Legal News

8th Cir. Ruling Lets Bankruptcy Lawyers Speak More Freely

By Ashby Jones

If ever there were a story in the Law Blog’s sweet spot, it may well be the one out today on the Eighth Circuit shooting down part of the 2005 federal bankruptcy law. It’s got it all: bankruptcy (hence the Laird pic), the First Amendment, the rights of lawyers. We’re of half a mind to devote the entire day to the ruling, but we’ll restrain ourselves and just whet your appetites.

The basics, taken from the WSJ story: The Eighth Circuit ruled on Thursday that a provision of 2005 overhaul to the bankruptcy code — the Bankruptcy Abuse Prevention and Consumer Protection Act — violates the free-speech rights of lawyers. The court struck a provision that barred attorneys from advising clients to take on more debt before they filed for bankruptcy protection.

The appeals court, in a 2-1 ruling, said the provision “prevents attorneys from fulfilling their duty to clients to give them appropriate and beneficial advice.”

For example, a client contemplating a bankruptcy filing might benefit from refinancing a home mortgage to lower his monthly payments or to free up funds to pay off other debts, the court said.

The big winner in Thursday’s ruling? Minnesota law firm Milavetz, Gallop & Milavetz, which challenged the bankruptcy provision soon after the 2005 law went into effect.

“We have a right to help our clients put their affairs in order before they file for bankruptcy,” said Barbara Nilva Nevin, a lawyer with the firm. A Justice Department representative said the department was reviewing the decision.

Full post as published by Law Blog - WSJ.com on September 05, 2008 (boomark / email).