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Are Attorneys 'Debt Relief Agencies' Under The BAPCPA?
Have you or any member of your firm appeared in a Chapter 7 or Chapter 11 bankruptcy proceeding on behalf of a consumer? Do you include the following language on your firm Web site or advertisements? “We are a debt relief agency. We help people file for relief under the Bankruptcy Code.”
Well, according to the newly enacted Bankruptcy Abuse Pre-vention and Consumer Protection Act of 2005 (BAPCPA), attorneys practicing bankruptcy law may in fact be required to identify themselves as debt relief agencies. One of the new and significant aspects of the BAPCPA are the provisions designed to restrict and monitor the activities of so-called “debt relief agencies.” Among other requirements, Section 528(a)(4) mandates that a “debt relief agency shall … clearly and conspicuously use the following statement in such advertisement: 'We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.' or a substantially similar statement.” See generally Sections 526, 527 and 528 for the restrictions on and requirements for debt relief agencies. However, who and what a debt relief agency is, and more specifically, whether attorneys are debt relief agencies, remains a matter of great debate, dispute and confusion.
Section 101(12)(A) defines a debt relief agency as “any 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 …” The definition of debt relief agency does by its terms encompass both non-attorneys and attorneys and specifically all attorneys who represent consumer debtors. See ' 101(3) for the definition of “assisted person” and Section 110(a)(1) for the definition of “bankruptcy petition preparer.” Section 526(c) outlines the penalties for violations of the debt relief agency provisions — ranging from voiding of contracts between the debtor and debt relief agency or disgorgement of fees to sua sponte civil penalties or injunctions imposed by the Bankruptcy Court or prosecution by State authorities for injunctive relief or monetary damages against the offending party. The applicability of these provisions to attorneys was left unresolved by Congress and has left bankruptcy attorneys mired in a sea of uncertainty with potentially great consequences.
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