SCOTUS: Lawyers are ‘debt relief agencies’
Bankruptcy attorneys are “debt relief agencies,” and are therefore subject to a federal statute governing the kind of advice they can give to clients to the way they advertise, the U.S. Supreme Court held today.
The case Milavetz, Gallop & Milavetz, P. A. v. United States involved a challenge launched by bankruptcy attorneys claiming the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 should not apply to attorneys. They also argued that the law’s prohibition against advising clients “to incur more debt in contemplation of such person filing” for bankruptcy, and its requirements that debt relief agencies make disclosures such as, “We are a debt relief agency. We help people file for bankruptcy under the Bankruptcy Code,” violated the constitution.
But the Court disagreed. In an opinion by Justice Sonia Sotomayor, the Court held that attorneys perform the many of the functions specified by the act – indeed some functions can only be performed by attorneys.
The Court also found that the prohibition against advising a client to incur more debt only applied to advise “to incur more debt because the debtor is filing for bankruptcy, rather than for a valid purpose,” and therefore was an unconstitutionally vague or overbroad provision. The opinion upheld the disclosure requirement as well, noting that lawyers have flexibility to draft the disclosure in a way to make it clear they provide legal advice.
The Court also held in Bloate v. United States that the time granted to prepare pretrial motions is not automatically excluded from the 70-day limit to bring a defendant to trial under the Speedy Trial Act of 1974 unless the court grants a continuance.
More on these cases to come on Lawyers USA online.
