-Hoc Committee on Bankruptcy Courts and Structure that drafted the resolution.

The resolution, submitted by Francis J. Brady, President of the Connecticut Bar Association  and Robert A. Zupkus, Chair of the ABA General Practice, Solo and Small Firm Division, sets a policy enabling the ABA to take action in the courts and in Congress respecting the provisions.

As an initial matter, the resolution provides a policy basis for an amicus brief that the ABA plans to submit in the case of Milavetz, Gallop & Milavetz, P. A. v. United States, No. 08-1119 & 1225 (see the ABA Journal article on the case, with related links, here), which the U.S. Supreme Court will hear in the October 2009 term. In addition, the resolution lends weight to the ABA’s ongoing legislative efforts to persuade Congress to amend or repeal the provisions.

At the core of the controversy is BAPCPA’s extremely broad definition of "debt relief agency," 11 U.S.C. section 101 (12A), which has been held to apply to lawyers. ABA members have identified as problematic four aspects of the Act’s "debt relief agency" provisions, many of which are codified in sections 101 and 526-528 of the Bankruptcy Code.

First, section 526(a)(4) imposes controversial speech restrictions on lawyers involved in consumer bankruptcy matters, restrictions that arguably interfere with the attorney-client relationship and violate lawyers’ First Amendment right to free speech. That provision effectively bars a lawyer from advising a client to "incur more debt in contemplation of" filing a bankruptcy petition, even if the incurrence of such debt is legal and prudent. In Milavetz, the petitioner seeks to challenge section 526(a)(4) on these grounds, among others.

Second, section 528, requiring a lawyer involved in a consumer bankruptcy matter to identify him- or herself in advertising as "a debt relief agency" that "help[s] people file for bankruptcy relief under the Bankruptcy Code" would compel many lawyers, notably those who represent creditors, to misrepresent their practices.

Finally, the BAPCPA "debt relief agency" provisions regulate attorney conduct — and empower entities including the U.S. Trustee and state law enforcement offices to enforce those regulations — in ways that are inconsistent with the traditional regulation of the bar by state courts.

According to Marc S. Stern, the resolution "refines and clarifies ABA’s longstanding policy on this issue, so as to enable the ABA to file a persuasive amicus brief in Milavetz." Stern also observed that the resolution underscored the ABA’s role as a national organization of attorneys.

"So often people ask me," said Stern, "what the purpose of the ABA is today. Why are we here? This [resolution] is a perfect example of why we need a national association that can articulate the views of lawyers across the country on a major policy issue that directly affects our practices." Among those primarily involved in the resolution process, Stern highlighted the contributions of Francis J. Brady and the Connecticut Bar Association, Lisa Hill Fenning of Dewey & LeBoef, and R. Larson Frisby, ABA’s Senior Legislative Counsel. For more information, see the full text of the resolution, or contact Marc S. Stern.

Related:

American Bar Association – Resolution by House of Delegates: Opposition to the Bankruptcy Abuse Prevention and Consumer Protection Act, P .L. 109-8 ("BAPCPA") (full copy of text)

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