§ 4.1     WARNING! You Are a Debt Relief Agency
Cite as:    Keith M. Lundin, Lundin On Chapter 13, § 4.1, at ¶ ____, LundinOnChapter13.com (last visited __________).

Most who use this book are bankruptcy professionals involved one way or another in Chapter 13 cases. In your considerations of how the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA)1 has changed Chapter 13, you must not neglect three new sections of the Bankruptcy Code that aren’t specific to Chapter 13 practice but affect, and reflect on, all of us who work in the bankruptcy courts. If you find angry words in this section, it is because—more so than any other aspect of BAPCPA—the undeserved assault by a misguided Congress on the professionalism of bankruptcy practitioners demands a heated response.


Principle Number Four: Don’t Trust Lawyers.2 Lobbyists for the credit community convinced Congress that there was rampant “abuse” in bankruptcy.3 The slather slopped over onto the professionals who represent debtors and creditors in bankruptcy cases and onto some professionals who do neither.


In BAPCPA, Congress branded bankruptcy lawyers with a pejorative new name: “Debt Relief Agency.” If you are a Debt Relief Agency (DRA), you have complex new duties and responsibilities toward clients and potential clients and toward the public. If you are a DRA and don’t satisfy the new duties and responsibilities, there are severe consequences, including civil liability.


The story begins in § 101(12A), the definition of “Debt Relief Agency”:

The term “debt relief agency” means any person who provides any bankruptcy assistance to an assisted person in return for the payment of money or other valuable consideration, or who is a bankruptcy petition preparer under section 110, but does not include— . . . .4

Any “person” in § 101(12A) includes individuals, partnerships and corporations.5 It is broad enough to capture law partnerships as well as professional corporations and limited liability corporations that provide bankruptcy assistance.


“Bankruptcy assistance” and “assisted person” are separately defined by BAPCPA. An assisted person is “any person whose debts consist primarily of consumer debts and the value of whose nonexempt property is less than $192,450.”6 The “primarily . . . consumer debts” part is not unfamiliar and means debts “incurred by an individual primarily for a personal, family or household purpose.”7 There is a brief disconnect here: consumer debts are debts incurred by “an individual”; an assisted person can be an entity that is not an individual. Defining an assisted person to have primarily consumer debts limits assisted person to individuals who have incurred debts primarily for personal, family or household purposes.


The definition of assisted person contains the further limitation that the value of an assisted person’s “nonexempt property” must be less than $192,450. Most consumer debtors have nonexempt property valued less than $192,450. Individuals with consumer debts and relatively few assets will be assisted persons.


The term “bankruptcy assistance” is then defined as

any goods or services sold or otherwise provided to an assisted person with the express or implied purpose of providing information, advice, counsel, document preparation, or filing, or attendance at a creditors’ meeting or appearing in a case or proceeding on behalf of another or providing legal representation with respect to a case or proceeding under this title.8

“Goods or services” seems straightforward enough, but the phrase “sold or otherwise provided” leaves more unanswered than defined. An “express or implied purpose” is conceptually unbounded except by the imagination of the conceiver. The rest of the definition contains serial disjunctives apparently intended to include every possible relationship or manner of communication with an assisted person. Arguably, bankruptcy assistance only arises “with respect to a case or proceeding under this title,” but other constructions are possible.


The net effect of these three new definitions is something like this: any person who provides goods or services by sale or otherwise to an individual with primarily consumer debts and nonexempt property valued at less than $192,450 becomes a Debt Relief Agency if, in return for money or other valuable consideration, the individual is provided information, advice, counsel, document preparation, filing or appearance with respect to a bankruptcy case or proceeding. Admittedly, there are internal contradictions in this construction—not the least of which is whether the “payment of money or other valuable consideration” means the same thing as “sold or otherwise provided.” The interlocking definitions of “bankruptcy assistance” and “Debt Relief Agency” drag in competing words and concepts.


Why do you care whether you are a Debt Relief Agency? The answer is in three new Code sections enacted by BAPCPA, §§ 526, 527 and 528. Section 526 contains a long list of things that a DRA is forbidden to do. Section 527 contains an equally long list of new disclosures that a DRA must provide. Section 528 mandates that a DRA adhere to a strict schedule and contract with every assisted person and that every DRA include specific statements that will not necessarily be true in any dealings with the public.


A brief digression before the details. Notice what a Debt Relief Agency isn’t under the lettered subsections in § 101(12A):

(A) any person who is an officer, director, employee, or agent of a person who provides such assistance or of the bankruptcy petition preparer;
(B) a nonprofit organization that is exempt from taxation under section 501(c)(3) of the Internal Revenue Code of 1986;
(C) a creditor of such assisted person, to the extent that the creditor is assisting such assisted person to restructure any debt owed by such assisted person to the creditor;
(D) a depository institution (as defined in section 3 of the Federal Deposit Insurance Act) or any Federal credit union or State credit union (as those terms are defined in section 101 of the Federal Credit Union Act), or any affiliate or subsidiary of such depository institution or credit union; or
(E) an author, publisher, distributor, or seller of works subject to copyright protection under title 17, when acting in such capacity.9

A person who is an “officer, director, employee or agent of a person who provides [bankruptcy] assistance” is not a Debt Relief Agency. This exception seems to say that a lawyer who is an employee or officer of a professional corporation (or of any “person”) that offers bankruptcy services is not a DRA, but the employer or professional corporation is? If a law firm provides bankruptcy assistance but does not want to be labeled a Debt Relief Agency,10 could the firm disassociate its DRA by owning a professional corporation that employs members who provide bankruptcy assistance?


Almost instantaneously after the effective date of BAPCPA, one bankruptcy court declared that members of the bar of the Southern District of Georgia were not Debt Relief Agencies.11 The court observed that the statutory definition of Debt Relief Agency in § 101(12A) did not use the word “attorney” or the word “lawyer” though it specifically did identify “bankruptcy petition preparer.” The court reasoned, “Because the definition of ‘debt relief agency’ omits express reference to attorneys and includes a term which excludes attorneys, it is difficult to imagine that Congress meant otherwise.”12 This holding was not immediately embraced by other courts13 but found enough support to command appellate review.14


In 2010, the Supreme Court decided several important questions about the DRA provisions of BAPCPA, including whether attorneys are DRAs. In Milavetz, Gallop & Milavetz, P.A. v. United States,15 Justice Sotomayor spoke for a unanimous court in concluding that attorneys can be Debt Relief Agencies:

By definition, “bankruptcy assistance” includes several services commonly performed by attorneys. Indeed, some forms of bankruptcy assistance, including the “provi[sion of] legal representation with respect to a case or proceeding,” § 101(4A), may be provided only by attorneys. . . . Moreover, in enumerating specific exceptions to the definition of debt relief agency, Congress gave no indication that it intended to exclude attorneys. . . . Thus, . . . the statutory text clearly indicates that attorneys are debt relief agencies when they provide qualifying services to assisted persons. . . . Milavetz relies heavily on the fact that § 101(12A) does not expressly include attorneys. . . . But Milavetz does not contend, nor could it credibly, that only professionals expressly included in the definition are debt relief agencies. . . . [W]e hold that attorneys who provide bankruptcy assistance to assisted persons are debt relief agencies within the meaning of the BAPCPA.16

Milavetz argued that the exception in § 101(12A) for any “officer, director, employee, or agent” revealed congressional intent to exclude attorneys because there was no exception for “partners.” As stated by Milavetz, “treating attorneys as debt relief agencies will obligate entire law firms to comply with §§ 526, 527, and 528 based on the conduct of a single partner, while the agents and employees of debt relief agencies not typically organized as partnerships are shielded from those requirements.”17 Justice Sotomayor made quick work of this argument, but along the way said this about law partnerships and the new DRA rules:

[P]artnerships are themselves “person[s]” under the BAPCPA, see § 101(41), and can qualify as “debt relief agenc[ies]” when they meet the criteria set forth in § 101(12A). Moreover, a partnership’s employees and agents are exempted from § 101(12A) in the same way as the employees and agents of other organizations. To the extent that partners may be subject to the debt-relief-agency provisions by association, that result is consistent with the joint responsibilities that typically flow from the partnership structure[.]18

Milavetz settled that attorneys can be DRAs for purposes of §§ 526, 527 and 528. But not so clearly, Justice Sotomayor’s opinion in Milavetz interpreted the interlocking sections that define DRAs in a way that limits what might otherwise have been the “plain language.” The conditions on becoming a DRA cited in Milavetz have inspired one court of appeals to draw bright lines of exclusion.


