Bankruptcy filings in each of Oklahoma’s three federal bankruptcy districts continued their upward climb in 2009.

Oklahoma bankruptcy filings set all-time highs in 2005 as thousands upon thousands of Oklahomans raced to file bankruptcy before new bankruptcy laws took effect in October 2005 setting tighter income limits and new standards for measuring a debtor’s ability to repay creditors.

In 2006, after the new bankruptcy laws went into effect, bankruptcy filings dropped precipitously, mainly because many of the people who would have filed bankruptcy in 2006 had already filed in 2005 in an effort to beat the new laws known as the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA).

According to Michael Williams, bankruptcy court clerk for the Northern District of Oklahoma in Tulsa, “At the time, people thought they needed to file because they’d never be able to file for bankruptcy again.”

“Filings have risen, and we expected it,” said Michael Williams, bankruptcy clerk for the Northern District Court. “We expected it, not because of the economy, but because the filings went so low after the new rules went into effect.

“We expect it to grow back to the level where it was before the new rules were passed. It will probably be at least another 30 percent next year.”

Source: Tulsa World

If like me, you’re a consumer bankruptcy lawyer who represents debtors, then listen up.

A very important case is being argued today before the U.S. Supreme Court regarding whether or not lawyers representing debtors must comply with the debt relief agency requirements mandated by the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) which was passed by Congress and signed into law by President Bush back in 2005.

Under BAPCPA, debt relief agencies are required to do certain things and prohibited from doing other things. And when these requirements and prohibitions are applied to bankruptcy lawyers, in my opinion they impair the attorney-client relationship and violate an attorney’s free speech rights.

And Alan Milavetz agrees with me.

Milavetz  is a Minnesota lawyer who remembers how his mother, “in typical Jewish-mother fashion,” always urged him to be a doctor, lawyer or engineer when he grew up. “She didn’t say doctor, debt relief agency or engineer,” he recalls.

For Milavetz, the inclusion of lawyers in BAPCPA’s debt relief agency provisions is troubling. And while some of the provisions are merely irritating like a pair of ill-fitting shoes, other provisions are far more serious.

In particular, BAPCPA restricts the advice that a lawyer may give to someone contemplating bankruptcy. Specifically, BAPCPA prohibits a bankruptcy lawyer from advising persons of certain limited means to incur additional debt before filing bankruptcy. This restriction, together with the law’s advertisement and disclosure requirements, strikes at the heart of fundamental First Amendment values.

So Alan Milavetz has taken the issue all the way to the U.S. Supreme Court.

“It’s a huge challenge for any firm to litigate against the federal government, but especially for us,” says Milavetz, noting the firm has 10 lawyers. “But there comes a point when if you think you’re right — and we do — you move on it.”

Milavetz’s four-year odyssey culminates today when the Supreme Court justices hear arguments in Milavetz, Gallop & Milavetz v. U.S.

“This is an evil law prohibiting speech, and among the least powerful people, interfering with their right to get reasonable advice,” Milavetz said. “If we don’t get a judgment that this law is unconstitutional, I have said we will handle no more consumer bankruptcy cases, and we think no true lawyer can handle them as well.”

Source: Law.com

In October 2005, Congress passed and President Bush signed into law the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA). Unfortunately, much of the law was poorly drafted leaving its various provisions open to multiple interpretations. Inevitably, bankruptcy attorneys filed legal challenges on many different fronts and the decisions by numerous bankruptcy judges and appellate courts have been all across the board.

Recently, the U.S. Supreme Court granted certiorari to determine the constitutionality of some of BAPCPA’s most controversial provisions. This fall, the Supreme Court will hear oral argument on two key provisions of the BAPCPA:

1. Is a debtor’s attorney a “debt relief agency”?
2. What disclosures are required to be given to a debtor by “debt relief agency”?

Is a debtor’s attorney a “debt relief agency”?

Under 11 USC §526, a debt relief agency is 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.”

Bankruptcy attorneys argue that they should not be considered debt relief agencies, but if they are, then the requirements under the statute violate their First Amendment rights.

What disclosures are required to be given to a debtor by “debt relief agency”?

Under 11 USC §528, debt relief agencies must disclose the following in all of their advertising materials: “We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code,” or a similar statement.

Again, attorneys argue that these requirements violate their First Amendment rights and amount to mandatory deceptive disclosures that confuse the public.

The Court will consider an 8th Circuit ruling that said a law firm representing debtors met the definition of debt relief agency, but that this provision of the law is unconstitutional. However the court said that law firms are still required to give the disclosures.

Alan Milavetz, a partner at the Minnesota firm of Milavetz, Gallop & Milavetz that was the plaintiff in the 8th Circuit case, said he plans to argue the case before the Court. “This case is really about what is so important about being a lawyer: that we are able to give our clients options and let them make their decisions within the boundaries of the law,” he said.

A decision from the Supreme Court can’t come soon enough for bankruptcy attorneys, who have experienced an increase in workload since the Act went into effect.

The questions involved in the case are “all the more important in these troubling economic times because our clients need lawful, accurate advice on financial matters in pre-bankruptcy litigation,” said Chad Schulze, a lawyer at the Milavetz firm who worked on the cert petition.

And the issues in the case go beyond bankruptcy practice, said Howard Marc Spector, a sole practitioner in Dallas who represented the plaintiff in similar case in the 5th Circuit. “It seems to me that all lawyers have to be very concerned about laws that prohibit them from giving legal advice to their clients,” he said.

