In re Attorneys at Law and Debt Relief Agencies

Decision Date17 October 2005
Citation332 B.R. 66
PartiesIn re ATTORNEYS AT LAW AND DEBT RELIEF AGENCIES.
CourtU.S. Bankruptcy Court — Southern District of Georgia
ORDER

LAMAR W. DAVIS, JR., Chief Judge.

The issue before the Court is whether amendments to the Bankruptcy Code, which become effective today, regulating Debt Relief Agencies apply to attorneys licensed to practice law who are members of the Bar of this Court.

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 ("BAPPA") established new and significant restrictions on the activities of debt relief agencies. 11 U.S.C. §§ 526, 527 and 528. They require "debt relief agencies" who render "bankruptcy assistance" to enter written contracts with "assisted persons," disclose the extent of services provided and fees charged, and disclose clearly and conspicuously in all advertising that their services contemplate bankruptcy. § 528. They are required to provide a detailed written notice to all "assisted persons" of the disclosure requirements of the Code, the obligation of accuracy and truthfulness on those disclosures, and that failure to comply with those requirements carry potential civil and criminal sanctions. § 527. They are required to advise the "assisted person" that the person may proceed pro se, or may hire an attorney, or may hire a bankruptcy petition preparer, and that only attorneys and not petition preparers can render legal advice. Id. They are required to provide the "assisted person" with information on how to value assets, how to complete bankruptcy schedules, and how to determine what property is exempt. Id. Debt relief agencies are prohibited from failing to provide the services they contracted to provide, counseling any person to make false statements, or advising the person "to incur more debt in contemplation of such person filing a case under this title or to pay an attorney or bankruptcy petition preparer ...." § 526(a)(4) (emphasis added).

Section 526(c) creates civil liability for violation of the duties enumerated. It also grants to the Court the right "on its own motion" or that of the United States Trustee or a debtor to enjoin violations or impose civil remedies. This grant complements the inherent authority of a Court to regulate the practice of the members of its Bar, as embodied in this District in Southern District Local Rules 83, 83.5 and Local Bankruptcy Rule 2090.

Debt relief agencies are defined as follows in § 101(12A):

[A]ny person who provides any bankruptcy assistance to an assisted person in return for the payment of money or other valuable consideration, or who is a bankruptcy petition preparer under section 110 ....

Bankruptcy assistance is defined as follows in § 101(4A):

[A]ny goods or services sold or otherwise provided to an assisted person with the express or implied purpose of providing information, advice, counsel, document preparation, or filing, or attendance at a creditors' meeting or appearing in a case or proceeding on behalf of another or providing legal representation with respect to a case or proceeding under this title.

Although attorneys are not expressly included in the definition, the language defining debt relief agencies is broad enough on its face to include attorneys and the reference to "providing legal representation" in § 101(4A) suggests that attorneys are covered.

Indeed during the months since passage of BAPCA, considerable analysis of all its provisions has been undertaken by the academic and legal community to educate the public, attorneys, and the judiciary of its content, scope and meaning. Commentary relating to these provisions appear to assume or at least raise the specter that beginning October 17, 2005, attorneys will come within the scope of §§ 101(12A), 526, 527, and 528. See HON. WILLIAM HOUSTON BROWN AND LAWRENCE R. AHERN, III, 2005 BANKRUPTCY REFORM LEGISLATION WITH ANALYSIS, p.58 (Thomson/West 2005); Erwin Chemerinsky, Constitutional Issues Posed in the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, 79 AM. BANKR. L.J. 571, 576 (2005) ("A lawyer who provides any bankruptcy assistance to an `assisted person' is defined to be a `debt relief agency.'"); Coastal Bankruptcy Law Institute Seminar Materials (September 23, 2005) at Tab 4, pg. 2; Hon. Keith M. Lundin, Ten Principles of BAPCPA: Not What was Advertised, 24 AM. BANKR. INST. J. 1, 69 (Sept.2005) (BAPCPA "de-professionalizes bankruptcy attorneys as `debt relief agencies.'"); Samuel Gerdano, 25 Changes to Personal Bankruptcy Law, at ¶ 19, http://www.abiworld. netlbankbill/changes.html ("Attorneys as Debt Relief Agencies"). In the words of one bankruptcy scholar:

More confusing, if not simply absurd, are the provisions setting out requirements for "debt relief agencies." These provisions, due to slipshod drafting, will apply to many attorneys who rarely, or never, represent consumer bankruptcy debtors ...