In Connecticut Bar Ass’n v. United States,19 the United States Court of Appeals for the Second Circuit faced an orchestrated appeal by attorneys and the Connecticut Bar Association challenging several of the same provisions of BAPCPA that were before the Supreme Court in Milavetz. Addressing standing of the parties, the Second Circuit acknowledged that “attorneys representing consumer debtors can qualify as debt relief agencies.”20 But the Second Circuit read Justice Sotomayor carefully to define this exclusion from the DRA rules:

The [Supreme] Court, nevertheless, determined that use of the term “assisted person” in the § 101(12A) definition of “debt relief agency” signaled that not all attorneys providing bankruptcy assistance qualified as debt relief agencies. “Assisted person” is statutorily defined as “any person whose debts consist primarily of consumer debts and the value of whose nonexempt property is less than $175,750.” 11 U.S.C. § 101(3). . . . [T]he Supreme Court deemed it “evident” that §§ 526–528 “govern only professionals who offer bankruptcy-related services to consumer debtors.” . . . Following this holding, . . . the only attorneys qualifying as debt relief agencies are those advising consumer debtors contemplating bankruptcy. . . . With Milavetz clarifying that §§ 526–528 apply “only [to] professionals who offer bankruptcy-related services to consumer debtors,” . . . we are now compelled to conclude that the plaintiff law firm of Brown & Welsh, which represents only creditors, and attorney plaintiff Gerald Roisman, who also does not represent debtors in bankruptcy, lack standing to pursue this case.21

Individuals and firms that provide “foreclosure prevention services” have been captured by the DRA net. In In re Ross,22 a law firm claiming to provide foreclosure prevention services that prepared a skeletal Chapter 13 petition but did not appear as counsel in a “pro se” debtor’s bankruptcy case was determined to be a DRA that had to comply with §§ 526, 527 and 528. In In re Valdez,23 the bankruptcy court held that “Financial Hope for America” was a DRA because its employees instructed the debtor to file serial bankruptcy cases to stop a foreclosure. Financial Hope was enjoined from operating in the Southern District of Texas until it demonstrated compliance with DRA requirements.


A nonprofit organization that is tax exempt under § 501(c)(3) of the Internal Revenue Code is not a DRA.24 There is special irony here. Investigations by the media, by state officials and by congressional committees—at exactly the time Congress was considering BAPCPA—revealed fraud on a large scale by organizations that provided fraudulent credit counseling services.25 It emerged from these investigations that fraudulent credit counselors often operated from behind the facade of not-for-profit, tax-exempt organizations. Talk about misdirection—§ 101(12A) excludes from coverage exactly the folks that should have been targeted.


A creditor of an assisted person is not a DRA, but only to the extent the creditor is “assisting such assisted person to restructure any debt owed by such assisted person to the creditor.”26 A creditor that provides information, advice, or the like to an individual who meets the definition of assisted person could become a DRA when the conversation wanders beyond restructuring the debt owed to the creditor. Creditors and their counsel best watch what they say to debtors at § 341 meetings.


Credit unions and depository institutions are excluded from the definition of Debt Relief Agency, but what about the employees of a bank or credit union? The statute excludes affiliates and subsidiaries of depository institutions and credit unions from the DRA definition but makes no mention of employees, officers or agents. The specific exclusion for employees and officers in § 101(12A)(A), discussed above, does not apply because a bank or credit union, by definition, doesn’t provide bankruptcy assistance.


Section 101(12A)(E) exempts authors, publishers and distributors of works that are subject to copyright protection when “acting in such capacity.” Just speculating for a moment, the author of a book about Chapter 13 bankruptcy would not be a DRA so long as the author acts like an author. Is the author acting in the right capacity when the author teaches a seminar on Chapter 13? Does the author become a DRA if the seminar discussion strays beyond the material in the book? This would be silly if it wasn’t so close to home.


The serious part begins in § 526 with the statutory list of restrictions on Debt Relief Agencies. A DRA “shall not” fail to perform any service that an assisted person or “prospective assisted person” was informed would be provided in connection with a bankruptcy case or proceeding.27 The concept of a prospective assisted person is a frightening extension of the definition in § 101(3). Before a bankruptcy professional utters a word of “information” or “advice” the statute contemplates that you will determine whether you are dealing with an individual whose debts are primarily consumer debts and whose nonexempt property is valued at less than $192,450. Then you must assess whether the individual is a prospective recipient of bankruptcy assistance. If the answer is yes to both guesses, then everything else that happens between you and that individual that has bankruptcy content is subject to the restrictions and duties in §§ 526, 527 and 528.28 Risk-averse debtors’ counsel will assume that any individual who finds the office is a prospective assisted person.


Prior to the Bankruptcy Technical Corrections Act of 2010,29 § 526(a)(2) contained this internally inconsistent prohibition:

(a) A debt relief agency shall not— 
. . . . 
(2) make any statement, or counsel or advise any assisted person or prospective assisted person to make a statement in a document filed in a case or proceeding under this title, that is untrue and misleading, or that upon the exercise of reasonable care, should have been known by such agency to be untrue or misleading.30

Once again, there is the impenetrable concept of a “prospective assisted person” to whom a DRA might give counsel or advice. No one doubts that bankruptcy professionals should not counsel or advise clients to make statements in court documents that are untrue and misleading. But the “reasonable care” and “should have been known” standards in § 526(a)(2) sound like negligence concepts that would be violated when a DRA gives counsel or advice that turns out to be untrue or (and?) misleading on further investigation.


In 2010, one of the many not-so-“technical” amendments deleted “untrue and” and substituted ‘untrue or” in § 526(a)(2).31 The good news is that the technical amendment eliminated one of the miscues in § 526. The (obvious) bad news is that Congress expanded the potential exposure of DRAs by prohibiting untrue statements or advice with respect to the making of an untrue statement without regard to whether the resulting statement is misleading, and vice versa—a misleading statement is prohibited even if it is true. Nothing “technical” about that amendment.


What does reasonable care mean in this context? Is it an objective standard of the sort used in negligence cases? Will it be defined on a case-by-case basis based on evidence of what an ordinary attorney or ordinary Debt Relief Agency should have known under the circumstances?


For example, if some debtors’ attorneys accept the debtor’s list of personal property while other debtors’ attorneys contract with an agent to verify each debtor’s list of personal property, does a missing chair or end table violate the attorney’s duty under § 526(a)(2) if no agent was used? If any attorney in a community concludes it is reasonable to use agents to verify personal property in consumer bankruptcy cases, must all attorneys in that community use agents or embrace the § 526(a)(2) risk that the bankruptcy judge thinks agents are reasonable? How does a bankruptcy attorney determine what constitutes reasonable care within a professional community as diverse as the provision of bankruptcy services? Is the exercise of reasonable care the same level of investigation for an attorney who charges $1,500 for a basic Chapter 13 case as it is for an attorney who charges $3,000?


Section 526(a)(4) contains a restriction on DRAs that inflamed the bar across the country:

(a) A debt relief agency shall not—
 . . . . 
(4) advise an assisted person or prospective assisted person to incur more debt in contemplation of such person filing a case under this title or to pay an attorney or bankruptcy petition preparer [a]32 fee or charge for services performed as part of preparing for or representing a debtor in a case under this title.33

The grammar was lousy, but § 526(a)(4) could be read to prohibit an attorney from advising a person to incur debt in contemplation of filing a bankruptcy case or to pay an attorney in a bankruptcy case. Advising a prospective debtor to incur more debt is sometimes exactly the right legal advice.


For example, a debtor who intends to reject the lease of an expensive automobile as part of a bankruptcy case would appropriately be advised by counsel to surrender the leased car and contract for a less expensive ride. Is the advice to stop making lease payments advice to “incur more debt” in contemplation of bankruptcy? If not, telling the debtor to get replacement transportation certainly would be if a loan or new lease is involved. Does § 526(a)(4) prohibit counseling a prospective debtor to refinance a mortgage at a more favorable interest rate? If the debtor cannot afford the expensive rental apartment, is it prohibited to advise leasing a less expensive apartment? And if the debtor does not have enough cash to pay attorney fees in full before filing a Chapter 13 case, can counsel agree to accept payment through the plan or would that agreement constitute incurring debt in contemplation of filing a bankruptcy case?


