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March 12, 2010

Peter Carroll to be New Chief Judge in the Central District of California

Peter Carroll sitting in Riverside will move to Los Angeles in September of this year and will become the new Chief Judge on January 1, 2011 replacing Judge Vincent Zurzolo as Chief Judge.  Judge Sam Bufford is retiring in September and will take a position at Penn State University.  Geraldine Mund and Kathleen Thompson are retiring in January, 2011 - they are sure going to be missed.  Judges Alan Ahart and Victoria Kaufman will move from downtown to the San Fernando Valley to fill the vacancies.  As I understand it, Judge Mund will remain on some sort of temporary status and finish up the cases assigned to her.   

March 12, 2010 in Judicial Announcements | Permalink | Comments (0) | TrackBack

March 11, 2010

Some Thoughts on Milavetz - Disappointing Decision and Opinion

As I have said, the issue of whether attorneys are DRAs was really a no brainer.  Congress makes the laws and bankruptcy assistance is defined in section 101(4A) as "providing legal representation with respect to a case or proceeding..."  A DRA is someone who provides bankruptcy assistance.  The real issue was the part of section 526(a)(4) which says a DRA cannot "advise an assisted person to incur more debt in contemplation of” filing bankruptcy.  As Justice Roberts pointed out at oral argument, there is all kinds of advise relating to incurring debt in contemplation of bankruptcy which might be perfectly appropriate but there is also all kinds which is inappropriate.  So where is that line and if the attorney is worrying about where the line is, doesn't that chill speech between the client and attorney? 

Before I complain about the opinion, I would point out that I long ago stopped worrying about whether I can tell the prospective client that it is okay to rent a different apartment or buy a new car or borrow money from mother to pay the fees "in contemplation of filing bankruptcy."  It is just too clear that that that is appropriate advice.  But I am aware of attorneys who are afraid and wobble giving that kind of advice.


So the Supreme Court ruled that the restriction only prohibits bad stuff and there are good reasons for Congress to do that so it's okay.  But Sotomayor really sort of wanders in the opinion trying to tell us what "bad advice is" which is good but then makes broad statement which resurrect the fears.  For example, "we conclude that §526(a)(4) prohibits a debt relief agency only from advising a debtor to incur more debt because the debtor is filing forbankruptcy, rather than for a valid purpose."  I tease my students regularly about words I hate and tell them don't utter those words in my classroom or on the test.  I do that to emphasize that words are important and because they look up from their laptops and blackberrys when I say something funny.  The worst is "bad faith."  The second worst is "valid."  What does that mean?  I can give my client advice as long as it is for a valid purpose? 

Sotomayor writes, "advice to incur more debt because of bankruptcy, as prohibited by §526(a)(4), will generally consist of advice to 'load up' on debt with the expectation of obtaining its discharge—i.e., conduct that is abusive per se."  That's good to hear and helps a lot - it does. "[W]e conclude that §526(a)(4) prohibits a debt relief agency only from advising an assisted person to incur more debt when the impelling reason for the advice is the anticipation of bankruptcy."  "Impelling"?  Some definitions from google, "To urge to action through moral pressure; drive"  "markedly effective as if by emotional pressure" "to urge or drive forward or on by or as if by the exertion of strong moral pressure."  Huh?   

She helps us understand impelling by saying, "Covered professionals remain free to 'tal[k] fully and candidly about the incurrence of debt in contemplation of filing a bankruptcy case.'”  "Section 526(a)(4) requires professionals only to avoid instructing or encouraging assisted persons to take on more debt in that circumstance."  So I can tell them the consequences of various alternatives, just don't impell them to do one or the other - don't instruct or encourage the conduct.  "Under our reading of the statute, of course, the prohibited advice is not defined in terms of abusive prefiling conduct but rather the incurrence of additional debt when the impelling reason is the anticipation of bankruptcy."  "It would make scant sense to prevent attorneys and other debt relief agencies from advising individuals thinking of filing for bankruptcy about options that would be beneficial to both those individuals and their creditors."  "Section 526(a)(4) by its terms prevents debt relief agencies only from 'advis[ing]' assisted persons 'to incur' more debt.  Covered professionals remain free to 'tal[k] fully and candidly about the incurrence of debt in contemplation of filing a bankruptcy case.” 

