Supreme Court Considers Changes to Bankruptcy Laws

The U.S. Supreme Court is taking another look at the provisions added to the U.S. bankruptcy code in 2005.

As part of the 2005 bankruptcy provisions, bankruptcy attorneys are not allowed to advise or encourage clients who are considering filing for bankruptcy to take on more debt. Bankruptcy attorneys are also now required to identify themselves as "debt-relief agencies." 

One law firm is arguing that these rules violate the first amendment. Attorney G. Eric Brunstad, who is representing Milavetz, Gallop & Milavetz, P.A., argued that the provision, "basically proscribes or tells the lawyer you can't give perfectly legitimate advice, and that's wrong. The government has no compelling reason to prohibit that kind of advice."

But William M. Jay, an attorney with the Solicitor General's Office, argued back, saying the provision was included to discourage debtors from abusing the bankruptcy system to defraud creditors.

After hearing both arguments, the justices agreed the provisions were not right, one justice even calling them a stupid law.

For now, it's unclear when changes to the law will be made, but Brunstad thinks a decision will be made within 90 days.

If you are interested in learning more about the new bankruptcy laws, please click here to find a bankruptcy attorney in your area.