POST BAPCPA 

Milavetz, Gallop & Milavetz, P.A. v. US, No. 08–1119 (U.S. Supreme Court, March 08, 2010)
In an action by a law firm seeking declaratory relief, arguing that plaintiff was not bound by the Bankruptcy Abuse Prevention and Consumer Protection Act's (BAPCPA) debt relief agency provisions and therefore could freely advise clients to incur additional debt and need not make the requisite disclosures in its advertisements, the Eighth Circuit's order rejecting the district court's conclusion that attorneys are not "debt relief agencies" under BAPCPA, upholding application of BAPCPA's disclosure requirements to attorneys, and finding BAPCPA section 526(a)(4) unconstitutional, is affirmed in part where: 1) attorneys who provided bankruptcy assistance to assisted persons were debt relief agencies under the BAPCPA; and 2) BAPCPA section 528's requirements were reasonably related to the government's interest in preventing consumer deception. However, the court of appeals' order is reversed in part where BAPCPA section 526(a)(4) prohibited a debt relief agency only from advis! ing a debtor to incur more debt because the debtor was filing for bankruptcy, rather than for a valid purpose. Read more...

Hersh v. U.S., 347 B.R. 19 (N.D.Tex. 2006) Godbey, District Judge  DEBTORS' ATTORNEYS ARE "DEBT RELIEF AGENCIES" UNDER 11 U.S.C. § 101(12A)

BAPCPA PROHIBITION AGAINST ATTORNEYS ADVISING CLIENTS TO INCUR NEW DEBT PRIOR TO FILING BANKRUPTCY IS UNCONSTITUTIONAL
BAPCPA REQUIREMENT THAT ATTORNEYS PROVIDE CERTAIN DISCLOSURES IS CONSTITUTIONAL § 101(12A), § 526(a)(4), § 527

Dallas attorney Susan B. Hersh filed this action to have certain portions of BAPCPA declared unconstitutional.

Held: The definition of debt relief agency at § 101(12A) lists 5 exceptions, none of which refers to attorneys. Had Congress meant to exclude attorneys from the category of debt relief agencies it would have been explicit in its list of exclusions. Hence, attorneys are debt relief agencies.

However, the provision found at § 526(a)(4) which states "A debt relief agency shall not ... (4) advise an assisted person or prospective assisted person to incur more debt in contemplation of such person filing a case under this title . . ." bans bankruptcy attorneys from advising their clients to take on additional debts 'in contemplation' of bankruptcy. Thus, section 526(a)(4) prevents lawyers from advising clients to take actions that are lawful, even under BAPCPA."

The opinion gives examples of taking on more debt would be lawful, including refinancing a mortgage to get a lower interest rate, taking on secured debt such as a loan on an automobile that would survive bankruptcy and also enable to the debtor to continue with employment. "Thus, § 526(a)(4) prevents lawyers from giving their clients their best advice."

"Thus, section 526(a)(4) of the BAPCPA imposes limitations on speech beyond what is 'narrow and necessary'" under a constitutional test.
Hersh also argued that § 527 violates the First Amendment. Held, Section 527 which requires the attorney to provide certain disclosures "advances a sufficiently compelling governmental interest and does not unduly burden either the attorney-client relationship or the ability of a client to seek bankruptcy."

In re Thomas, 342 B.R. 758 (S.D.Tex. 2006)  BAPCPA IMPOSES NEW ACCOUNTABILITY ON DEBTORS AND ATTORNEYS  RULE 9011

BAPCPA imposes new responsibilities on debtors and their counsel for omitted and false data on schedules, and imposes on schedules the same standards as for other pleadings.

Debtor criticized for not informing her attorney of student loan lawsuit and attorney for student loan agency of her bankruptcy, and debtor's attorney criticized for not making sufficient inquiry into debtor's creditors to discover the lawsuit.

In re Moser, 347 B.R. 471 (Bkrtcy.W.D.N.Y. 2006) CARL L. BUCKI, Bankruptcy Judge. ATTORNEY'S OVERSIGHT JUSTIFIED DEBTOR'S FAILURE TO FILE COPY OF TAX RETURN WITH TRUSTEE NO LATER THAN 7 DAYS BEFORE MOC  § 521(e)(2)(A), 521(e)(2)(B)

The court held that the debtor's attorney's oversight in failing to file tax return with trustee was "circumstance beyond the control of the debtor, thus avoiding dismissal of case. The code provides that in the event of failure to file the return (or transcript of return) with the trustee as required shall result in the case being dismissed unless the debtor can persuade the court the failure was due to "circumstances beyond the control of the debtor."

In this case the trustee did not receive the documents prior to the meeting of creditors. The debtor's attorney attempted to present them at the meeting, but the trustee declined to accept them and subsequently moved to dismiss the case. The attorney testified that the debtors had given him the copies of the returns in a timely manner but that he neglected to file them with the trustee.

The court recited the rule that generally the acts of the attorney are imputed to the client. The court observed "The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 has created many new pitfalls for practitioners of bankruptcy law. Even excellent attorneys will encounter an enhanced risk for inadvertent delay." The court cited in agreement the rulings in In re Grasso, 341 B.R. 821 (Bkrtcy.D.N.H. 2006) and In re Merrill, 340 B.R. 671 (Bkrtcy.D.N.H. 2006).

WARNING: PRE-BAPCPA:  Musser v. Provencher 28 Cal.4th 272 (2002) (12/26/02) BANKRUPTCY ATTORNEY LIABLE FOR GIVING DIVORCE ATTORNEY ADVICE SHE COULD PROCEED WITH MOTION FOR SUPPORT WITHOUT RELIEF FROM AUTOMATIC STAY  On a California court case an attorney representing the wife in a divorce filed a motion for spousal support. Before the motion was heard in state court the husband filed bankruptcy. The divorce attorney called a bankruptcy lawyer (not the husband's) to file a motion for relief from stay allowing the hearing on support to proceed. The bankruptcy attorney advised her that she could proceed without relief from stay, as long as the support order was not made final until relief from stay was granted. Divorce attorney proceeded with hearing. Debtor sought damages against wife for violation of the stay, who in turn sued her divorce attorney for malpractice, who in turn sued the bankruptcy attorney she had consulted. Bankruptcy attorney was held liable.