Minnesota Chief District Judge Rosenbaum Splits with Other District Courts and Holds that BAPCPA Cannot Constitutionally Designate Bankruptcy Lawyers as Federal "Debt Relief Agents"

Last summer, as part of my continuing BAPCPA Consumer Outline series, I posted an outline section entitled Attorneys as 'Debt Relief Agencies' -- Court Decisions and Constitutional Challenges, in which I reviewed various cases winding their way through the federal courts challenging the constitutionality of BAPCPA's "debt relief agency" provisions.  Since then, I added this post on the decision of Dallas District Court Judge David C. Godbey upholding the constitutionality of most of BAPCPA's "debt relief agency" provisions that were applicable to attorneys.  Recent decisions handed down in other cases have been reported in the ABI BAPCPA Blog (here-S.D. Ga., here-Olsen-D.Or., and here-Geisenberger-E.D. Pa.), the Georgia Bankruptcy Blog (here-Zelotes-D.Ct.), and The Bankruptcy Lawyers Blog (here-Zelotes-D.Ct.).  Sadly, none of these reported decisions found BAPCPA's broad "debt relief agency" provisions inapplicable to attorneys, though they did tinker around the edges.

Alas, however, hope is not lost, for as reported at length in this recent post at the Georgia Bankruptcy Blog, the Honorable James M. Rosenbaum, Chief Judge of the Minnesota District Courts (himself a Reagan appointee and outspoken critic of the federal sentencing guidelines), last week broke new ground and declared that attorneys are NOT "debt relief agents" under BAPCPA!  Milavetz, Gallop & Milavetz v. United States, 2006 WL 3524399, (D. Minn. 12/7/06) (pdf) (pleadings - see Sec. III.B.1). 

Unlike the only other court decision reaching the same conclusion (first reported here and recently dismissed based on lack of standing by the US Trustee), this decision finds principled grounds for holding the "debt relief agency" provisions unconstitutional -- and hence inapplicable -- when applied to attorneys.

Stay tuned, as now there is a split among the district courts, and one can only hope that these issues make their way to the US Supreme Court.  Meanwhile, however, rumor has it that consumer bankruptcy lawyers in Minnesota are privately calling Judge Rosenbaum "NEO."

© Steve Jakubowski 2006

Written By:James Anderson On April 29, 2010 11:01 AM

After reading the Milavetz decision I am still torn as to whether or not being classified as a debt relief agency is problematic. My understanding of Milavetz was that attorneys cannot advise clients to incur more debt before a bankruptcy in violation of the current bankruptcy code, i.e. with the intent to discharge the debt or for fradulent purposes.