U.S. Supreme Court Says Attorneys are Debt Relief Agencies under BAPCPA, Upholds Ban on Advising Clients to Incur Additional Debt
For nearly five years, courts across the country have been asked to determine whether or not BAPCPA's Debt Relief Agency designation applies to bankruptcy lawyers and whether the disclosure requirements and limitations on advice set forth in BAPCPA were Constitutional as applied to bankruptcy lawyers. The answers have varied from jurisdiction to jurisdiction.
Now, the United States Supreme Court has laid the conflict to rest. Justice Sotomayor, writing for the majority of 7, said that Congress clearly intended to include attorneys within the definition of Debt Relief Agency under the statute and that the required disclosures were reasonably related to the Government's interest in preventing consumer deception.
The Court determined that the prohibition on advising a client to take on additional debt in anticipation of bankruptcy must be read narrowly, and that "§526(a)(4) prohibits a debt relief agency only from advisinga debtor to incur more debt because the debtor is filing forbankruptcy, rather than for a valid purpose." While the construction alleviates the uncertainty of bankruptcy attorneys attempting to thoroughly and legitimately advise their clients, the end result of that interpretation is that the provision is upheld with regard to bankruptcy lawyers.