There is an absurd result here for Debt Relief Agencies that file Chapter 13 cases. Read literally, § 526(a)(4) prohibits a DRA from advising an assisted person or prospective assisted person to incur debt to pay a fee or charge for the filing of a bankruptcy case. In almost every bankruptcy case, debtor’s counsel (or bankruptcy petition preparer) quotes a fee and the debtor either agrees to pay that fee or heads down the street. When the prospective debtor agrees to pay that fee, there is a contract—perhaps not enforceable except by the debtor until reduced to writing under §§ 526(c) (1)34 and 528(a)(1)35—but nonetheless a contract that creates an obligation in the debtor to pay fees upon performance of the services promised. When that agreement is reduced to writing consistent with § 528(a)(1), it is enforceable even between a DRA and a prospective debtor.


That contract creates a debt for bankruptcy purposes.36 Did debtor’s counsel—the DRA in this example—“advise” the prospective assisted person to incur that debt “in contemplation of” bankruptcy? If so, how could any DRA contract with a prospective debtor without violating § 526(a)(4) if there is a fee or charge for services? But § 528(a)(1) mandates exactly that contract, including a written provision for any fee or charge. This suggests the absurd result that a DRA could never contract with a consumer debtor with nonexempt property less than $192,450 if there is any fee or charge for services in a bankruptcy case. Perhaps Congress intended to make bankruptcy “free” for all assisted persons represented by a DRA. (Just kidding.)


The plot thickens in Chapter 13 cases where it is common in some districts and universal in others that Chapter 13 attorneys are paid some or all of their fees through the confirmed plan. In every such situation, there is a contract between the debtor and counsel that includes future payment—a debt. Could it have been the intention in §§ 526 and 528 to prohibit attorneys from “advising” Chapter 13 debtors to pay fees through the plan? It is, of course, perfectly “legal” to pay attorney fees through a Chapter 13 plan.


To make sense out of the statutory requirement that every DRA have a written contract and the prohibition against “advice” with respect to incurring debt in contemplation of bankruptcy, it must be true that a DRA can contract for bankruptcy fees without transgressing § 526(a)(4). Section 528(a)(1) requires a written contract with respect to fees; it cannot be true that § 526(a)(4) prohibits that same conduct. Both sections have meaning if “advice” does not include quoting and explaining fees to a prospective assisted person. Or, put in Milavetz, Gallop & Milavetz, P.A. v. United States37 terms, because attorney fees given in consideration of advice with respect to bankruptcy are not incurred with discharge of those fees as the “impelling cause,” advice to incur fees is not a § 526(a)(4) problem. DRAs can and must tell prospective assisted persons what a bankruptcy case is going to cost and must include that information in the written contract. It must be that complying with § 528(a)(1) is not a violation of § 526(a)(4).


The prohibition against advice with respect to incurring debt in contemplation of bankruptcy quickly spawned constitutional challenges. At least four U.S. district courts declared § 526(a)(4) facially inconsistent with the First Amendment guarantee of free speech.38 These opinions catalogued circumstances in which advising a debtor to incur debt in contemplation of bankruptcy was prudent lawyering and not an abuse of the bankruptcy system.39 The blanket prohibition against advice to clients to lawfully and prudently incur debt was “overbroad and restricts attorney speech beyond what is ‘narrow and necessary’ to further the governmental interest.”40


The courts of appeals reached inconsistent conclusions with respect to the constitutionality of § 526(a)(4). The United States Court of Appeals for the Eighth Circuit concluded that § 526(a)(4) was unconstitutional because it “broadly prohibits a debt relief agency from advising an assisted person . . . to incur any additional debt when the assisted person is contemplating bankruptcy” even when that advice was prudent prebankruptcy planning that did not abuse bankruptcy law.41 In contrast, the United States Court of Appeals for the Fifth Circuit held that § 526(a)(4) was constitutional because it could be narrowly construed to prohibit only advice to abuse or manipulate the bankruptcy system.42


In Milavetz the Supreme Court resolved this circuit split by adopting a narrow reading of § 526(a)(4). Justice Sotomayor focused on the phrase “in contemplation of” bankruptcy in § 526(a)(4), producing this not altogether satisfying description of what advice DRAs are prohibited to give:

[W]e think the phrase refers to a specific type of misconduct designed to manipulate the protections of the bankruptcy system. . . . [Section] 526(a)(4) prohibits a debt relief agency only from advising a debtor to incur more debt because the debtor is filing for bankruptcy, rather than for a valid purpose. . . . [A]dvice to incur more debt because of bankruptcy, as prohibited by § 526(a)(4), will generally consist of advice to “load up” on debt with the expectation of obtaining its discharge—i.e., conduct that is abusive per se. . . . [Section] 526(a)(4) prohibits a debt relief agency only from advising an assisted person to incur more debt when the impelling reason for the advice is the anticipation of bankruptcy. . . . Covered professionals remain free to “tal[k] fully and candidly about the incurrence of debt in contemplation of filing a bankruptcy case.” . . . Section 526(a)(4) requires professionals only to avoid instructing or encouraging assisted persons to take on more debt in that circumstance.43
Justice Sotomayor continued this explanation in a footnote:
We emphasize that awareness of the possibility of bankruptcy is insufficient to trigger § 526(a)(4)’s prohibition. Instead, that provision proscribes only advice to incur more debt that is principally motivated by that likelihood. Thus, advice to refinance a mortgage or purchase a reliable car prior to filing because doing so will reduce the debtor’s interest rates or improve his ability to repay is not prohibited, as the promise of enhanced financial prospects, rather than the anticipated filing, is the impelling cause. Advice to incur additional debt to buy groceries, pay medical bills, or make other purchases “reasonably necessary for the support or maintenance of the debtor or a dependent of the debtor,” § 523(a)(2)(C)(ii)(II), is similarly permissible.44

Although hardly beyond dispute, Milavetz can be read to limit advice with respect to incurring debt in anticipation of filing a bankruptcy case only when discharge—rather than some “valid” purpose—is the impelling reason for the new debt. The cross-reference in the note quoted above to § 523(a)(2) is coupled with some discussion by Justice Sotomayor of the nondischargeability of “fraudulent debts.”45 There is at least the suggestion that only fraudulent or abusive debts are within prohibited advice.


Section 526(c)(1) is the first hint of teeth and consequences in the new DRA provisions:

Any contract for bankruptcy assistance between a debt relief agency and an assisted person that does not comply with the material requirements of this section, section 527, or section 528 shall be void and may not be enforced . . . by any . . . person, other than such assisted person.46

It has been held that the contract between a DRA and a debtor must be provided to the Chapter 13 trustee to permit the trustee to fully perform the duty to investigate the debtor’s finances.47


Section 526(c)(2) makes a Debt Relief Agency liable to an assisted person for fees, charges, actual damages and attorney fees if the DRA has done any of the following:

(A) intentionally or negligently failed to comply with any provision of this section, section 527, or section 528 with respect to a case or proceeding under this title for such assisted person;
(B) provided bankruptcy assistance to an assisted person in a case or proceeding under this title that is dismissed or converted to a case under another chapter of this title because of such agency’s intentional or negligent failure to file any required document including those specified in section 521; or
(C) intentionally or negligently disregarded the material requirements of this title or the Federal Rules of Bankruptcy Procedure applicable to such agency.48

There is a lot to swallow here. Section 526(c)(2) makes a DRA liable to an assisted person for any intentional or negligent failure to follow the new rules in §§ 526, 527 and 528; for the intentional or negligent failure to file any required document that causes a bankruptcy case or proceeding to be converted or dismissed; and for any intentional or negligent “disregard” for a material requirement of the Bankruptcy Code or Bankruptcy Rules. This section imposes liability on debtors’ attorneys for intentional or negligent failure to assist the debtor with respect to anything that is required of a debtor by Title 11 or by the Bankruptcy Rules. The breathtaking absence of boundaries makes § 526(c)(2) a statutory invitation for debtors to sue their lawyers whenever things don’t go exactly right in a bankruptcy case. The (perverse?) consolation is that § 526(c)(2) only applies to individual debtors with primarily consumer debts and nonexempt assets less than $192,450.49


Civil liability to (former) clients was not punishment enough for DRAs that don’t follow all the new rules. In addition to all other remedies available under state law, the “chief law enforcement officer of a state, or an official or agency designated by a state” is authorized by § 526(c)(3) to bring actions to enjoin violations of § 526 and to recover damages on behalf of all assisted persons. Bankruptcy attorneys—at least those who choose to counsel really poor clients—are fair game for supervision by the consumer protection agency or whatever other agency or official a state designates. There’s more. A lot more.