[The definition of "debt relief agency"] clearly includes attorneys who represent individual landlords or other mom and pop businesses that owe primarily consumer debts, as well as those who represent consumer creditors, or nondebtor spouses who are creditors in title 11 cases, including Chapter 11 cases. Because "person" is defined to include partnership and corporations, presumably the entire law firm is a debt relief agency.

Henry J. Sommer, Trying to Make Sense Out of Nonsense: Representing Consumers Under the "Bankruptcy Abuse Prevention and Consumer Protection Act of 2005", 79 AM. BANKR. L.J. 191, 206-07 (Spring 2005). If these commentators are correct, a new layer of regulation will be superimposed on the bar of this Court, and evaluation of new risks and liabilities will preoccupy them as they strive to represent their clients, comply with existing state regulation of their practice, learn the new substantive and procedural mandates of this new law, and adhere to the separate professional standards applicable to members of the Bar of this Court. See Local Rule 83.5(d). That is a burden which should not be borne by the Bar needlessly or merely out of an abundance of caution. It should and must be borne by the Bar if that is the result Congress mandated. Anything less than the highest level of professional conduct is not tolerable in this Court. Equally intolerable is needless uncertainty in the minds of the Bar as to their duty under this new statute.

Are the members of the Bar of this Court "debt relief agencies?" Exercising the grant of authority of 11 U.S.C. §§ 526(c)1 and 105 and the inherent power of this Court, I conclude that they are not.

1) The § 101(12A) definition of "debt relief agency," while extremely broad does not include the word "attorney" or "lawyer." It does include "bankruptcy petition preparer," but that term is defined in § 110 and expressly excludes attorneys and their staffs. "Attorney" is separately defined in § 101(4), which makes no reference to debt relief agencies or to subsection (12A). Clearly as a matter of plain language, "attorney" and "debt relief agency" are not synonymous nor do they in common understanding include each other. When construing a statute, the ordinary meaning should be read into terms unless a special statutory definition controls. See American Tobacco Co. v. Patterson, 456 U.S. 63, 68, 102 S.Ct. 1534, 71 L.E[d].2d 748 (1982) ("As in all cases involving statutory construction, our starting point must be the language employed by Congress, and we assume that the legislative purpose is expressed by the ordinary meaning of the words used. Thus absent a clearly expressed legislative intention to the contrary, that language must ordinarily be regarded as conclusive.") (citations omitted). Because the definition of "debt relief agency" omits express reference to attorneys and includes a term which excludes attorneys, it is difficult to imagine that Congress meant otherwise. Even though the definition of debt relief agency is facially broad enough to cover bankruptcy petition preparers and attorneys, it is instructive that Congress saw the necessity of expressly including "bankruptcy petition preparers" (who clearly provide "bankruptcy assistance") in the definition of debt relief agency, yet omitted any express inclusion of attorneys.

It is true that to be a debt relief agency an entity must provide "bankruptcy assistance," which may include "providing legal representation." § 101(4A). The inclusion of "legal representation" in the scope of what a debt relief agency does certainly suggests a contrary result to that which I reach, but it is well-known that non-lawyers often attempt to provide "legal representation," often to poorer, less educated, and more vulnerable citizens. To do so constitutes unauthorized practice of law and may include misdemeanor penalties under state law. O.C.G.A. § 15-19-56. However, the likelihood of effective enforcement of those remedies by the organized bar varies from state to state, is restricted by limited availability of resources, and often cannot occur in a time-sensitive period so as to protect the consumer. I conclude that the inclusion of the term "legal representation" in the definition of "bankruptcy assistance" was Congress's effort to empower the Bankruptcy Courts presiding over a case with authority to protect consumers who are before the Court, who may have been harmed by a debt relief agency that may have engaged in the unauthorized practice of law, and whose existing remedies for any damage is more theoretical than real.2

2) Section 527(b) requires debt relief agencies to inform assisted persons that they have the right to hire an attorney or to represent themselves, that only an attorney can render legal advice, and how to perform services pro se that would be universally provided if the person hired an attorney. It is hard to imagine that the language which, again, conspicuously omits the word "attorney" really requires an attorney to tell an assisted person that he/she has the right to hire an...

