Consumer Bankruptcy Attorneys Fall Under BACPA’s Definition of Debt Relief Agencies

Bad legislation makes for bad jurisprudence. After all that has been said and written following Justice Satomayor’s recent incursion into the consumer bankruptcy world, perhaps this is the single most important lesson to be learned. BACPA may be a terrible piece of legislation, however, popular or not, the Supreme Court is still charged with telling all of us what it says. Out of the gates, they were given a softball for a warm up pitch. In light of ­­­­­­Heintz v. Jenkins (1995) in which the Court held that attorneys who engaged in consumer debt-collection litigation on behalf of creditor clients were “debt collectors” under the Fair Debt Collection Practices Act, Milavetz had a very tough hill to climb. The contention that the definition of debt relief agency does not apply to attorneys because the word “attorney” appears nowhere in the text of §101(12A) is attenuated at best. The provisions at controversy clearly describe and are intended to regulate the activities of bankruptcy attorneys.

BACPA defines a debt relief agency as: “any person who provides any bankruptcy assistance to an assisted person . . . for. . . payment . . . , or who is a bankruptcy petition preparer.” Under § 101(4A), bankruptcy assistance refers to goods or services “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.” The definition is clearly intended to cast a wide net. Let’s face it; consumer bankruptcy practitioners have been voluntarily disclosing their status as debt relief agencies for years post-BACPA. “We are a debt relief agency, we help people file for relief under the Bankruptcy Code.” This common practice represents an already well established understanding that since 2005, bankruptcy attorneys are now also debt relief agencies. The tortured, government speak term does leave one scratching their head, but not for long if they’re even marginally familiar with the workings of our Congress. Indeed, under the law Satomayor and Co. were charged with interpreting, it is difficult if not impossible to argue that bankruptcy attorneys, in representing their clients, do not provide bankruptcy assistance (advice, counsel) and therefore do not qualify as debt relief agencies. Bankruptcy petition preparers, the only class of professionals Milavetz contended qualified as debt relief agencies are prohibited by law from giving legal advice. Kudos to Milavetz for trying, but whether they would admit it or not, their quest was more an assault on BACPA as an unpopular piece of legislation, rooted in a vague and as yet somewhat undefined equitable undercurrent that still refers to the 5 year old law as “new” and hasn’t adjusted to its rather unpleasant after taste. It remains to be seen whether the government won the battle but will lose the war. The issue is not as much with the way BACPA broadly defines debt relief agencies as much as it is with the strictures of BACPA itself. It would be fair to say that consumer bankruptcy attorneys by and large are “not fans” of the legislation with its onerous document production requirements and draconian income guidelines. However, the Milavetz decision goes further than imposing nonsensical busy work on attorneys; it creates dangerous ambiguity as to how they can appropriately advise their clients. The preliminary skirmish over the definition of a tortured, almost Orwellian phrase, “debt relief agency”, was the gateway to the larger discussion of whether BACPA impermissibly infringes upon the First Amendment rights of the consumer bankruptcy bar. If bankruptcy attorneys are not considered debt relief agencies under BACPA, there is no reason to address whether section 526 and 528 are constitutional as applied to attorneys.

John O’Connor