A Debt Relief Agency providing bankruptcy assistance to an assisted person is required by new § 527 to provide the following notices, statement and writing:

1.A (second) copy of the written notice that § 342(b)(1) requires the clerk of the bankruptcy court to give to an individual before the commencement of a bankruptcy case.50 This notice describes Chapters 7, 11, 12 and 13, describes the services available from credit counseling agencies, warns the debtor that concealing assets or making a false oath will result in fines and imprisonment and warns the debtor that information given in connection with a bankruptcy case may be audited by the Attorney General of the United States.
2.Not later than three business days after the “first date on which a debt relief agency first offers to provide any bankruptcy assistance services to an assisted person,” a “clear and conspicuous written notice” that the information “provided with a petition and thereafter during a case” must be complete, accurate and truthful; that assets and liabilities must be completely and accurately disclosed, with the “replacement value” of each asset stated after “reasonable inquiry”; that current monthly income, the abuse test calculation in § 707(b)(2) and disposable income in a Chapter 13 case “determined in accordance with § 707(b)(2)” must be stated after “reasonable inquiry”; and that information provided by an assisted person during a bankruptcy case may be audited and may result in criminal sanctions.51 This second notice is obviously redundant of some of the mandated content of the (second copy of the) first notice.52 Some of the required information in the second notice is not accurate. For example, disposable income in a Chapter 13 case is “determined in accordance with § 707(b)(2)” only for a debtor with current monthly income greater than applicable median family income.53 The mandated, clear and conspicuous second written notice will only be accurate for a small minority of Chapter 13 debtors. A third written warning about the potential for criminal sanctions seems calculated only to intimidate people who are mostly already scared.
3.A third54 written “statement,” mandated by § 527(b), that clearly and conspicuously “in a single document separate from other documents or notices” includes the following phrases:
  • “You can represent yourself.”
  • “The law requires an attorney or bankruptcy petition preparer to give you a written contract.”
  • “Although bankruptcy can be complex, many cases are routine.”
  • “You may be questioned by a court official called a ‘trustee.’”
  • “You are generally permitted to represent yourself in litigation in bankruptcy court.”
4.A final (fourth?) conspicuous “writing,” required by § 527(c), that must: “[p]rovide each assisted person . . . reasonably sufficient information . . . how to . . . value assets at replacement value . . . determine current monthly income . . . determine disposable income in accordance with § 707(b)(2) . . . complete the list of creditors . . . value exempt property at replacement value.” Does this sound familiar yet?



Section 527(d) requires a DRA to maintain copies of the first two notices for two years after the notices are given to an assisted person. The statute is silent about keeping copies of the (third) statement or of the (fourth) writing.


The “statement” required by § 527(b) is detailed in quoted form in the statute. DRAs can simply use the form, although the statute permits a “substantially similar” statement to be used. The other notices and writing are described but not drafted—leaving it to each DRA to create these documents at its own risk. There will be no uniformity in the documents assisted persons received.


The multiple notices, statement and writings required by § 527 are very troubling. BAPCPA has grotesquely complicated and confused bankruptcy law and practice. Requiring bankruptcy attorneys to inform debtors that they can represent themselves in a bankruptcy case and requiring those same attorneys to give each debtor detailed written explanations of complicated bankruptcy law concepts is a statutory sucker punch. Repeatedly informing debtors about the abuse test in § 707(b)(2) certainly reveals the biases of the drafters of BAPCPA, but results in mandated notices and statements that will not be accurate for many debtors and that will inevitably confuse many debtors about their responsibilities in a bankruptcy case.


There are difficult dilemmas here for bankruptcy attorneys who become Debt Relief Agencies. Do you give inaccurate disclosures because they are mandated by statute? Do you draft accurate disclosures at the risk of providing a notice or statement that is not “substantially similar” to the one in the statute?55


The “three-business-day” requirement in § 527(a)(2) is problematic because a DRA doesn’t know whether it is dealing with an “assisted person” without first inquiring fully about the debts and assets of every individual that comes in the door. The first date on which a DRA “offers” to provide bankruptcy services triggers the three-business-day notice requirement. Many individuals consult attorneys about bankruptcy without actually filing. To satisfy the three-business-day deadline, debtors’ attorneys will prophylactically give the written notices, statement and writing required by § 527 to every individual at first contact.


It is not obvious how § 527 disclosures can be delivered by attorneys who provide bankruptcy consultations over the phone or in public settings such as bar association “help days.” It is likely that bankruptcy attorneys will stop consulting with prospective clients over the phone unless written notices and statements can be delivered and signed and copies returned immediately. Keep in mind that failure to give the written notices, statement and writing described in § 527 not later than three business days after the first offer of bankruptcy assistance threatens to void any subsequent contract with that assisted person under § 526(c)(1).


The challenges don’t end here. Section 528 as added by BAPCPA requires a Debt Relief Agency to also do the following:

1.“[N]ot later than 5 business days after the first date on which such agency provides any bankruptcy assistance services to an assisted person, but prior to such assisted person’s petition under this title,” a DRA must execute a written contract that explains “clearly and conspicuously” the services that will be provided, the fees or charges for those services and the terms for payment.56 The assisted person must receive a fully executed copy of the contract.57



This requirement to provide a written contract within five business days is not to be confused with the notice discussed above that must be delivered not later than three business days after the first offer of bankruptcy assistance under § 527(a)(2). Once again, the moment at which a DRA first provides bankruptcy assistance services to an assisted person is a critical moment not precisely defined.


Attorneys who field questions about debt problems over the phone are probably providing bankruptcy assistance services. If the caller is an individual with primarily consumer debts and less than $192,450 of nonexempt assets, that phone call may be the date from which to count the five business days for an executed written contract.


If a potential client visits a law office and receives the notices, statement and writing required by § 527, that individual almost certainly has received bankruptcy assistance services and the five-day counting begins. If that potential client leaves without a signed contract and comes back more than five days later, it is not obvious how that attorney can ever satisfy the five-business-day rule in § 528(a)(1).


Bankruptcy attorneys have been forced to invent clever mechanisms for satisfying the five-business-day rule in this uncertain environment. Two contracts have been suggested. The first is a “consultation contract” executed at first contact and at the same time as delivery of the three-day written notice in § 527(a)(2). The consultation contract contains the information required by § 528(a)(1), including a statement of the services that will be provided, the fee and terms of payment. If the potential assisted person becomes a client, a second more robust written contract is executed to complete the process contemplated by § 528(a)(1).


It is tempting to read §§ 526(c)(1) and 528(a)(1) together: there has to be a written contract between a DRA and every assisted person and that contract is void if the DRA fails to comply with all of the (innumerable) material requirements in §§ 526, 527 and 528—including the five-business-day requirement in § 528(a)(1). It is significant that the courts haven’t succumbed to this temptation. The court leading the way to some sanity with respect to the five-business-day requirement was the United States District Court for the Eastern District of Michigan.


In B.O.C. Law Group, P.C. v. Carroll (In re Humphries),58 an attorney conducted an initial client interview on November 17, 2009, and a written agreement with respect to bankruptcy services was signed on December 15, 2009—clearly outside the five-business-day rule in § 528(a)(1). The bankruptcy court found that the attorney was a DRA that had to comply with § 528(a)(1) within five days of the first provision of bankruptcy assistance services. The bankruptcy court counted the five-business-day deadline from the first provision of bankruptcy assistance without regard to when the debtor decided to retain the attorney to file a bankruptcy case. Reading § 526(c)(1) to void any nonconforming fee agreement, the bankruptcy court denied attorney fees because to do otherwise would reward noncompliance with § 528(a)(1) and conflict with § 526(c)(1).


