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ABI ENDOWMENT TO FUND STUDY OF BAPCPA’S EFFECT ON PRO BONO LEGAL ASSISTANCE

July 7, 2008, Alexandria, Va. — The American Bankruptcy Institute Endowment Fund has awarded a $7,500 grant to researchers from Harvard Law School to examine the effect of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) on bankruptcy attorneys' pro bono assistance (or free legal representation) for struggling consumer debtors. Many bankruptcy professionals have expressed concern that BAPCPA has reduced the delivery of bankruptcy pro bono services since its enactment in October 2005 because of potential liability concerns for attorneys under provisions of the law.

Attorneys have been concerned with controversial provisions included in BAPCPA that could potentially subject counsel providing pro bono services to liability as a  “debt relief agency” under the revised Code. BAPCPA classifies professionals providing “bankruptcy assistance to an assisted person in return for the payment of money or other valuable consideration” to be debt relief agencies. As “valuable consideration” is not currently defined within the Code, attorneys providing pro bono assistance to meet state bar requirements could possibly be subject to the debt relief agency provisions of the Code. The attorneys would then be subject to a host of additional requirements such as prohibitions on the types of advice that they could give debtors, providing lengthy disclosures to the debtors and additional advertising requirements.

In the case of In re Reyes, 361 B.R. 276, 278 (Bankr. S.D. Fla. 2007), rev'd in part, aff'd in part, No. 07-20684 (S.D. Fla. Dec. 17, 2007), the court expressed its concern that “[a]s long as the pro bono waters remain murky and chilled by the possibility that pro bono representation may brand the pro bono contributor a debt relief agency, there remains the risk that some unfortunate and needy debtors may not be able to obtain pro bono counsel in their hour of desperate need.”   This particular court held that being able to attribute time spent on pro bono representation of a debtor toward the state's annual pro bono requirement was not valuable consideration, and the appellate court affirmed this aspect of the ruling.

The controversy of BAPCPA's effect on pro bono assistance was reflected in an ABI Quick Poll conducted in December 2006.  The respondents were divided over the question of whether an attorney's work performed pro bono could expose them to liability under BAPCPA because the statute says that services must be performed for valuable consideration.

Harvard Law School researchers Jeanne Charn, Director of the Bellows Sacks Access to Legal Services Project at Harvard Law School, and Sheryl Serreze, Senior Fellow of the WilmerHale Legal Services Center at Harvard, will use case-level data from bankruptcy courts from 2004 and 2007 to examine whether bankruptcy pro bono work has declined.  In order to discern which of the more than one million cases filed each year involves attorney pro bono services, the study will analyze the “Disclosure of Compensation of Attorney for Debtor(s)” forms, which require an attorney to report any payment received from a debtor to the bankruptcy court. The project will look at between 800 and 1,000 cases from nine different federal districts. Additionally, the researchers will send out a survey to private, government and pro bono practitioners across the country for their insight regarding BAPCPA's effect on pro bono work.

Supporting Charn and Serreze will be the Clerk of the U.S. Bankruptcy Court for the District of Massachusetts, an economist with the Administrative Office of the U.S. Courts and a researcher at the Federal Judicial Center. The study is to be completed this year.

The ABI Endowment Fund was created in 1989 to provide a secure financial base for the Institute and to provide resources for insolvency research and education. Projects eligible for Endowment funding include research by individuals or entities relating to bankruptcy or insolvency; surveys or other analytical investigation; the education of judges, court personnel, other governmental personnel and the general public; scholarships or other educational grants; support for the Robert M. Zinman Resident Scholar; and support for both the Chief Judge Conrad B. Duberstein National Bankruptcy Memorial Moot Court Competition and ABI’s Corporate Restructuring Competition. Since 1998, the Fund has awarded nearly $750,000 in grants.

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ABI is the largest multi-disciplinary, nonpartisan organization dedicated to research and education on matters related to insolvency. ABI was founded in 1982 to provide Congress and the public with unbiased analysis of bankruptcy issues. The ABI membership includes nearly 11,700 attorneys, accountants, bankers, judges, professors, lenders, turnaround specialists and other bankruptcy professionals, providing a forum for the exchange of ideas and information. For additional information on ABI, visit www.abiworld.org. For additional conference information, visit http://www.abiworld.org/conferences.html.