"Our construction of §526(a)(4) to prevent only advice principally motivated by the prospect of bankruptcy further ensures that professionals cannot unknowingly run afoul of its proscription.  Because the scope of the prohibition is adequately defined, both on its own terms and by reference to the Code’s other provisions, we reject Milavetz’s vagueness claim."  In footnote 5 there is a helpful comment, "Reiterating the significance of such dialogue, we note that §526(a)(4), as narrowly construed, presents no impediment to “ ‘full and frank’ ”
discussions."  But don't give advice "principally motivated by the prospect of bankruptcy"?  What do you think I do all day?

So we have lots of sound bites to show the court in the event the UST or a client comes after us - something I'm not sure has ever happened.  But what about advice designed to help the client pass the means test, i.e., stop paying your taxes which will be a priority debt and deductible on the means test.  Buy a new car which will be deductible on the means test so you can pass.  Is that "valid."  I guess if you say, "Mr. Client, if you buy a new car whether you need it or not, you will pass the means test," that is only "frank discussion" or it is impelling the debtor to incur debt only because the debtor wants to file and cannot otherwise file.  Someone who files when they could not otherwise file would hurt creditors I assume.  That makes it not a valid purpose?

I better get to my office.  Let me know what you think.     

March 11, 2010 in Supreme Court | Permalink | Comments (3) | TrackBack

March 10, 2010

cdcbaa Meet the Clerk Program - location change


The Olympic Collection Banquet & Conference Center
11301 Olympic Blvd., Suite #204
Los Angeles, CA 90064 (West L.A. – 405 & 10 Freeway)
Tel (310) 575-4585

MCLE Program 11:00 a.m. – 1:00 p.m.

March 10, 2010 in Programs | Permalink | Comments (0) | TrackBack

cdcbaa Newsletter

You can access our most recent newsletter here

March 10, 2010 in Current Affairs | Permalink | Comments (0) | TrackBack

March 8, 2010

Public Counsel Program - Introduction to Chapter 7


The Honorable Maureen Tighe   Kenneth G. Lau
United States Bankruptcy Judge      U.S. Trustee Trial Attorney

James King     David A. Tilem
King & Associates    Law Offices of David A. Tilem

Magdalena Reyes Bordeaux
Public Counsel

Date:   Thursday, April 8, 2010
Time:   9:00 am-12:00 pm
Location:   255 E. Temple Street
   9TH Floor, Rm. 952

This program is designed to provide training to attorneys who will be providing pro bono assistance to pro se debtors

• Introduction to Chapter 7 Bankruptcy Process
• Avoid common mistakes in filing a Chapter 7 bankruptcy case

To register, please email your contact information and availability to volunteer to Magdalena Reyes Bordeaux at mbordeaux@publiccounsel.org.  This program is approved for 3 hours of MCLE Credit. REGISTRATION IS LIMITED.  A 2 HOUR PRO BONO COMMITEMENT WILL BE REQUIRED TO REGISTER FOR THIS PROGRAM.

This program is co-sponsored by the Central District Consumer Bankruptcy Attorney Association (“CDCBAA”).

*Refreshments generously provided by Suite Solutions*

March 8, 2010 in Programs | Permalink | Comments (0) | TrackBack

Supreme Court Rules on Milavetz

We are debt relief agencies as I predicted but the Supreme Court refused to rule that the speech restrictions in section 526(a)(4) are overbroad, for which I am shocked given the tenor of the oral argument. "[W]e conclude that §526(a)(4) prohibits a debt relief agency only from advising a debtor to incur more debt because the debtor is filing for bankruptcy, rather than for a valid purpose."  It is essentally a unanimous decision with Scalia and Thomas writing concurring opinions.  You can access the opinion here. 

March 8, 2010 in Supreme Court | Permalink | Comments (2) | TrackBack