On appeal, the district court parsed the statute differently to conclude that a written fee agreement within five business days after the initial provision of bankruptcy assistance services was not a “material requirement” of the contract for purposes of § 526(c)(1). The district court explained:

Subsection 526(c)(1) deals with “contract[s] for bankruptcy assistance,” and says that if such a contract does not measure up, it is void and cannot be enforced against the debtor. Subsection 526(c)(2) deals with the conduct of debt relief agencies (including law firms) themselves, and it sets forth a list of remedies that may be directed against them . . . . These two sanctions provisions are separate and distinct, but the bankruptcy court’s treatment of the five-business-days provisions in section 528(a)(1) conflates the two subsections. The five-business-days requirement in section 528(a)(1) is directed at the conduct of a debt relief agency, not the contents of the agreement for services. In other words, that provision is a requirement of the agency, not a requirement of the contract. The requirements of the contract are described in the provisions of sections 526, 527, and 528 that prescribe the mandatory and prohibited terms of the agreement for services. The five-business-days language does not set out what must be in such an agreement; it states when the agency must execute the agreement . . . . The remedy for a violation of [§ 528(a)(1)] is set forth in subsection 526(c)(2), not subsection 526(c)(1). . . . [W]here, as here, the fee agreement is not rendered void as a non-conforming document under subsection 526(c)(1), denying fees altogether is a harsh remedy for a technical violation of the Bankruptcy Code, especially when the debtor expresses satisfaction with the services rendered and the fee agreement (if not the law firm itself) conforms to the requirements ushered in by BAPCPA.59

Some of the early decisions addressing the written contract requirement in § 528(a)(1) punish violations of the statute in ways short of voiding the contract itself. For example, in In re Radford,60 the bankruptcy court reduced fees by $400 when the attorney did not provide the debtor with a written contract within five business days after the first provision of services. Similarly, in In re Robinson,61 the bankruptcy court reduced attorney fees by 20 percent when the written contract was difficult to read, internally inconsistent and not up to the standards required by § 528(a)(1).


There have been a handful of post-BAPCPA decisions that sanction debtors’ attorneys in Chapter 13 cases for doing or not doing things that appear in §§ 526–528. For example, in In re Garrard,62 the attorney got in trouble for blindly accepting a debtor’s “objectively implausible budget.”63 Another attorney intentionally and negligently failed to comply with § 526(a)(2) by filing inaccurate schedules and Statement of Financial Affairs.64 In In re Casavalencia,65 damages of $8,000 were extracted from a DRA for misrepresentations in bankruptcy schedules—including the use of a false name. In In re Irons,66 on the court’s own initiative, deficient and missing documents triggered a separate hearing to determine whether to discipline counsel under § 526. One bankruptcy court held that the many duties and responsibilities in §§ 526 and 527 can only be satisfied by a DRA that meets individually with each prospective debtor before filing a bankruptcy petition.67


In contrast to these cases, a recent DRA decision from the United States Court of Appeals for the Eleventh Circuit could give debtors’ attorneys some hope in the uncharted waters of debtor representation after BAPCPA. In Torrens v. Hood (In re Hood),68 the law firm offered two kinds of services: bankruptcy representation and “mortgage defense” services. The debtor in Hood contracted for mortgage defense services. With the assistance of several “someones” at the law firm, the debtor prepared and the law firm filed a “pro se” Chapter 13 petition that did not reveal any assistance by the law firm. The bankruptcy and district courts determined that the law firm violated §§ 527 and 528 and various provisions of the Florida Rules of Professional Conduct by enabling the debtor to file an “ostensibly pro se . . . bankruptcy petition in bad faith to stall a foreclosure sale.”69


The Eleventh Circuit characterized the issue as whether “ghost writing” was the perpetration of a fraud for purposes of the Florida Rules of Professional Conduct. The circuit panel concluded that the law firm’s assistance in the preparation of Hood’s Chapter 13 petition could not be fraud because it was not ghost writing—what the firm did to assist Hood didn’t constitute “drafting” a legal document of any consequence. Here is how the Eleventh Circuit explained this less than intuitive outcome:

[U]nder the plain language of the [Florida Rules of Professional Conduct], Appellants did not “draft” a document for Hood. . . . They did not “write or compose” the pre-formatted Chapter 13 petition. . . . Appellants recorded answers on a standard fill-in-the-blank Chapter 13 petition based on Hood’s verbal responses. . . . Hood personally signed the petition. . . . A Chapter 13 petition is a publicly available form that is designed in a manner that lends itself to a pro se litigant. Hood could have personally completed the petition at issue in the exact same manner and likely obtained the same result. . . . Appellants did not “draft” a document . . . and did not commit fraud in violation of the Florida Rules of Professional Conduct or 18 U.S.C. § 157(3).70
2.A Debt Relief Agency must clearly and conspicuously disclose in “any advertisement of bankruptcy assistance services or of the benefits of bankruptcy directed to the general public” that the services or benefits are “with respect to bankruptcy relief.” This disclosure extends to “general media, seminars or specific mailings, telephonic or electronic messages, or otherwise.” Any advertisement to the general public by a Debt Relief Agency must include the statement: “‘We are a Debt Relief Agency. We help people file for bankruptcy relief under the Bankruptcy Code.’”71



Attorneys who use recorded phone messages that describe the availability of debt relief services or who answer common questions about debt problems should consider whether a call by a potential client triggers the disclosures above in addition to the three-day notice requirement in § 527(a)(2) and the five-day contracting requirement in § 528(a)(1). Would the recorded message be “information, advice [or] counsel” for purposes of § 101(4A)?


The disclosure requirements extend to any advertisement directed to the general public indicating the availability of assistance with respect to credit defaults, mortgage foreclosures, eviction proceedings or debt collection. Any mention of Chapter 13 and any public statement that could lead a “reasonable consumer” to believe that “debt counseling” is offered when in fact bankruptcy assistance is offered engages the cascade of consequences in § 528.72


There is no statutory definition of “debt counseling.” The definition of bankruptcy assistance in 11 U.S.C. § 101(4A) easily includes much that could be characterized as traditional debt counseling. BAPCPA encourages this potential confusion then punishes it in § 528.


The net cast by the new advertising requirements is broad, and the boundaries are not clear. Does an “advertisement of bankruptcy assistance services” directed to the general public include a law firm’s letterhead or an attorney’s business card? Is speaking at a bar association seminar an advertisement to the public? A yellow pages advertisement that lawfully mentions certification as a “bankruptcy specialist” probably requires all of the clear and conspicuous disclosures and statements if the advertiser is a DRA.


Lawyers and law firms that participate in pro bono bankruptcy programs or in public clinics sponsored by law schools or bar associations could become Debt Relief Agencies—subject to the advertising mandates of § 528—even if the attorney or firm never helps clients file for bankruptcy relief in any other context. Are goods or services “otherwise provided” to an assisted person when an attorney provides bankruptcy information at a free clinic or bar association call-in program? Does the attorney receive “other valuable consideration” when freely given services satisfy a professional responsibility or occasionally result in a client referral?


Domestic relations attorneys are particularly at risk of stumbling into the dark world of Debt Relief Agency. Any attorney who includes in a domestic relations document provisions intended to address actual or potential bankruptcy issues quickly becomes a DRA if any party has primarily consumer debts and less than $192,450 of nonexempt assets. Before you jump to the conclusion that the asset ceiling is your safe haven, answer this question: are your client’s minor children “assisted” by that bankruptcy-proof support provision you drafted?


Although the contract requirements in § 528(a)(1) apply only when a particular individual is an assisted person, the advertising requirements in § 528(a)(3) and (a)(4) apply generically once a person becomes a Debt Relief Agency by providing bankruptcy assistance to any assisted person. In other words, once a DRA, always a DRA for purposes of the advertisement requirements in § 528(a)(3) and (a)(4).


Constitutional challenges to the public disclosures required by § 528(a)(3) and (a)(4) were dashed by the Supreme Court in the same Milavetz decision discussed above. Characterizing § 528 as directed at misleading commercial speech, Justice Sotomayor gave this explanation why the required disclosures were reasonably related to preventing deception:

[Section] 528’s required disclosures are intended to combat the problem of inherently misleading commercial advertisements—specifically, the promise of debt relief without any reference to the possibility of filing for bankruptcy, which has inherent costs. Additionally, the disclosures entail only an accurate statement identifying the advertiser’s legal status and the character of the assistance provided, and they do not prevent debt relief agencies like Milavetz from conveying any additional information. . . . The required statement that the advertiser “‘help[s] people file for bankruptcy relief’” gives meaningful context to the term “debt relief agency.” And Milavetz may further identify itself as a law firm or attorney. Section 528 also gives Milavetz flexibility to tailor the disclosures to its individual circumstances, as long as the resulting statements are “substantially similar” to the statutory examples. §§ 528(a)(4) and (b)(2)(B).73

Perhaps of some solace, to answer Milavetz’s argument that § 528 was not reasonably related to any governmental interest because it required inaccurate disclosures by attorneys who represent creditors, Justice Sotomayor limited § 528 to professionals who represent debtors:

We think it evident from the definition of “assisted person”—which is stated in terms of the person’s debts, see § 101(3)—and from the text and structure of the debt-relief-agency provisions in §§ 526, 527, and 528 that those provisions, including § 528’s disclosure requirements, govern only professionals who offer bankruptcy-related services to consumer debtors.74

Notice the “ethics trump” in new § 526(d):

(d) No provision of this section, section 527, or section 528 shall—
(1) annul, alter, affect, or exempt any person subject to such sections from complying with any law of any State except to the extent that such law is inconsistent with those sections, and then only to the extent of the inconsistency; or
(2) be deemed to limit or curtail the authority or ability–
(A) of a State or subdivision or instrumentality thereof, to determine and enforce qualifications for the practice of law under the laws of that State; or
(B) of a Federal court to determine and enforce the qualifications for the practice of law before that court.75

Section 526(d)(1) says that §§ 526, 527 and 528 overcome any inconsistent state laws with respect to attorneys who become DRAs under BAPCPA. The obvious implication of this not-so-subtle exercise of supremacy is that the cobweb of restrictions, notices, statements, writings, warnings and disclosures discussed above applies to bankruptcy attorneys even when inconsistent with state laws governing professional conduct. A provision of BAPCPA that requires an attorney to give misleading information overcomes state laws that prohibit misleading advice by a licensed attorney. If the advertising provisions in § 528 require an attorney to violate the lawyer advertising rules of the state, the good news is that § 526(d) seems to give a DRA a get-out-of-jail-free card. The bad news is Congress has mandated—and no more sensible view can interfere—that an attorney who never practices in bankruptcy court can be required to advertise, “I help people file for bankruptcy relief.”


