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BAPCPAs Requirements Regarding Attorney Communication to Clients on Debt Advice Prior to Bankruptcy Filing Found to be Overly Restrictive According to ABI Poll

Contact: John Hartgen
             703-739-0800
             jhartgen@abiworld.org


BAPCPA’S REQUIREMENTS REGARDING ATTORNEY COMMUNICATION TO CLIENTS ON DEBT ADVICE PRIOR TO BANKRUPTCY FILING FOUND TO BE OVERLY RESTRICTIVE, ACCORDING TO ABI POLL

January 14, 2008, Alexandria, Va. —A large majority of respondents (73 percent) in ABI’s latest online poll agreed that §526(a)(4), implemented by the 2005 bankruptcy law, is overly restrictive and has a chilling effect on the speech of attorneys seeking to advise clients to incur new debt prior to filing for bankruptcy protection, and thus violates the First Amendment of the Constitution. Sixty-three percent of respondents “strongly agreed” and 10 percent “somewhat agreed” that §526(a)(4) is overly restrictive and has a chilling effect on the speech of attorneys seeking to advise clients to incur new debt prior to filing for bankruptcy protection.

Seventeen percent of respondents, however, did not agree that §526(a)(4) was overly restrictive and has a chilling effect on the speech of attorneys seeking to advise clients to incur new debt prior to filing for bankruptcy protection. Thirteen percent “strongly disagreed” and 4 percent “somewhat disagreed” that §526(a)(4) is overly restrictive and has a chilling effect on the speech of attorneys seeking to advise clients to incur new debt prior to filing for bankruptcy protection. Seven percent of the respondents did not know or had no opinion on the issue.

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) created new §526(a)(4), which prohibits 'debt relief agencies,' including attorneys, from providing advice to clients to incur debt. In Olsen v. Gonzales, three attorneys (two of whom represented consumer debtors in bankruptcies, and one of whom advised clients regarding bankruptcies but did not file bankruptcy petitions or represent clients in bankruptcy cases) challenged the constitutionality of BAPCPA provisions prohibiting 'debt relief agencies' from providing advice to clients to incur debt. The court agreed that the restrictions on attorneys advising clients to incur debt in contemplation of bankruptcy were constitutionally overbroad.

ABI members and members of the public were welcome to submit their response to the statement: “Section 526(a)(4) is overly restrictive and has a chilling effect on the speech of attorneys seeking to advise clients to incur new debt prior to filing for bankruptcy protection, and thus violates the First Amendment of the Constitution. (Olsen v. Gonzales, D. Oregon, No. 05-6365-HO, 5/7/07)”

ABI’s Quick Poll is posted on ABI’s home page, www.abiworld.org. ABI members and the public are invited to respond to a question on a timely bankruptcy or insolvency issue. Visit http://www.abiworld.net/quickpoll/ to access the results of previous ABI Quick Polls.

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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 11,600 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.