Finally the Court upheld the requirement that attorneys and law firms providing debt relief services in preparation of bankruptcy must disclose this in advertisements.

1. Legal Daily News Feature
Supreme Court Ruling Could Affect Bankruptcy Practices
By Joshua Nave
The Supreme Court today released its decision in MILAVETZ, GALLOP & MILAVETZ, P. A. v. UNITED STATES, viewable at
www.supremecourtus.gov/opinions/09pdf/08-1119.pdf.
03/09/10 In regards to advising clients to take on more debt, the
argument focused first on the breadth of the statute. Milavetz
Milavetz arose from changes argued that the statute was unconstitutional because it was
made to the bankruptcy code that overly broad. Under Milavetz’ reading of the statute, attorneys
required debt relief advisors to acting as debt relief advisors would be prohibited from
specifically identify themselves as such in any advertisements advising their clients to take on any additional debt, even if it
to the general public, and to refrain from advising clients was sound legal advise. The Court however disagreed, holding
to incur additional debt in preparation for bankruptcy. The that the statute ‘’...prohibits a debt relief agency only from
petitioners in the case are a group of lawyers and law firms advising a debtor to incur more debt because the debtor is
that filed for declaratory relief. They asked the Court to find filing for bankruptcy, rather than for a valid purpose.’’ Under
that law firms are not debt relief agencies under the act, or this reading of the statute, the Court held that it is not overly
that in the alternative, the provisions mandating disclosure broad.
in advertisements and prohibiting advising clients to incur
additional debt are unconstitutional as they apply to attorneys. Finally the Court upheld the requirement that attorneys and
law firms providing debt relief services in preparation of
The Court today ruled against them on all three questions in bankruptcy must disclose this in advertisements. The court
an opinion written by Justice Sotomayor. reiterated the rule that ‘’...the States retain authority to
regulate inherently misleading advertisements, particularly
The Court had little problem finding that the bankruptcy code through disclosure requirements.’’
included lawyers and law firms among those considered ‘’debt
relief agencies’’ pointing to specific provisions that applied to
actions only a lawyer could take.
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