Bankruptcy petition preparers are fully ensnared in all of these nets—if anything, even more so than attorneys. The definition of Debt Relief Agency in § 101(12A) includes any person “who is a bankruptcy petition preparer under section 110.”76 All of the restrictions in § 526, the disclosures in § 527 and the requirements in § 528 apply to bankruptcy petition preparers with some curious consequences.


Bankruptcy petition preparers are prohibited from giving legal advice.77 Many of the disclosures, notices and written statements required by §§ 526 and 527 contain legal advice—including how to value assets for bankruptcy purposes, and how to perform the § 707(b)(2) calculations. Section 527(c) states that a Debt Relief Agency is required to give this information “to the extent permitted by nonbankruptcy law.” Presumably, a non-attorney bankruptcy petition preparer would be prohibited by nonbankruptcy law from giving most of the information required by § 527(c). How will the preservation of state law in § 527(c) be applied when state law is inconsistent with a mandate in § 526, 527 or 528 and state law must give way under § 526(d)? Bankruptcy petition preparers are strongly advised to get some heavy-duty legal advice—especially with respect to the permitted content of the documents they must provide—before assisting any person with a bankruptcy petition.


Bankruptcy attorneys are painfully aware that there are many places in the Bankruptcy Code other than §§ 526, 527 and 528 where BAPCPA imposes new professional responsibilities. For example, there are new swearings and new certificates in § 707(b)(4)(C) and (D)—the signature of an attorney on a Chapter 7 petition, pleading or motion is a certificate that the attorney has performed a reasonable investigation and determined that the document is well-grounded in fact and warranted by existing law and does not constitute an abuse of Chapter 7 under § 707(b)(1).78 Under § 707(b)(4)(D), the signature of an attorney on a Chapter 7 petition is a certification that the attorney “has no knowledge after an inquiry that the information in the schedules filed with such petition is incorrect.”


Don’t forget § 521(a)(1)(B)(iii), which requires a certificate that debtor’s counsel delivered to the debtor the notice required by § 342(b).79 Yes, this is the same § 342(b) notice discussed above that § 527(a)(1) requires a Debt Relief Agency to give to every assisted person.80 This is more than a little excessive given that the § 342(b) notice must also be given by the clerk’s office to most individual debtors.81 But note that § 527(a)(1) requires a DRA to give the § 342(b) notice only to individual debtors with primarily consumer debt and nonexempt assets of less than $192,450. The bankruptcy court clerk must give the § 342(b) notice to a broader group—individuals whose debts are “primarily consumer debts.”82 But any Chapter 13 debtor whose debts are not “primarily” consumer debts need not receive the § 342(b) notice from the clerk or from debtor’s counsel under § 521(a)(1)(B)(iii). That debtor—perhaps, a Chapter 13 debtor engaged in business or emerging from a failed business—would also not be an “assisted person” for purposes of § 527(a)(1). In other words, Chapter 13 debtors who do not have primarily consumer debts would not receive the § 342(b) notice from anyone. This, of course, is silly—BAPCPA gives some Chapter 13 debtors three or four copies of the § 342(b) notice and other Chapter 13 debtors get none. This must make sense to someone.


When required, and as many times as required, the § 342(b) notice must be in writing and must contain a brief description of Chapters 7, 11, 12 and 13, including the purposes, benefits and costs of each, the types of services available from credit counseling agencies and a statement with respect to the consequences of knowingly and fraudulently concealing assets or making a false oath.83


There is one provision of BAPCPA that is not destructive of the professional responsibilities of attorneys in consumer bankruptcy cases. Section 330 of the Bankruptcy Code—dealing with the compensation of professional persons—was amended by BAPCPA to provide: “In determining the amount of reasonable compensation to be awarded to . . . [a] professional person, the court shall consider . . . all relevant factors, including— . . . (E) . . . whether the person is board certified or has otherwise demonstrated skill and experience in the bankruptcy field.”84


In a Chapter 13 case, debtor’s counsel is a professional person who may be awarded compensation under § 330.85 Attorneys board certified in bankruptcy—especially those certified in consumer bankruptcy—should command higher hourly rates and better compensation in Chapter 13 cases as a result of the amendments to § 330 by BAPCPA.


Where does this leave us with respect to the professional responsibilities of attorneys in Chapter 13 cases after BAPCPA? The answer probably includes confused, scared and angry. Attorneys who represent debtors in Chapter 13 cases are Debt Relief Agencies under BAPCPA. Some collection lawyers who occasionally represent debtors will trip into DRAdom without intending. Lawyers who give counsel with respect to the bankruptcy implications of other transactions and events may become stealth DRAs.


The written notices, statements and contracting requirements in §§ 526, 527 and 528 are onerous but perhaps easily routinized within a law office but for the ridiculous three-day and five-day timing requirements that start from invisible points. The advertising mandates in § 528 are misguided, will be misleading to the public in many circumstances and create great potential for professional responsibility problems, both for lawyers who choose to follow the mandates and for those who ignore or defy them.


Lawyers in doubt whether they are Debt Relief Agencies might petition state boards of professional responsibility for advisory opinions. But it is hardly clear that an opinion from a state bar or agency would provide much insulation in the event a disgruntled client challenges the enforceability of a contract under § 526. There are few obvious safe harbors for bankruptcy attorneys who want to do it right under §§ 526, 527 and 528 but are uncertain what doing it right means.


There is no good reason for Congress to put the bar in this unhealthy position. Principle Nine comes to mind:86 Was this malice or incompetence? Did the drafters of BAPCPA intend to drive competent attorneys out of the practice of bankruptcy law? Did the credit coalition that drafted this legislation intentionally erect barriers to public access to bankruptcy legal services? There is much evidence that these were exactly the goals of the credit industry in the drafting of §§ 526, 527 and 528.


1  Pub. L. No. 109-8, 119 Stat. 23 (2005).


2  See § 3.5  Four: Don’t Trust Lawyers.


3  See H.R. Rep. No. 109-31, at 3–6. See also § 3.2  One: Those Who Can Pay Should Pay.


4  11 U.S.C. § 101(12A).


5  See 11 U.S.C. § 101(41).


6  11 U.S.C. § 101(3). This amount was $150,000 in 2005 at the enactment of BAPCPA and adjusted automatically on April 1 of 2007, 2010, 2013 and 2016. See § 2.3  Brief History of Chapter 13 after BAPCPA.


7  11 U.S.C. § 101(8).


8  11 U.S.C. § 101(4A).


9  11 U.S.C. § 101(12A).


10  Many good reasons for not wanting to be labeled a DRA are discussed below in this section.


11  In re Attorneys at Law & Debt Relief Agencies, 332 B.R. 66 (Bankr. S.D. Ga. Oct. 17, 2005) (Davis).


12  In re Attorneys at Law & Debt Relief Agencies, 332 B.R. at 69.


13  See, e.g., In re McCartney, 336 B.R. 588, 592 (Bankr. M.D. Ga. Jan. 12, 2006) (Hershner) (Debtors’ counsel seeking declaration that attorneys were not “debt relief agencies” did not raise a case or controversy. “In the case at bar, no party has threatened to enforce against Movant the debt relief agency provisions of BAPCPA. Movant has not sustained any real, actual or direct harm or injury. Movant has not shown that he is in danger of sustaining any immediately impending harm or injury.”).


