South-Western Legal Studies in Business

Speech Restrictions in 2005 Bankruptcy Reform Act Unconstitutional
Description Trial court held that bankruptcy attorneys many not be prevented from advising their bankruptcy clients to take financial actions that are legal under the bankruptcy law. Restriction on advice is unconstitutional under the free speech provisions of the First Amendment.
Topic Bankruptcy
Key Words BAPCPA; Constitutionality; Free Speech; Attorney and Client
C A S E   S U M M A R Y
Facts The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005 contains provisions that apply to consumer bankruptcy attorneys and how they provide service to clients. Hersh, a Dallas attorney who counsels clients regarding federal bankruptcy law, sued the government, contending that the provision of the BAPCPA that prohibits attorneys from advising clients to incur additional debt in contemplation of bankruptcy is an unconstitutional restriction of speech.

As defined by the BAPCPA, Hersh, as a bankruptcy attorney, is a "debt relief agency" subject to the statute. Congress clearly intended to have the statute apply to bankruptcy attorneys. The Act states that a debt relief agency may not "advise an assisted person or prospective assisted person to incur more debt in contemplation of such person filing a case under [the bankruptcy law]." That provision is facially unconstitutional. Content-based restrictions on speech are subject to strict review. Regulation of speech must be narrowly tailored to promote a compelling government interest. As drafted, the Act prohibits attorneys from advising clients to take actions that are lawful under the BAPCPA. The Act also prohibits attorneys from giving financially prudent advice.

Citation Hersh v. U.S., ---B.R.--- (2006 WL 2088270, N.D. Texas, 2006)

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