Tuesday, January 13, 2009

debt relief agencies

The first federal appeals court has struck down a provision of BAPCPA that limits what lawyers may say to their clients who are contemplating bankruptcy.

In the case of Milavetz v. U.S., the 8th U.S. Circuit Court of Appeals at St. Louis invalidated a section of the Bank­ruptcy Abuse Preven­tion and Con­sumer Protection Act (BAPCPA) which prohibited “debt relief agencies”from advising their clients to incur more debt in anticipation of filing bankruptcy. This provision also includes lawyers.

Judge Lavenski R. Smith called that section 526(a)(4) “unconstitutionally overbroad” thus violating the the First Amendment -free speech. This conflicts with the attorneys duties to provide full and proper advice to their respective clients. For a thorough analysis of this story, please read the article, "A Debt-Defying Act" in the ABA Journal.