Georgia Bankruptcy Court Rules Sua Sponte that Attorneys Admitted to Practice in the District are Not "Debt Relief Agencies" Under BAPCPA

In the first case to address who is (or is not) a "debt relief agency" under BAPCPA, an important question given the "new and significant restrictions on the activities of debt relief agencies," Judge Lamar W. Davis, Chief Bankruptcy Judge of the Bankruptcy Court for the Southern District of Georgia, ruled sua sponte on October 17, 2005, BAPCPA's effective date, that attorneys who are members of the bar of that court, as well as those admitted pro hac vice, are not "debt relief agencies" within the meaning of BAPCPA, so long as their activities fall within the scope of the practice of law and do not constitute a separate commercial enterprise. In re Attorneys at Law and Debt Relief Agencies, (2005 WL 2626199) (Bankr. S.D. Ga. 10/17/05). The matter raises interesting "case or controversy" issues, as it's not exactly clear what specific situation(s) the Court was addressing, other than the obvious theoretical ones. Still, it's hard to imagine anyone challenging or disagreeing with this opinion and order. You have to wonder whether this Court's proactive style will catch on elsewhere.

Without explicitly casting aside "plain meaning" canons of statutory construction, the Court drew support from a wealth of current critical commentary on the topic in rejecting the plain meaning of BAPCPA's relevant provisions (which seemingly include attorneys within BAPCPA's definition of "debt relief agencies"), stating:

Commentary relating to these provisions appear to assume or at least raise the specter that beginning October 17, 2005, attorneys will come within the scope of §§ 101(12A), 526, 527, and 528. See Hon. William Houston Brown and Lawrence R. Ahern, III, 2005 Bankruptcy Reform Legislation with Analysis, p.58 (Thomson/West 2005); Erwin Chemerinsky, Constitutional Issues Posed in the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, 79 Am. Bankr. L. J. 571, 576 (2005) ("A lawyer who provides any bankruptcy assistance to an 'assisted person' is defined to be a 'debt relief agency'); Coastal Bankruptcy Law Institute Seminar Materials (September 23, 2005) at Tab 4, pg. 2; Hon. Keith M. Lundin, Ten Principles of BAPCPA: Not What was Advertised, 24 Am. Bankr. Inst. J. 1, 6 (Sept. 2005) (BAPCPA "de-professionalizes bankruptcy attorneys as 'debt relief agencies'"); Samuel Gerdano, 25 Changes to Personal Bankruptcy Law, at � 19, http:// www.abiworld.net/bankbill/changes.html ("Attorneys as Debt Relief Agencies"). In the words of one bankruptcy scholar:
More confusing, if not simply absurd, are the provisions setting out requirements for "debt relief agencies." These provisions, due to slipshod drafting, will apply to many attorneys who rarely, or never, represent consumer bankruptcy debtors ... [The definition of "debt relief agency"] clearly includes attorneys who represent individual landlords or other mom and pop businesses that owe primarily consumer debts, as well as those who represent consumer creditors, or nondebtor spouses who are creditors in title 11 cases, including Chapter 11 cases. Because "person" is defined to include partnership and corporations, presumably the entire law firm is a debt relief agency.

Henry J. Sommer, Trying to Make Sense Out of Nonsense: Representing Consumers Under the "Bankruptcy Abuse Prevention and Consumer Protection Act of 2005", 79 Am. Bankr. L. J. 191, 206-07 (Spring 2005). If these commentators are correct, a new layer of regulation will be superimposed on the bar of this Court, and evaluation of new risks and liabilities will preoccupy them as they strive to represent their clients, comply with existing state regulation of their practice, learn the new substantive and procedural mandates of this new law, and adhere to the separate professional standards applicable to members of the Bar of this Court. See Local Rule 83.5(d). That is a burden which should not be borne by the Bar needlessly or merely out of an abundance of caution. It should and must be borne by the Bar if that is the result Congress mandated. Anything less than the highest level of professional conduct is not tolerable in this Court. Equally intolerable is needless uncertainty in the minds of the Bar as to their duty under this new statute.

Finally, I will conclude by revisiting the concurring opinion of Justice Scalia who stated that when Congress used the term "applicable non-bankruptcy law" it meant something more expansive than merely "state law." Indeed, he observed that when Congress meant "state law" it used the phrase "state law."

When the phrase "applicable nonbankruptcy law" is considered in isolation, the phenomenon that three Courts of Appeals could have thought it a synonym for "state law" is mystifying. When the phrase is considered together with the rest of the Bankruptcy Code (in which Congress chose to refer to state law as, logically enough, "state law"), the phenomenon calls into question whether our legal culture has so far departed from attention to text, or is so lacking in agreed-upon methodology for creating and interpreting text, that it any longer makes sense to talk of "a government of laws, not of men." Patterson v. Shumate, 504 U.S. 753, 766, 112 S.Ct. 2242, 2250-51, 119 L.Ed.2d 519 (1992).

In a similar vein, I believe that if Congress meant to ensnare attorneys in the thicket of §§ 526, 527 and 528, it would have used the term "attorney" and not "debt relief agency."

For the foregoing reasons, I rule that attorneys regularly admitted to the Bar of this Court or those admitted pro hac vice are not covered by the provisions of the Code regulating debt relief agencies, including without limitation §§ 101(12A), (4A), 526, 527 and 528, and are excused from compliance with any of those requirements or provisions, so long as their activities fall within the scope of the practice of law and do not constitute a separate commercial enterprise.

FURTHER ORDERED that attorneys appearing in this Court be reminded that maintaining the tradition of professional conduct remains of paramount concern to this Court. [FN. 5]

[fn. 5: In this regard it should be noted that some of the provisions of §§ 526, 527 and 528 may mirror the type of "best practices" that attorneys should follow and may be consistent with attorneys' pre-existing professional standards. The point is that attorneys are bound by those professional standards and are unaffected by any new or different requirements that are found in §§ 526, 527 and 528.]

© Steve Jakubowski 2005

Written By:James Glucksman On October 27, 2005 2:19 PM

Are there any follow-up rulings, orders, Local Rules or developments after the SDGA order?

[Ed note: See this link: http://blog.startfreshtoday.com/archives/practicing-bankruptcy-law-87-motion-for-declaration-not-debt-relief-agencies.html ]