Georgia Judge Says Attorneys Not "Debt Relief Agencies"

Apparently too impatient to await an actual case or controversy, a Georgia bankruptcy judge issued a sua sponte ruling on October 17, 2005, the effective date of most BAPCPA provisions, determining that attorneys are not "debt relief agencies" as that term is used in BAPCPA. In re Attorneys at Law and Debt Relief Agencies, __ B.R. __, 2005 WL 2626199 (Bankr. S.D. Ga. 2005).

As noted by Judge Davis, BAPCPA imposes substantial requirements on activities of "debt relief agencies," defined 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." 11 U.S.C. 101(12A). "Bankruptcy assistance," in turn, is defined as including any services provided to an assisted person "with the express or implied purpose of providing information, advice, counsel, document preparation, or filing, or attendance at a creditors' meeting or appearing in a case or proceeding on behalf of another or providing legal representation with respect to a case or proceeding under this title." 11 U.S.C. 101(4A). For instance, "debt relief agencies" are required to enter into written contracts with "assisted persons," disclose in all advertising that their services contemplate bankruptcy, and provide written notice to "assisted persons" of the disclosure requirements of the Bankruptcy Code and potential sanctions for non-compliance. They are required to advise the "assisted person" that the person may proceed pro se, and they are prohibited, among other things, from counseling an "assisted person" to pay an attorney for services in contemplation of bankruptcy. See 11 U.S.C. 526.

After going over much of the commentary written in anticipation of the passage of BAPCPA on the "debt relief agency" provisions, Judge Davis concluded that attorneys are not "debt relief agencies." First, he noted that while the definition of "debt relief agency" includes "petition preparers," that term expressly excludes "attorneys," which is a separately defined term under 11 U.S.C. 101(4). Pointing to plain meaning, he reasoned that "attorney" and "debt relief agency" are not synonymous and do not in common understanding include each other. Judge Davis found that the references to "providing legal representation" in the definition of "debt relief agency" refer to the unauthorized practice of law by non-attorneys, rather than the rendering of legal advice by attorneys. and was intended to empower bankruptcy courts to protect consumers harmed by such unauthorized practice.

Second, Judge Davis noted the illogic of interpreting certain of the provisions (for instance, those requiring a "debt relief agency" to advise an "assisted person" that they have the right to hire an attorney or how to perform services pro se) as applying to attorneys. Interpreting "debt relief agency" as excluding attorneys therefore favors a logical and sensible interpretation over an illogical or absurd one.

Finally, the court found that it would be inappropriate to interpret the amendments as effecting a broad preemption of the traditional right of states to regulate the practice of law absent a clearly expressed legislative intention to do so. Finding no such express intent, and indeed some contrary indications that Congress did not intend to curtail the states' role in enforcing the qualifications for the practice of law, he declined to interpret the definition of "debt relief agency" as including attorneys, which would "ensare attorneys in the thicket of ss. 526, 527 and 528."