A setback for debtors and debtors attorney’s everywhere.

This part is bad for the attorneys:

Attorneys who provide bankruptcy assistance to assisted persons are debt relief agencies under the BAPCPA. By definition, “bankruptcy assistance” includes several services commonly performed by attorneys, e.g., providing “advice, counsel, [or] document preparation,” §101(4A). Moreover, in enumerating specific exceptions to the debt-relief-agency definition, Congress indicated no intent to exclude attorneys. See §§101(12A)(A)–(E). Milavetz relies on the fact that §101(12A) does not expressly include attorneys in advocating a narrower understanding.

And this part is bad for the debtors:

Section 526(a)(4) prohibits a debt relief agency only from advising a debtor to incur more debt because the debtor is filing for bankruptcy, rather than for a valid purpose. The statute’s language, together with its purpose, makes a narrow reading of §526(a)(4) the natural one. Conrad, Rubin & Lesser v. Pender, 289 U. S. 472, supports this conclusion. The Court in that case read now-repealed §96(d), which authorized reexamination of a debtor’s attorney’s fees payment “in contemplation of the filing of a petition,” to require that the portended bankruptcy have “induce[d]” the transfer at issue, id., at 477, understanding inducement to engender suspicion of abuse. The Court identified the “controlling question” as “whether the thought of bankruptcy was the impelling cause of the transaction,” ibid. Given the substantial similarities between §§96(d) and 526(a)(4), the controlling question under the latter is likewise whether the impelling reason for “advis[ing] an assisted person . . . to incur more debt” was the prospect of filing for bankruptcy. In prac- tice, advice impelled by the prospect of filing will generally consist of advice to “load up” on debt with the expectation of obtaining its discharge. The statutory context supports the conclusion that §526(a)(4)’s prohibition primarily targets this type of conduct.

What does this mean for you? It means that debtor’s counsel will no longer be able to give advice to debtor’s about obtaining debt in order to qualify for a discharge or to exchange unsecured debt for secured debt. While we have previously referred to this as ‘bankruptcy planning’, the Supreme Court believes that this is an invitation to commit fraud.

However, I completely disagree with this analysis as I don’t intend for my client’s to commit fraud. I intend for them to use the law to their maximum advantage. I don’t see how that is fraudulent. In every law school class I ever intended, I was tasked with the mandate of zealously representing my clients to the best of my ability and to use every ‘legal’ method available to maximize their results. Anything less was not acceptable.

Now the Supreme Court has drawn a line in the sand by intruding on the sanctity of the attorney/client relationship. I can no longer feel free to provide the best level of advice that I can to my clients. I now have to censure myself and it is to the detriment of my client’s case. That is not an acceptable outcome for myself or my clients.

This is a bad ruling. What’s even more unfortunate is that the Court ruled unaminously on the issue. A 9-0 opinion. This is also a dangerours precedent for the legal community at large. The ABA needs to sit up and take notice that speech restrictions have been placed on the attorney/client relationship. Today Bankruptcy Attorneys, tomorrow, who knows where it will lead?

Jay S. Jump
www.jumplawgroup.com
Washington State
Offices in Kent and Davenport