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7 cases
  • Connecticut Bar Ass'n v. U.S., Civil Action No. 3:06-CV-729 (CFD).
    • United States
    • United States District Courts. 2nd Circuit. United States District Court (Connecticut)
    • September 9, 2008
    ...are expressly excluded from the definition of bankruptcy petition preparers.3 See In re Attorneys at Law and Debt Relief Agencies, 332 B.R. 66, 67 (Bkrtcy.S.D.Ga.2005) However, this suggests that a possible inference from what is likely imprecise drafting outweighs the plain meaning of the ......
  • Milavetz, Gallop & Milavetz, P.A. v. U.S., 07-2405.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (8th Circuit)
    • September 4, 2008
    ...(Bankr.E.D.Va.2006) (finding debtor's counsel qualified as a debt relief agency); but see In re Attorneys at Law and Debt Relief Agencies, 332 B.R. 66 (Bankr.S.D.Ga.2005) (holding that attorneys are not debt relief agencies); In re Reyes, 361 B.R. 276 (Bankr.S.D.Fla. 2007) (finding that att......
  • Olsen v. Gonzales, 05-5365-HO.
    • United States
    • United States District Courts. 9th Circuit. United States District Court (Oregon)
    • August 11, 2006
    ...that attorneys are not "debt relief agencies within the meaning of the BAPCPA". See In re Attorneys At Law and Debt Relief Agencies, 332 B.R. 66 Judge Lamar Davis acknowledged that the language defining debt relief agency is broad enough to include attorneys and law firms. Id. at 67-68. Jud......
  • Hersh v. U.S. ex rel. Mukasey, 07-10226.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (5th Circuit)
    • December 18, 2008
    ...believe Congress intended the scope of [11 U.S.C. § 101(12A)] to include attorneys."); In re Attorneys at Law and Debt Relief Agencies, 332 B.R. 66, 71 (Bankr.S.D.Ga.2005) (holding that attorneys who are members of the bar of the Bankruptcy Court for the Southern District of Georgia and tho......
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8 books & journal articles
  • Megan A. Taylor, Gag Me With a Rule of Ethics: Bapcpa's Gag Rule and the Debtor Attorney's Right to Free Speech
    • United States
    • Emory University School of Law Emory Bankruptcy Developments Journal No. 24-1, March 2008
    • Invalid date
    ...327-where state and federal ethical guidelines would be in conflict would exacerbate the problem. 129 In re Debt Relief Agency Attorneys, 332 B.R. 66, 71 (Bankr. S.D. Ga. 2005). 130 MODEL RULES OF PROF'L CONDUCT Preamble [9] (1989); see supra Part III.A. 131 See supra Part II.B. 132 See In ......
  • 2005: a Consumer Bankruptcy Odyssey
    • United States
    • University of Nebraska - Lincoln Nebraska Law Review No. 39, 2022
    • Invalid date
    ...the scope of the practice of law and do not constitute a separate commercial enterprise." In re Attorneys at Law and Debt Relief Agencies, 332 B.R. 66 (Bankr. S.D. Ga. 2005). This extraordinary order - the judicial equivalent of "take that!" - came too late for an evaluation or response in ......
  • The Eighth Circuit loosens the grip of the bankruptcy gag rule, but holds attorneys to advertising disclosure requirement: Milavetz, Gallop & Milavetz, P.A. v. United States.
    • United States
    • Missouri Law Review Vol. 74 No. 3, June 2009
    • June 22, 2009
    ...opinion of Chief Judge Rosenbaum in Milavetz, Gallop & Milavetz, P.A. v. United States, 355 B.R. 758, 768-69 (D. Minn. 2006)). (58.) 332 B.R. 66, 69 (Bankr. S.D. Ga. (59.) Id. at 70. (60.) Id. at 69-70 (referring specifically to 11 U.S.C. [section] 527(b) (2006)). (61.) Id. (suggesting ......
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    • United States
    • Mercer University School of Law Mercer Law Reviews No. 58-4, June 2007
    • Invalid date
    ...Id. at 1748. 15. Id. 16. Id. at 1749. 17. Id. at 1748-49. 18. Id. at 1750. 19. Id. 20. In re Attorneys at Law and Debt Relief Agencies, 332 B.R. 66, 69 (Bankr. S.D. Ga. 2005). See Hon. James D. Walker, Jr. & Amber Nickell, Bankruptcy, 57 Mercer L. Rev. 1013, 1014-15 (2006), for a full discu......
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