Across the country, federal courts have reached different conclusions about the constitutionality of the Act.

Bankruptcy Courts and Appellate Courts are split as to whether bankruptcy attorneys are “debt relief agencies”

The 8th Circuit , U.S. District Courts in Connecticut , Minnesota , Oregon and Texas and a bankruptcy court in Virginia have all held that attorneys are debt relief agencies.

The 5th Circuit and bankruptcy courts in Florida and Georgia reached the opposite conclusion.

Every court that has found §526(a)(4) applicable to attorneys has held that the provision is unconstitutional. However, they have also held that the disclosure and advertising requirements do not impose an undue burden on attorneys.

In the 8th Circuit case, Milavetz, Gallop & Milavetz filed suit against the U.S. seeking a declaratory judgment that §526 and §528 were unconstitutional.

The 8th Circuit held that bankruptcy attorneys do fall within the Act’s definition of “debt relief agency,” noting that Congress had listed exclusions to the section’s application and that lawyers were not included.

It further held that §526(a)(4), which provides that “[a] debt relief agency shall not … advise an assisted person or prospective assisted person to incur more debt in contemplation of such person filing a case under this title,” violated attorneys’ First Amendment rights.

Advising clients to take on more debt is commonplace, explained Marc Stern, a solo bankruptcy attorney in Seattle. “Telling a client it might be time to re-finance the mortgage, or to turn in the Cadillac and get a Hyundai, those are reasonable things to advise a client to do,” he said. “But the [Act] says that it is illegal for me to advise my clients to take on new debt.”

Ironically, such advice can sometimes prevent a client from filing bankruptcy, Stern noted.

Bankruptcy Courts and Appellate Courts are split as to “disclosure requirements”

The 8th Circuit went on to hold that the disclosure requirements of §§528(a)(4) and (b)(2) were constitutional.

“Section 528 requires debt relief agencies to disclose: ‘“We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.” or a substantially similar statement,’ in all of their bankruptcy-related advertising materials directed to the general public. The requirement does not prevent those attorneys meeting the definition of debt relief agencies ‘from conveying information to the public; it … only require[s] them to provide somewhat more information than they might otherwise be inclined to present,’” the court said.

Barbara Nevin, a bankruptcy attorney at Milavetz, Gallop & Milavetz, said that her clients are “very confused” when she gives them the required disclosures. “Now I have people come in an extra half hour early just to go through the disclosures and help them understand what it means and why I have to give it to them,” she said.

Predictions?

Bankruptcy attorneys are refusing to predict the outcome of the case, but Henry Sommer, a Supervising Attorney at the pro bono Consumer Bankruptcy Assistance Project in Philadelphia and former president of the National Association of Consumer Bankruptcy Attorneys, said he will be watching how Justice Antonin Scalia interprets the statute.

“It will be interesting to see whether Justice Scalia follows the plain language of the law, which he supposedly adheres to, since the Justice Department is suggesting that the Court not look at the plain language and should read [§526] much more narrowly than the plain language provides,” said Sommer.

Spector said the justices will have to grapple with what level of First Amendment protection legal advice should receive.

Another issue that will be relevant to the Court’s analysis, said Stern, is a separation of powers problem. The law “invades the attorney-client relationship by limiting how you represent your clients and the advice you can give them, which puts the federal government in direct conflict with the state governments,” he said.

A decision from the Court is expected next term.

Source: LawyersUSAOnline.com

Many people have heard that a new law has done away with bankruptcy. Nothing could be further from the truth.

Bankruptcy is still an available option for good people who are struggling with serious debt problems.

The “new” bankruptcy law took effect on October 17, 2005. It’s official name is the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA). A better name would be the “Bankruptcy Prevention and Consumer Abuse Act of 2005″ because that is really what the two-pronged effect of this new law.

For 8 years the credit card companies spent hundreds of millions of dollars lobbying Congress to change the bankruptcy laws. The credit card companies argued that bankruptcy abuse was rampant and that the majority of bankruptcy filers were deadbeats simply looking for an easy way out. On the other side where many knowledgeable bankruptcy judges, law professors, and consumer advocates who warned against the harm that would come from passing this poorly drafted and not well thought out legislation. Unfortunately, the big money offered by Capital One, Citibank, MBNA and other credit card companies finally won out in 2005.

The new law has made filing bankruptcy more difficult and more expensive. What was already a complex area of law is now even more difficult. There is more paperwork involved, the paperwork is much harder to complete, and if the paperwork is not completed correctly there are harsh consequences that can be suffered.

Now more than ever people filing bankruptcy need an experienced bankruptcy lawyer to guide them through the bankruptcy process.

One of the new requirements is that a person must take an approved credit counseling course within 180 days before filing bankruptcy. However, you don’t need to take th credit counseling course before seeing a bankruptcy lawyer and I would suggest that you don’t. A good bankruptcy attorney can answer any questions you may have and can help you get signed up for the credit counseling course.

A financial education course is now required before you can receive a bankruptcy discharge, but this course is taken after your bankruptcy is filed, not before. Your bankruptcy lawyer will give you information regarding the specifics of this course.

If you are struggling with serious debt problems and would like to know more about how bankruptcy may be able to help you, contact me today by phone or email to schedule a FREE initial consultation. I would count it a privilege to be able to visit with you in a relaxed and confidential environment where I’ll answer all of your questions in plain English and give you the straight scoop on the pros and cons of bankruptcy as related to your specific situation.