The Supreme Court ruled Monday that lawyers are “debt relief agancies,” details of which are posted at law.com.
Consumer bankruptcy lawyers are “debt relief agencies” under a 2005 federal bankruptcy law and restrictions on the type of advice they can give clients are constitutional, the U.S. Supreme Court ruled on Monday.
In a challenge brought by a Minnesota law firm, the justices unanimously held that the plain language of the Bankruptcy Abuse Prevention and Consumer Protection Act clearly indicates that lawyers function as debt relief agencies when they provide bankruptcy help to consumers covered by the law. The 2005 law was enacted to combat abuse of the bankruptcy system.
The Supreme Court case, Milavetz, Gallop & Milavetz v. U.S., actually raised three issues for the justices:
Whether lawyers are debt relief agencies.
Whether a provision prohibiting lawyers from advising clients to incur more debt “in contemplation” of filing for bankruptcy violates First Amendment free speech guarantees.
Whether provisions requiring a debt relief agency to include the sentence “We are a debt relief agency,” or one substantially similar, in all advertisements mandate unconstitutional compelled speech.
The 8th U.S. Circuit Court of Appeals had ruled in favor of the law firm only on the second issue — the restriction on lawyers’ advice. That ruling prompted a cross-petition for Supreme Court review by the government.
In her opinion for the Court, Justice Sonia Sotomayor said the law’s definition of “bankruptcy assistance” included several services commonly performed by lawyers. “Indeed, some forms of bankruptcy assistance, including the ‘provision of legal representation with respect to a case or proceeding,’ may be provided only by attorneys,” she wrote, adding that, in listing specific exceptions to the definition of debt relief agency, Congress gave no indication that it intended to exclude lawyers.
The justices also rejected the view of the 8th Circuit and the Milavetz firm that the restriction on lawyers’ advice prohibits lawyers broadly from advising a client to incur additional debt when contemplating bankruptcy even if that advice could help the person avoid bankruptcy.