Bankruptcy Reform Act challenges

The Bankruptcy Abuse Prevention & Consumer Protection Act, which went into effect in April 2005, is said to have made some of the most substantial amendments to bankruptcy law since that code was enacted in 1978. It's also caused debate and controversy.

A National Law Journal article tells us that now the Supreme Court has agreed to resolve "a long-simmering debate over the constitutionality of provisions in the Act that include lawyers in the definition of 'debt relief agencies,' and restricts the advice they can give clients."

Technically there are two cases, but they've been consolidated for argument next term – Milavetz, Gallop & Milavetz v. United States, 08-1119 and U.S. v. Milavetz, Gallop & Milavetz, 08-1225. The question is "whether an attorney who provides bankruptcy assistance and doesn't fall in one of the five exception categories defined by the Act, is a 'debt relief agency' pursuant to 11 U.S.C. 526, and whether 11 U.S.C. 528 is a violation of the First Amendment." The government contends the provision can be narrowly construed and be interpreted to forbid only advice that a client take on new debt; Milavetz is arguing that including bankruptcy attorneys in a definition of "debt relief agencies," and requirements & restrictions on their advice & advertisements is unconstitutional.

The Eighth Circuit Court of Appeals, last September, held that “attorneys who provide bankruptcy assistance to assisted persons are debt relief agencies under the Bankruptcy Code, and §526(a)(4) is unconstitutional as it applies to them, but §528(a)(4) and 528(b)(2) are constitutional.”