WisBar News: Bankruptcy "reform" signed into law, "lawyer-unfriendly" provisions remain to be addressed:

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  • WisBar News
    April
    21
    2005

    Bankruptcy "reform" signed into law, "lawyer-unfriendly" provisions remain to be addressed

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    President Bush signed into law sweeping bankruptcy legislation, S. 256, containing provisions that will dramatically increase the liability and administrative burdens of debtor bankruptcy attorneys and seriously impinge on the effective legal representation of many Wisconsinites.

    Bankruptcy "reform" signed into law, "lawyer-unfriendly" provisions remain to be addressed

    April 21, 2005

    On April 20, President Bush signed into law sweeping bankruptcy legislation, S. 256, containing provisions that will dramatically increase the liability and administrative burdens of debtor bankruptcy attorneys and seriously impinge on the effective legal representation of many Wisconsinites.

    The State Bar vigorously opposed three provisions in the bill that would heighten attorney liability and intrude on the attorney-client relationship. Those provisions will require debtor attorneys to: 1) certify the accuracy of the debtor’s schedules of assets, under penalty of harsh court sanctions; 2) certify the ability of the debtor to make future payments under reaffirmation agreements; and 3) identify and advertise themselves as “debt relief agencies” subject to a host of intrusive regulations that would interfere with the confidential attorney-client relationship.

    During the Senate floor and House Judiciary Committee debates on S. 256 last month, several amendments were offered that would have removed the harmful attorney liability provisions from the bill. Despite substantial support for the amendments in the Senate and on the committee, the amendments were not adopted. The State Bar will continue to work with House and Senate Judiciary Committee leaders in an effort to address the attorney liability provisions contained in S. 256 before the legislation becomes effective on Oct. 17. A Wisconsin delegation, including State Bar President Michelle Behnke and lobbyists for the Bar, will head to Washington D.C. next week to join with the American Bar Association’s lobbying efforts to remove these provisions from the law.

    The new Bankruptcy Reform Act, which makes several sweeping changes, culminates an eight-year effort by banks and credit card interests to enact reforms that will, among other things, make it harder for most consumers to discharge debts in Chapter 7 bankruptcies. Proponents argue the reforms in the Act are needed to prevent abuse of the bankruptcy system by making it more difficult for many individuals to file for bankruptcy under Chapter 7 of the Bankruptcy Code, which erases most of an individual’s debt after assets are liquidated to pay creditors. The Act establishes a means test to force more affluent debtors to file under Chapter 13, which requires individuals to repay some of their debt within three to five years.

    This legislation will affect a large number of our (your) clients. For opportunities to learn more about the Bankruptcy Reform Act and how it may affect your practice and clients, watch closely for other highlights and in-depth seminars on this topic in the coming weeks and months.

    • State Bar Bankruptcy, Insolvency & Creditors’ Rights Section CLE program, May 4, at the State Bar Annual Convention.
    • State Bar Seminars Northwestern Wisconsin Bankruptcy Institute, May 13, Eau Claire
    • A critical issues and highlights “dial-up” teleseminar will be presented by State Bar CLE Seminars on June 9.
    • State Bar CLE Seminars also will present live half-day seminars on Aug. 4 and 5 in Milwaukee and Madison, respectively. The Aug. 5 seminar also will be presented as a Webcast.
    • An article will be published in the July Wisconsin Lawyer.
    • The State Bar is updating it consumer pamphlet, “Answering Your Questions About Bankruptcy” for distribution to clients.
    • CLE Books plans to release a new book in the fall of 2005.

    For more information, visit the American Bankruptcy Institute or the American Bar Association Web sites.