Lawsuit Challenges New Bankruptcy Law

The Connecticut Bar Association (CBA) and the National Association of Consumer Bankruptcy Attorneys (NACBA) today filed suit in the federal court challenging several key provisions of the new bankruptcy law passed by Congress in 2005. According to the suit, the challenged provisions create requirements for “debt relief agencies” that prohibit lawful legal advice and require statements that are untrue or misleading. If these provisions are applied to attorneys, they would impair the constitutional rights of attorneys and their clients under the First and Fifth Amendments to the Constitution.

“The U.S. Justice Department has taken the position that attorneys are ‘debt relief agencies’ and bound by these provisions,” said Louis R. Pepe, President of the CBA. “We do not agree, but if that is so, then the new law would prevent attorneys from carrying out their professional and ethical responsibilities to give their clients complete and truthful advice and impair those clients’ constitutional rights to access to the courts.”

NACBA President Henry J. Sommer added, “We have thousands of members around the country who are trying to figure out how to deal with these provisions. Some attorneys are being deterred from representing any individuals in bankruptcy, even pro bono, because they are afraid of being classified as “debt relief agencies.” In other cases, attorneys will not even talk to clients on the telephone for fear of violating these provisions, or feel they are restricted in giving legal advice. Their possible application to all consumer bankruptcy attorneys is a serious obstacle to giving our clients the competent and complete representation to which they are entitled.”

The lawsuit seeks a preliminary injunction prohibiting the provisions from being enforced against attorneys. The court has not yet set a hearing date.

The complaint and accompanying documents may be viewed at www.nacba.org.