Bankruptcy Attorneys and Debt Relief Agencies

I write this post to clarify the definitions of a “bankruptcy attorney” and a “debt relief agency” (“DRA”) because, at least according to one recent client, there is a substantial amount of confusion over these terms.

A bankruptcy attorney is an attorney (or lawyer), licensed to practice in the courts of whatever jurisdiction he is practicing, who handles bankruptcy related cases. (click here for an explanation of the differences–if any–between an attorney and lawyer)

A debt relief agency is a made-up designation that our Congress created as part of the 2005 Bankruptcy Reform Act and is defined in 11 U.S.C. 101(12A). It includes “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…”. Without getting too detailed about who an assisted person is and other nuances, this basically includes a very wide variety of “people”, including credit counselors, unlicensed petition preparers, and it can be argued that it can extend to accountants or anyone else who provides any assistance in connection to the filing or possible filing of a bankruptcy case or even giving financial advice. It may be even broader than that.

Subject ultimately to rulings by the appellate courts in this country, all bankruptcy attorneys are debt relief agencies (although this is being appealed in many different circuits at this time). However, as you can see above, not all debt relief agencies are bankruptcy attorneys.

It has been argued that one of the reasons Congress added this definition was to cause the precise confusion experienced by my client. It was implemented to add additional disclosure and paperwork requirements, to add costs to the bankruptcy process and to cause confusion between who is licensed to practice bankruptcy and who is not, and (it has been argued) it was designed to take business away from licensed attorneys as a result of this confusion.

In any event, in order to represent you in a bankruptcy case (or any other legal proceeding, for that matter) an attorney must be licensed to practice law in whatever state your case is in. Whether or not he/she is also a “debt relief agency” depends on the rulings of the courts in that jurisdiction. Perhaps more importantly, it is virtually meaningless.