In a decision handed down by the United States Supreme Court yesterday in the case of Milavetz and Milavetz v. United States, it has now been held that attorneys who represent debtors and provide bankruptcy assistance are considered “debt relief agencies”, requiring them to include such a disclosure in any advertisements they make. More importantly, as a “debt relief agency” these attorneys are prohibited from advising a debtor to incur more debt because the debtor will be filing a bankruptcy. Such actions have, in the past, been termed as “loading up” on debt prior to bankruptcy.
The decision does not, however, preclude such attorneys from advising their clients to incur additional debt “for a valid purpose.” So long as a valid purpose exists for incurring the additional debt (other than the mere fact that a bankruptcy is to be filed), it would appear that debtor’s counsel would not be held liable for the actions of their clients. Conversely, an attorney could be held personally liable if he is found to have advised his client to load up on debt solely because a bankruptcy is being considered and no other valid reasoning existed.
This decision is sure to be studied closely by debtor’s counsel, as they now must consider the consequences of their client consultations and the advice they offer.
If you have any questions, please contact Mr. Scott Fink, Esq. Scott is an Associate in the Bankruptcy department of the Brooklyn Heights office of Weltman, Weinberg & Reis Co., LPA. He can be reached at 216.739.5644 or via e-mail at sfink@weltman.com.