14  See Milavetz, Gallop & Milavetz P.A. v. United States, No. 05-CV-2626 (JMR/FLN), 2007 WL 1227598 (D. Minn. Apr. 19, 2007) (unpublished) (Rosenbaum) (Minnesota attorneys are not Debt Relief Agencies.).


15  559 U.S. 229, 130 S. Ct. 1324, 176 L. Ed. 2d 79 (Mar. 8, 2010).


16  Milavetz, 559 U.S. at 236–39. Accord B.O.C. Law Grp., P.C. v. Carroll (In re Galloway), No. 11-cv-10380, 2011 WL 2148603 (E.D. Mich. May 30, 2011) (unpublished) (Murphy) (Law firm was Debt Relief Agent, providing bankruptcy assistance services to prospective debtor at initial consultation.); In re Eskew, No. 11-72934, 2012 WL 4866687 (Bankr. C.D. Ill. Oct. 12, 2012) (Gorman) (Attorney representing consumer debtors was Debt Relief Agent.); In re Pereira Santiago, 457 B.R. 172 (Bankr. D.P.R. May 2, 2011) (Lamoutte) (Debtors’ attorneys in Chapter 13 cases are Debt Relief Agencies.); In re Casavalencia, 389 B.R. 292 (Bankr. S.D. Fla. June 5, 2008) (Olson) (Debtor’s attorney was a Debt Relief Agent.); In re Irons, 379 B.R. 680, 687 (Bankr. S.D. Tex. Dec. 19, 2007) (Isgur) (“[T]his Court joins the vast majority of courts in holding that compensated debtors’ counsel are Debt Relief Agencies subject to § 526.”).


17  Milavetz, 559 U.S. at 238.


18  Milavetz, 559 U.S. at 238.


19  620 F.3d 81 (2d Cir. Sept. 7, 2010) (Leval, Raggi, Gleeson).


20  Connecticut Bar, 620 F.3d at 89.


21  Connecticut Bar, 620 F.3d at 89–90.


22  No. 09-12073, 2010 WL 2509939 (Bankr. N.D. Cal. June 16, 2010) (unpublished) (Jaroslovsky).


23  No. 11-30883, 2011 WL 3704716 (Bankr. S.D. Tex. Aug. 22, 2011) (Isgur).


24  11 U.S.C. § 101(12A)(B).


25  See, e.g., David Lander & Deane Loonin, Restoring “Nonprofitness” and “Quality” to the Credit Counseling Industry, 4 Norton Bankr. L. Adviser 1–13 (2005); Debra Cowen & Debra Kawecki, Credit Counseling Organizations, 2004 EOCPE, available at http://www.irs.gov/pub/irs-tege/eotopica04.pdf; IRS, FTC and State Regulators Urge Care When Seeking Help from Credit Counseling Organizations, IR-2003-120 (Oct. 14, 2003), available at http://www.irs.gov/newsroom/article/0,,id=114574,00.html.


26  11 U.S.C. § 101(12A)(C).


27  11 U.S.C. § 526(a)(1).


28  And, incidentally, you are a Debt Relief Agency.


29  Pub. L. No. 111-327, 124 Stat. 3557 (2010). See § 2.3  Brief History of Chapter 13 after BAPCPA and App. S.


30  11 U.S.C. § 526(a)(2) (emphasis added) (prior to amendment).


31  See App. S.


32  Bankruptcy Technical Corrections Act of 2010, Pub. L. No. 111-327, 124 Stat. 3557 (2010).


33  11 U.S.C. § 526(a)(4).


34  See below in this section.


35  See below in this section.


36  There has been litigation over the priority of that debt in Chapter 13 cases. See In re Busetta-Silvia, 314 B.R. 218 (B.A.P. 10th Cir. Sept. 8, 2004) (Michael, McNiff, Thurman).


37  Milavetz, Gallop & Milavetz, P.A. v. United States, 559 U.S. 229, 130 S. Ct. 1324, 176 L. Ed. 2d 79 (Mar. 8, 2010), discussed further below in this section.


38  See Milavetz, Gallop & Milavetz P.A. v. United States, No. 05-CV-2626 (JMR/FLN), 2007 WL 1227598 (D. Minn. Apr. 19, 2007) (unpublished) (Rosenbaum); Zelotes v. Martini, 352 B.R. 17 (D. Conn. Nov. 7, 2006) (Dorsey); Olsen v. Gonzales, 350 B.R. 906 (D. Or. Aug. 11, 2006) (Hogan); Hersh v. United States, 347 B.R. 19 (N.D. Tex. July 26, 2006) (Godbey). See also Jackson v. McDow (In re Jackson), Nos. 05-44941-B, 1:06-cv-00089-MBS, 2006 WL 2781052 (D.S.C. Sept. 25, 2006) (unpublished) (Seymour) (Debtor’s motion for declaratory judgment that provisions of BAPCPA are unconstitutional which prohibit attorney from advising to refinance or obtain a new mortgage before filing Chapter 13 presents actual and justiciable controversy ripe for judicial review but must be refiled as adversary proceeding.).


39  Zelotes, 352 B.R. at 24.


40  Zelotes, 352 B.R. at 25.


41  Milavetz, Gallop & Milavetz, P.A. v. United States, 541 F.3d 785, 793 (8th Cir. Sept. 4, 2008) (Bye, Smith, Colloton).


42  Hersh v. United States, 553 F.3d 743 (5th Cir. Dec. 18, 2008) (Garwood, Clement, Elrod).


43  Milavetz, 559 U.S. at 243–46. See also Adams v. Zelotes, 606 F.3d 34 (2d Cir. May 18, 2010) (B.D. Parker, Livingston, Chin).


44  Milavetz, 559 U.S. at 248 n.6.


45  Milavetz, 559 U.S. at 247.


46  11 U.S.C. § 526(c)(1) (emphasis added).


47  In re Norman, No. 06-70859-A, 2006 WL 3053309, at *4–*7 (Bankr. E.D. Va. Oct. 24, 2006) (unpublished) (Adams) (Debtor’s attorney must provide Chapter 13 trustee initial consultation letter and engagement letter required by new Debt Relief Agency provisions. “[O]ne might think that Congress would have had the foresight to amend § 329 and Rule 2016 to reflect whether the specific documents required by [11 U.S.C. §§ 526, 527 and 528] must be turned over during the bankruptcy process; such an expectation would be wrong. . . . [T]he Court has a right to review the letters at issue . . . . [A]ny disclosures that are required to be made to the UST should also be made to the Chapter 13 trustee, who handles the day to day administration of the case. . . . Rule 2016 requires that debtor’s counsel provide a compensation disclosure statement to the UST and this Court finds that such a statement should also be made available to the trustee. In order for that disclosure to be a meaningful one the documents that give rise to it, namely the letters in dispute here, should also be produced. . . . [R]eviewing the letters falls within the purview of investigating the debtor’s finances. . . . [I]f a person wants to obtain the benefits of bankruptcy . . . they must make all of their financial information, including the initial disclosure letter and the engagement letter with their counsel, available for the scrutiny of those tasked with administering the system.”).


48  11 U.S.C. § 526(c)(2).


49  11 U.S.C. § 101(3).


50  11 U.S.C. § 527(a)(1). See § 36.33  Certificate of § 342(b) Notice after BAPCPA.


51  11 U.S.C. § 527(a)(2).


52  11 U.S.C. § 527(a)(2) instructs the DRA to correct this statutory redundancy by deleting from the second notice matters “covered in” the first. Is this some sort of test of the competence of DRAs? Why mandate redundant notices in the first place?


53  See 11 U.S.C. § 1325(b), discussed in § 92.1  In General.


54  Fourth, if you count the clerk’s written notice under 11 U.S.C. § 342(b), duplicated above by the first written notice required by 11 U.S.C. § 527(a)(1).


55  See Leslie A. Dyer, Being a Professionally Responsible Debt Relief Agent: How Do You Respect a Law That Can Get You Disbarred?, 10 Norton Bankr. L. Adviser 11–18 (2006).


56  11 U.S.C. § 528(a)(1).


57  11 U.S.C. § 528(a)(2).


58  453 B.R. 261 (E.D. Mich. Apr. 19, 2011) (Lawson).


