Bankruptcy Attorneys are “Debt Relief Agencies”
The term "Debt Relief Agency" was considered by the United States Supreme Court in the case of Milavetz, Gallop & Milavetz, P. A. v. United States, 559 U.S. 229 (2010) in the context of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA). The BAPCPA introduced several changes to the bankruptcy code, and one of these changes was the definition of a "Debt Relief Agency" under Section 101(12A) of the Bankruptcy Code.
A "Debt Relief Agency" is any person or entity that provides bankruptcy assistance to individuals or consumers. This includes attorneys who offer legal services related to bankruptcy. The primary role of a Debt Relief Agency, such as a bankruptcy attorney, is to assist individuals in dealing with their financial difficulties through bankruptcy proceedings or other debt relief alternatives.
The key reason for labeling bankruptcy attorneys as "Debt Relief Agencies" under the BAPCPA is to subject them to certain disclosure requirements and regulations aimed at protecting consumers from potential abuse and deceptive practices. By defining attorneys as Debt Relief Agencies, the BAPCPA sought to ensure that consumers seeking help with their financial problems receive accurate and comprehensive information about their options, potential consequences, and available alternatives.
Some of the key provisions applicable to Debt Relief Agencies include:
1. Disclosures: Debt Relief Agencies are required to provide written notices to their clients explaining the potential alternatives to bankruptcy, the consequences of filing for bankruptcy, and other essential information related to the bankruptcy process.
2. Prohibition against Misleading Practices: Debt Relief Agencies are prohibited from engaging in deceptive practices, false advertising, or any actions that may mislead consumers seeking debt relief assistance.
3. No Guarantee of Specific Results: Debt Relief Agencies are not allowed to guarantee specific outcomes or results to their clients regarding the success of bankruptcy filings.
4. Special Requirements for Advertising: The BAPCPA introduced specific advertising regulations for Debt Relief Agencies to ensure their advertisements are transparent, truthful, and not misleading to consumers.
In summary, by categorizing bankruptcy attorneys as Debt Relief Agencies, the U.S. Supreme Court and the BAPCPA aimed to provide added protection to consumers seeking financial assistance during challenging times. The regulations and disclosure requirements imposed on Debt Relief Agencies are intended to safeguard consumers from potential exploitation and ensure they are well-informed about the options available to them when considering bankruptcy or other debt relief solutions.