Academic journal article The University of Memphis Law Review

The Attorney Gag Rule in Consumer Bankruptcy Cases and the Continued Efficacy of It in a Post-Milavetz World

Academic journal article The University of Memphis Law Review

The Attorney Gag Rule in Consumer Bankruptcy Cases and the Continued Efficacy of It in a Post-Milavetz World

Article excerpt

I. INTRODUCTION ................................. 1

II. THE BIRTH OF THE ATTORNEY GAG RULE OF 11 U.S.C. § 526(A)(4) .................................... 2

III. THE CIRCUIT SPLIT OVER THE CONSTITUTIONALITY OF § 526(a)(4) .................................... 12



VI. CONCLUSION .................................... 32


In 2005, Congress enacted sweeping amendments to our bankruptcy laws. Some of these amendments primarily affect - and strike at - the very heart of the attorney-client relationship. After the amendments, consumer bankruptcy attorneys were lumped into the new definition of "debt relief agencies." As debt relief agencies, attorneys are prohibited from offering to their clients certain critical and highly beneficial legal advice that they were once allowed to freely dispense. Essentially, these new laws serve as a modern-day attorney gag rule for consumer bankruptcy attorneys. Some of the advice that attorneys are still prohibited from giving to their clients is beneficial to both debtors and creditors, and it could perhaps save some debtors from bankruptcy relief altogether. Nevertheless, Congress tied attorneys' hands, and the Supreme Court failed to take appropriate judicial action when it had the opportunity but did not strike down the law as unconstitutional.

As one can imagine, the attorney gag rule has caused, is causing, and will continue to cause significant problems in the consumer bankruptcy practice. This Article explores the history of and various problems with the attorney gag rule, and it also advises readers of the challenges ahead for consumer bankruptcy attorneys after the United States Supreme Court declared these new rules to be constitutional in its recent decision in Milavetz, Gallop & Milavetz, P.A. v. United States}

Part II examines the enactment of the attorney gag rule. Part III analyzes the split among the circuit courts regarding attorneys as debt relief agencies and the constitutionality of the attorney gag rule. Part rv discusses the Supreme Court decision that resolved the circuit split. Finally, Part V explains how the Supreme Court's decision continues to restrict consumer bankruptcy attorneys from giving to their clients the benefit of their full and frank legal advice.


Congress passed the Bankruptcy Abuse and Consumer Protection Act ("BAPCPA") on April 14, 2005, and the Act was signed into law by President George W. Bush on April 20, 2005. 2 Senator Chuck Grassley and Representative Jim Sensenbrenner sponsored the bill in the Senate and the House, respectively.3 The effective date of BAPCPA was October 17, 2005.4

BAPCPA is by far the single most significant and perhaps most controversial piece of bankruptcy reform in our time. It is also quite deceptively named a consumer protection law.5 One bankruptcy judge aptly said in an opinion that "to call [BAPCPA] a 'consumer protection' Act is the grossest of misnomers." BAPCPA was instead a complete victory for banks and the creditor lobby - not consumers. In fact, a lobbyist-produced report was the underlying framework for BAPCPA.7

Congress enacted BAPCPA to regulate perceived abuses of the bankruptcy system.8 Some of the more serious perceived abuses were, among other things, easy access to Chapter 7 bankruptcy relief, debtors who obtained a full discharge while earning income that could have been used to pay portions of their outstanding debt, and repeat bankruptcy filers.9 Another significant perceived abuse was attorney misconduct in bankruptcy cases.10 To reiterate, these were perceived abuses. Justice Scalia took this position in his concurrence in Milavetz, Gallop & Milavetz, P.A. v. United States, discussed in Part IV, when he questioned the evidence that supported the legislative record of attorney misconduct. …

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