Cite as: Keith M. Lundin, Lundin On Chapter 13, § 3.5, at ¶ ____, LundinOnChapter13.com (last visited __________).
Without a shred of evidence, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA)1 convicted debtors’ attorneys as conspirators in an “abusive” bankruptcy system. In Chapter 7 cases, BAPCPA inaugurated a new certification that the debtor’s attorney “has no knowledge after an inquiry that the information on the schedules . . . is incorrect.”2 By signing, debtor’s counsel must certify that the petition “does not constitute an abuse” based on a “reasonable investigation.”3
Punitively, BAPCPA de-professionalized bankruptcy attorneys as “Debt Relief Agencies.”4 New Code §§ 526, 527 and 528 require Debt Relief Agencies to give notices and warnings that are not relevant in many of the circumstances in which they must be given, that will be false in some required contexts and that are just mean and scary for no obvious benefit.5 Incongruously, BAPCPA hugely increased the complexity of filing bankruptcy and then requires debtors’ attorneys to tell potential clients that they can represent themselves or seek “help” from a bankruptcy petition preparer, who is forbidden to give legal advice.6 New § 528 requires some attorneys to advertise that they “help people file for bankruptcy relief” even when they don’t.7 In addition to being overseen by bar disciplinary boards, attorneys who are Debt Relief Agencies are subject to oversight by state consumer protection agencies.8
This is new territory—a federal statute that regulates the contracting practices and advice given by state-licensed attorneys in a single subject matter area. There are no federal statutes imposing comparable duties or restrictions on tax lawyers or antitrust lawyers or on plaintiffs’ counsel in securities litigation. The “abuse” at which these attorney provisions were aimed is not identified in the eight years of legislative materials produced by the proponents of BAPCPA.9 Burdening the content of advertising by attorneys who practice in the bankruptcy courts seems intended to reduce the availability of legal services in bankruptcy cases. Branding legal professionals as Debt Relief Agencies undoubtedly convinced some to stop providing bankruptcy services. Perhaps that was the goal—make it harder for debtors to find competent lawyers. This isn’t good public policy; but BAPCPA wasn’t about good public policy.
The status of bankruptcy lawyers (and judges)10 is not a trifling issue in the modern history of U.S. bankruptcy legislation. David Skeel in his history of bankruptcy11 traces the evolution of bankruptcy practice from the relative darkness of what some perceived to be the “bankruptcy ring” before 1978 through the main streaming of bankruptcy law practice—especially business reorganizations under Chapter 11—after enactment of the Bankruptcy Reform Act of 1978.12 The current generation of bankruptcy lawyers still includes a few who practiced before 1978 and many who basked if not prospered during the ascendancy of sophisticated bankruptcy practice between 1978 and 2005.
For many of these lawyers, BAPCPA can only be seen as a purposeful slap in the face—a Congressional “no thanks for all your good works.” A statement of no confidence: you can’t be trusted to tell your clients the truth, or enough of the truth, and your clients need protection from you in the form of intricate disclosures, warnings and promises on paper.13
The one immediately measurable effect of BAPCPA on bankruptcy lawyers is that BAPCPA caused attorney fees to rise. As explained by Professor Lois Lupica, the Principal Investigator for several comprehensive empirical studies of consumer bankruptcy after BAPCPA:
[F]or 47 of the states (including the District of Columbia) the post-BAPCPA pre-petition attorney fee exceeded the pre-BAPCPA fee and for 24 of these states the difference was statistically significant. . . . [T]here was a significant increase in post-petition attorney fees, post-BAPCPA, for chapter 13 cases. . . . [P]ost-petition attorney fees increased in 41 of the states. The difference in average post-petition attorney fees was statistically significant in 26 of the states as well as for the nation as a whole. Thus, post-BAPCPA, there was a marked increase in the cost of administering . . . chapter 13 consumer bankruptcy cases.14
Professor Lupica then noted:
Notwithstanding the Fee Study’s finding that debtor’s attorneys were paid more, on average per case post-BAPCPA, attorneys reported making less money on each consumer case. Attorneys noted that each case takes longer to prepare, and thus post-BAPCPA cases take more attorney and paralegal hours.15
For lawyers who file Chapter 13 cases, BAPCPA was a double whammy: increased professional risks; higher attorney fees without discernible benefit for debtors or their attorneys.
1 Pub. L. No. 109-8, 119 Stat. 23 (2005).
2 11 U.S.C. § 707(b)(4)(D).
3 11 U.S.C. § 707(b)(4)(C).
4 11 U.S.C. § 101(12A).
5 11 U.S.C. §§ 526, 527 and 528 are discussed in § 4.1 WARNING! You Are a Debt Relief Agency.
6 See 11 U.S.C. § 527.
7 See 11 U.S.C. § 528.
8 See 11 U.S.C. § 526.
10 See § 3.4 Three: Don’t Trust Judges.
11 David Skeel, Jr., Debt’s Dominion: A History of Bankruptcy Law in America (2001) [hereinafter Skeel].
12 See Skeel, at 131–59.
13 See § 3.4 Three: Don’t Trust Judges.
14 Lois R. Lupica, Am. Bankr. Inst., The Consumer Bankruptcy Creditor Distribution Study Final Report 21–23 (2013) [hereinafter Lupica, Distribution Study] (citing data from Lois R. Lupica, The Consumer Bankruptcy Fee Study: Final Report, 20 Am. Bankr. Inst. L. Rev. 17 (2012)).
15 Lupica, Distribution Study, at 49 n.70.