Bankruptcy A-Z: D is for Debt Relief Agency
December 22nd, 2011 | 
Author: Bankruptcy A-Z: D is for “debt relief agency”.
In 2005, when Congress amended the bankruptcy code, it created the term assisted person. In the code, it means “any person whose debts consist primarily of consumer debts and the value of whose nonexempt property is less than $175,750.”
Unfortunately, it also created the “debt relief agency.” The debt relief agency is “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.”
Basically, it is anyone who helps consumers file for bankruptcy and charges for it – in other words, Consumer Bankruptcy Attorneys.
Before the law, bankruptcy attorneys used to explain the pros and cons of filing for bankruptcy to their clients. We told our clients the truth about what to expect. We told our clients about the relevant Chapters of bankruptcy.
Now, as a debt relief agency, consumer bankruptcy attorneys are required to provide certain disclosures. Apparently, Congress didn’t think that the information that we disclosed was enough.
Funny, how the statute focuses on what we can’t do, more than what we can. We can’t tell you anything that is false or misleading or that we should have known to be false or misleading. We can’t lie about the services we provide or about the benefits and risks of filing for bankruptcy.
We can’t advise you to incur more debt in contemplation of filing for bankruptcy. Thankfully, the Supreme Court clarified this requirement in Milavetz v. U.S. While the Supreme Court did not remove attorneys from the definition of “debt relief agency,” it did allow us to advise clients to incur debt for a valid purpose. Like when my client’s car was falling apart and he needed a new one, I was able to advise him to buy a new one at a reasonable interest rate with reasonable payments (lower than the cost of maintaining his old car) prior to filing for bankruptcy. Now, he can get to work and pay his other bills.
Like any reasonable attorney would advise his client to rack up debt if it wasn’t necessary and then file for bankruptcy on it. I guess they forgot that consumer debts for luxury goods or services incurred within 90 days of filing for bankruptcy are presumed to be nondischargeable. They probably forgot that cash advances over a certain amount incurred within 70 days of filing for bankruptcy also are presumed to be nondischargeable.
If your attorney intentionally or negligently fails to file one of the documents required by the Code (see section 521) or disregards other material requirements and your case is dismissed or converted to a case under another chapter of this title, your attorney can be sanctioned and forced to disgorge the fee. In other words, we pay if we screw up just like before the amendments.
Did I mention that petition preparers are on the hook too? They fill out paperwork. Bankruptcy attorneys provide legal advice to keep you from getting into trouble and to make your case go as smoothly as possible.
If you need to protect your assets from creditors and are in the metro Richmond area, or anywhere in central Virginia, contact bankruptcy and consumer lawyer Mitchell Goldstein at (804) 592-1674 or by email at mitch at mitchellpgoldstein dot com.
Oh, and Congress makes me say that “I am a debt relief agency. I help people file for bankruptcy relief under the Bankruptcy Code.” I guess the bankruptcy attorney title wasn’t enough disclosure for them. As for the required disclosures, you can find those here or I would be happy to provide them with a consultation.
Other D posts:
D is for Debtor or Debtor.
D is for Deconsolidate.
D is for Discharge or Discharge or Discharge or Discharge.
D is for Disclosures.
D is for Documents.
D is for Domestic Support.
D is for DUI, DWI, OVI.
D is for Divorce.
D is for Do’s and Don’ts.
Photo Credit: studiosmith
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Posted in Bankruptcy, Bankruptcy Alphabet | 
Tags: bankruptcy, bankruptcy alphabet, debt relief agency