59  Humphries, 453 B.R. at 268–69. Accord B.O.C. Law Grp., P.C. v. Carroll (In re Galloway), No. 11-cv-10380, 2011 WL 2148603, at *5 (E.D. Mich. May 30, 2011) (unpublished) (Murphy) (Law firm was Debt Relief Agent, providing bankruptcy assistance services to prospective debtor at initial consultation; firm was entitled to reasonable compensation, notwithstanding failure to obtain signature on written fee agreement within five business days. Agreeing with B.O.C. Law Group, P.C. v. Carroll (In re Humphries), 453 B.R. 261 (E.D. Mich. Apr. 19, 2011) (Lawson), noncompliance with § 528(a)(1) five-day requirement was not material requirement for § 526(c)(1) contract. “‘The five-business-day language does not set out what must be in the agreement; it states when the agency must execute the agreement . . . .’ . . . § 526(c)(2), by contrast, pertains to the remedies for violation of the statute as a result of the debt relief agency’s intentional or negligent conduct. . . . Accordingly, the Court agrees with the district court in Humphries that the Bankruptcy Court here conflated § 526(c)(1) and § 526(c)(2) when it voided the written fee agreement for failure to comply with the five-day requirement.” Attorney met with prospective debtor for initial consultation and provided written estimate of fees, and nine days later, client signed retainer agreement.); In re Eskew, No. 11-72934, 2012 WL 4866687, at *5 n.2 (Bankr. C.D. Ill. Oct. 12, 2012) (Gorman) (Citing B.O.C. Law Group, P.C. v. Carroll (In re Humphries), 453 B.R. 261, 269 (E.D. Mich. Apr. 19, 2011) (Lawson), while fee agreement was not entered into within five business days as required by § 528(a), “[d]eveloping case law . . . suggests that the remedy for such violations is not necessarily an automatic denial of all fees but rather a review for reasonableness.” Attorney representing consumer debtors was Debt Relief Agent. Attorney falsely stated hourly rate in excess of amount actually charged; fees in excess of $3,300 no-look fee denied.).


60  No. 10-21983, 2011 WL 5827316 (Bankr. N.D. Ohio Nov. 18, 2011) (unpublished) (Harris).


61  368 B.R. 492 (Bankr. E.D. Va. May 17, 2007) (Mitchell).


62  No. 13-40418-JJR13, 2013 WL 4009324 (Bankr. N.D. Ala. Aug. 5, 2013) (Robinson).


63  Garrard, 2013 WL 4009324, at *3–*7 (“An attorney who represents a prospective debtor in a bankruptcy case is expected to take an active role and provide expert advice to his client with respect to completing the petition and related pleadings, including schedules. . . . Before filing his client’s bankruptcy schedules an attorney is required to determine that their content is well grounded in fact, and his signature on the petition serves as a certification that he has no knowledge after an inquiry reasonable under the circumstances that the information contained in the schedules is other than true and accurate. The failure by the Debtors’ attorney in these cases to inquire into the objectively implausible budget contained in [debtor’s] Schedule J constituted a failure to abide by the requisites of the Code and the Rules[.]”).


64  In re Jackson, No. 11-00007, 2011 WL 768098 (Bankr. D.D.C. Mar. 4, 2011) (Teel) (Schedules showed that debtor owned real property when property had been foreclosed upon before the petition. Debts were estimated between $500,001 and $1,000,000, which attorney knew could not be true. Intentional and negligent failures justified disgorgement of fees and $500 sanction under Bankruptcy Rule 9011. Attorney intentionally and negligently failed to comply with § 526(a)(2), which requires Debt Relief Agent to advise assisted person not to make statement in filed documents that is untrue or misleading, or that upon exercise of reasonable care would have been known to be untrue or misleading.).


65  389 B.R. 292 (Bankr. S.D. Fla. June 5, 2008) (Olson).


66  379 B.R. 680 (Bankr. S.D. Tex. Dec. 19, 2007) (Isgur) (Debtor’s counsel is Debt Relief Agent, and § 526 imposes many requirements that appear to be unsatisfied. “[T]he Court, acting on its own motion pursuant to § 526(c)(5), will consider whether the Court should conduct a proceeding to determine whether the Court should enjoin Mr. Broach from future violations of § 526 of the Bankruptcy Code, and whether the Court should impose an appropriate civil penalty against him. . . . [T]his Court joins the vast majority of courts in holding that compensated debtors’ counsel are Debt Relief Agencies subject to § 526. . . . The Court will presume the statute to be constitutional . . . . The new Debt Relief Agency provisions impose a number of requirements on debtors’ counsel. These include duties: Not to fail to provide a service that counsel obliged himself to provide. . . . Not to counsel a client to make an untrue or misleading statement. . . . Not to make misrepresentations to a client. . . . To provide the information required by § 342(b)(1) and § 527(b) . . . . To notify a prospective or actual client of the duty to provide honest and complete disclosures . . . . To have a clear fee contract with the client . . . . To follow certain advertising requirements. . . . [T]he apparent abuses in this case mandate further investigation and the Court will act accordingly.”). See also In re Seidel, 443 B.R. 411 (Bankr. S.D. Ohio Jan. 26, 2011) (Preston) (Stay is denied pending appeal of sanctions imposed on debtor’s attorney for violations of § 526 and Ohio Rules of Professional Conduct. Counsel was required to disgorge fees and costs received through credit card charge. No-look fee for Chapter 13 cases filed by attorney had been suspended, and attorney was required to complete six hours of bankruptcy ethics instruction.).


67  See In re Pereira Santiago, 457 B.R. 172, 176 (Bankr. D.P.R. May 2, 2011) (Lamoutte) (“Considering the broad and strict requirements in sections 526(a) and 527(a), as well as the serious consequences of failing to comply with the same, it is necessary that the attorney provides the services directly to the client as an assisted person. The direct provision of legal assistance by the attorney does not preclude the support from nonlawyers. However, nonlawyers may not provide directly to the assisted person the services outlined above. . . . [A]n attorney, as a debt relief agency, must provide face to face legal advice to a client as an assisted person, prior to the filing of the petition and at every critical stage of the bankruptcy proceedings.”).


68  727 F.3d 1360 (11th Cir. Aug. 29, 2013) (Tjoflat, Wilson, Coogler).


69  Hood, 727 F.3d at 1361.


70  Hood, 727 F.3d at 1364–65.


71  11 U.S.C. § 528(a)(3) and (a)(4).


72  See 11 U.S.C. § 528(b).


73  Milavetz, 559 B.R. at 250–52. See also Connecticut Bar Ass’n v. United States, 620 F.3d 81 (2d Cir. Sept. 7, 2010) (Leval, Raggi, Gleeson).


74  Milavetz, 559 U.S. at 252.


75  11 U.S.C. § 526(d) (emphasis added).


76  11 U.S.C. § 101(12A). Bankruptcy petition preparers are discussed in § 4.2  Bankruptcy Petition Preparers.


77  See 11 U.S.C. § 110(e)(2), discussed in § 4.2  Bankruptcy Petition Preparers.


78  See, e.g., Lafayette v. Collins (In re Withrow), 405 B.R. 505 (B.A.P. 1st Cir. May 26, 2009) (Vaughn, Kornreich, Tester) (After conversion from Chapter 13 to Chapter 7, bankruptcy court appropriately imposed sanctions under § 707(b)(4)(C) and (D) and Bankruptcy Rule 9011 when debtor’s attorney failed to conduct a reasonable inquiry into the facts set forth in the schedules and there were numerous errors and discrepancies in the documents filed before and after conversion.), aff’g 391 B.R. 217 (Bankr. D. Mass. July 3, 2008) (Boroff) (After conversion from Chapter 13 to Chapter 7, attorney sanctioned for misrepresentations, omissions and errors in bankruptcy schedules. Bankruptcy Rule 9011 applies even when counsel does not sign documents. Under § 707(b), as amended by BAPCPA, signature of attorney represents reasonable investigation into accuracy of schedules. Sanction of $3,585—three times intended charge for services—is payable to Chapter 7 estate. Errors in schedules leave court unable to determine debtor’s earnings in six months prior to filing.), stay denied by 2008 WL 294523 (Bankr. D. Mass. July 25, 2008).


79  See § 36.33  Certificate of § 342(b) Notice after BAPCPA.


80  See 11 U.S.C. § 527(a)(1), discussed above in this section.


81  See 11 U.S.C. § 342(b), discussed in § 36.33  Certificate of § 342(b) Notice after BAPCPA.


82  11 U.S.C. § 342(b).


83  See 11 U.S.C. § 342(b).


84  11 U.S.C. § 330(a)(3).


85  See § 136.6  Debtors’ Attorneys’ Fees before BAPCPA.


86  See § 3.10  Nine: Malice or Incompetence?.