New Jersey bankruptcy Article
By KATE COSCARELLI
STAR-LEDGER STAFF
Marlton bankruptcy lawyer Andrew Al tenburg says the part of the new federal bankruptcy law requiring he call himself a “debt-relief agency” is offensive.
Michael Schwartzberg, who handles a couple hundred bankruptcy cases each year from his Bloomfield office, thinks it’s ridiculous.
And at the mere mention of the new re quirement, prominent Bergen County bank ruptcy lawyer Gary Norgaard becomes inflamed, gesturing grandly and declaring the directive a demeaning attempt to associate lawyers with debt collectors.
“I go to school for seven years and prac tice for 30 years and I’m a debt-collection agency, just like the guy who dropped out of high school,” Norgaard said one day this week, standing in the halls of the federal courthouse in Newark.
At issue is a condition tucked into the hulking Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. The law says a debt-relief agency is “any person who provides any bankruptcy assistance” for payment or is a “bankruptcy-petition preparer.” Lawyers who don’t comply with various disclosure require ments or give some kinds of advice face sanctions.
Many in the legal world object to the idea that legal services are being lumped in with document preparers and other agencies that set up shop in strip malls to help people manage debt, said Barry Frost, chairman of the New Jersey State Bar Association’s bankruptcy law section.
“Attorneys are cast into one giant melting pot,” added William Mackin, a bankruptcy attorney in Woodbury. There is plenty of potential for harm if clients take the view that because they all have the same title, a more traditional debt-relief agency can provide the same help as a lawyer for less money, Mackin said.
If that happens, clients could “be led down the path to continued problems,” he said.
The change is going to be a costly one for lawyers and firms, Frost said.
Advertisements will now be longer because they are required to include the statement: “We are a debt-relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.” And disclo sures about clients’ rights must also appear on stationery and business cards, requiring massive re prints at some firms like Frost’s, he said.
To protest the requirements, lawyers are doing what they do best: going to court.
Cases have been filed – to mixed results – from Georgia to New Jersey. And the Washington, D.C.- based National Association of Consumer Bankruptcy Attorneys is gearing up for another, Executive Director Brad Botes said.
Many of the lawsuits have couched the issue in constitutional terms, saying the law restricts debt- relief agents, including attor neys, from giving advice in certain circumstances. For instance, court papers in a case filed in Minnesota say it has previously been appropriate for a lawyer to advise a client to get a home equity line of credit or car loan, since their credit rating will plummet after going bankrupt.
“Really, it’s a First Amendment issue,” said Lee Perlman, a Cherry Hill attorney who filed a motion in December challenging the provision in conjunction with a Maple Shade woman’s bankruptcy.
But government lawyers have argued otherwise in court papers. The law and disclosures are meant to keep lawyers honest and don’t stop an attorney from advising clients about what the law says, according to court papers filed by the office of the U.S. Trustee in the New Jersey case.
Earlier this month, New Jersey’s chief bankruptcy judge, Judith Wiz mur, dismissed the challenge without ruling on its substance when she ruled Perlman didn’t have standing to bring the case.
Likewise, judges in federal bankruptcy courts in Washington state and the Middle District of Georgia have booted cases in re cent months challenging the re quirements.
But lawyers aren’t giving up yet.
They point to a decision in the fall by the chief bankruptcy judge in the Southern District of Georgia, who took it upon himself to say at torneys are not debt-relief agencies under most circumstances.
In addition to the challenge pending in Minnesota, the national bankruptcy lawyers group has teamed up with constitutional scholars and the Connecticut Bar Association to research the issue. They expect to file in two weeks, association President Henry Som mer said.
“I’m hoping we’ll have better re sults,” he said. Of course, the ill feelings go both ways.
Peter Caspar owns We the People document preparation franchises in Verona and Elmwood Park, which he said are also considered debt-relief agencies under the law. Lawyers, he said, aren’t all they’re cracked up to be.
“Have you seen what they are charging for a bankruptcy?” he said.