Monday, February 06, 2006

Court Refuses Advisory Opinion on Lawyers as "Debt Relief Agencies"

Unlike its sister court in the Southern District of Georgia (see "Georgia Judge Says Attorneys Not Debt Relief Agencies"), a Middle District of Georgia bankruptcy judge has refused to give an advisory opinion on whether attorneys fall within the definition of a "debt relief agency" as defined in new 11 U.S.C. 101(12A). Matter of McCartney, __ B.R. __, 2006 WL 75306 (Bankr. M.D. Ga. 1/12/06). As discussed in the prior post, BAPCPA added provisions to the Bankruptcy Code defining a "debt relief agency" and, in 11 U.S.C. 526, imposed several requirements on such agencies as to the disclosures they must make to assisted persons, and the advice they may and may not give to such persons.

In McCartney, the debtors filed their petition pro se and subsequently hired an attorney, then filed a motion seeking a determination that attorneys who practice before the court are not "debt relief agencies." Judge Hershner refused to consider the motion on standing grounds, finding that no party had threatened to enforce any of the debt relief agency provisions of BAPCPA against the debtor. As a result the debtor had not sustained and was not under an immediate threat of any real, actual or direct harm or injury. The motion was dismissed for failing to present a case or controversy.

Although not discussed in any detail in the opinion, it should be noted that the United States Trustee filed a response in opposition to the motion, and argued that the plain language of BAPCPA, the legislative history (including a failed amendment seeking to expressly exclude attorneys), and a history of other legislation subjecting attorneys to federal regulation (such as the Fair Debt Collection Practices Act and the Sarbanes-Oxley Act) all demonstrated that Congress did in fact intend for attorneys to be subject to the "debt relief agency" provisions. Anyone assuming from Judge Davis' earlier opinion that the "debt relief agency" provisions did not apply to attorneys should proceed with caution.

1 comment:

Anonymous said...

From working with the ABA to have Congress remove attorneys from "Debt Relief Agencies", I know that the inclusion was intentional. We can only wish it were otherwise. I agree with you; relying on the opinion that says the inclusion was unintentional, unfortuneately, would be risky.