Consumer Debt AssistanceSupport with consumer debt
Nearly five years after the adoption of the Insolvency Abuse and Consumer Protection Act, the Supreme Court recently decided in Milavetz, Gallop & Milavetz, P.A., et al. v. United States that lawyers are "debt reduction agencies" who are restricted in their capacity to offer pre-bankruptcy advisory services to customers and oblige them to make extra disclosure in their advertising.
Milavetz claimants requested a declaratory judgement against the United States that the limitations on LPCPA placed on a debt reduction agent did not hold for lawyers and are contrary to the constitution as they do for a lawyer or solicitor. A Supreme Court confirmed the Eighth District's view that lawyers are "debt forgiveness agencies" under 11 USC § 101(3).
The Supreme Court, in its review of the 11 USC 101(4A) definitions of "insolvency assistance", argued that the definitions covered several types of service normally provided by lawyers. According to the Supreme Court, the clear wording of the law clearly indicates that lawyers are debt forgiveness agents when they are providing qualified service to persons with primary consumer debt.
The Supreme Court, dismissing Milavetz's assertion that lawyers should be barred from the rule for want of explicit references, stated that such a ruling would remove any significance from the rule and referred to other similar rules (e.g. Fair Debt Collection Practices Act) which were also respected by lawyers.
But the Supreme Court dismissed the Eighth District's view that the ban on 11 USC 526(a)(4) for debt cancellation agents to "advise a supported individual to consider either more debt when declaring bankruptcy" was constitutional when it came to lawyers. According to the Supreme Court, the ban consists of preventing lawyers from counseling clients to "charge" debts that would be unloaded in the event of insolvency.
The Supreme Court explained, as an example of good practice, that a lawyer can recommend to his customer that he should re-finance himself if he offers the possibility of lower interest charges or making money each month. In this case, however, it would not be unacceptable for the lawyer to recommend refinancing to the mandator if there were no other legal non-bankruptcy reason, as this could turn out to be a powerful indication of infringement.
Eventually, the Supreme Court found that the extra duties of public access required by 11 USC 528 are constitutionally the same as those applicable to lawyers. Legal revelations demand that a lawyer in his advertising in relation to assistance in bankruptcies that they "help individuals declare bankruptcy. However, the legal revelations demand that a lawyer in his advertising in relation to assistance in bankruptcies should "help individuals declare themselves bankrupt. "Under the more lax business vocabulary regime, the Supreme Court found that these disclosed information does not restrict the use of the terminology, but merely requires the inclusion of a specific terminology in the notifications relating to insolvency assistance activities.
However, the Supreme Court also found that the law has flexibilities so that debt reduction agents can adjust their disclosure as long as the resulting evidence is substantially similar to the legal example.