Bankruptcy "reform" signed into law, "lawyer-unfriendly" provisions
remain to be addressed
April 21, 2005
On April 20, President Bush signed into law sweeping
bankruptcy
legislation, S. 256, containing provisions that will dramatically
increase
the liability and administrative burdens of debtor bankruptcy
attorneys and
seriously impinge on the effective legal representation of many
Wisconsinites.
The State Bar vigorously opposed three provisions in the bill that
would heighten
attorney liability and intrude on the attorney-client relationship.
Those provisions
will require debtor attorneys to: 1) certify the accuracy of the
debtor’s
schedules of assets, under penalty of harsh court sanctions; 2)
certify the
ability of the debtor to make future payments under reaffirmation
agreements;
and 3) identify and advertise themselves as “debt relief
agencies” subject
to a host of intrusive regulations that would interfere with the
confidential
attorney-client relationship.
During the Senate floor and House Judiciary Committee debates on S.
256 last
month, several amendments were offered that would have removed the
harmful
attorney liability provisions from the bill. Despite substantial
support for
the amendments in the Senate and on the committee, the amendments were
not
adopted. The State Bar will continue to work with House and Senate
Judiciary
Committee leaders in an effort to address the attorney liability
provisions
contained in S. 256 before the legislation becomes effective on Oct.
17. A
Wisconsin delegation, including State Bar President Michelle Behnke
and lobbyists
for the Bar, will head to Washington D.C. next week to join with the
American
Bar Association’s lobbying efforts to remove these provisions
from the
law.
The new Bankruptcy Reform Act, which makes several sweeping changes,
culminates
an eight-year effort by banks and credit card interests to enact
reforms that
will, among other things, make it harder for most consumers to
discharge debts
in Chapter 7 bankruptcies. Proponents argue the reforms in the Act are
needed
to prevent abuse of the bankruptcy system by making it more difficult
for many
individuals to file for bankruptcy under Chapter 7 of the Bankruptcy
Code,
which erases most of an individual’s debt after assets are
liquidated
to pay creditors. The Act establishes a means test to force more
affluent debtors
to file under Chapter 13, which requires individuals to repay some of
their
debt within three to five years.
This legislation will affect a large number of our (your) clients.
For opportunities
to learn more about the Bankruptcy Reform Act and how it may affect
your practice
and clients, watch closely for other highlights and in-depth seminars
on this
topic in the coming weeks and months.
- State Bar Bankruptcy, Insolvency &
Creditors’ Rights
Section CLE program, May 4, at the State
Bar Annual Convention.
- State Bar Seminars Northwestern
Wisconsin Bankruptcy Institute, May 13, Eau Claire
- A critical issues and highlights “dial-up” teleseminar
will
be presented by State Bar CLE Seminars on June 9.
- State Bar CLE Seminars also will present live half-day seminars
on Aug.
4 and 5 in Milwaukee and Madison, respectively. The Aug. 5 seminar
also will
be presented as a Webcast.
- An article will be published in the July Wisconsin
Lawyer.
- The State Bar is updating it consumer pamphlet, “Answering
Your Questions
About Bankruptcy” for distribution to clients.
- CLE Books plans to release a new book in the fall of 2005.
For more information, visit the American Bankruptcy
Institute or the American
Bar Association Web
sites.
