Supreme Court Hears Argument in Two Important Bankruptcy Cases

Published on Nov 30, 2009 at 2:22 pm in General Blogs.

The Supreme Court hears oral argument today in two important consumer bankruptcy cases with potentially wide ranging impact on debtors and their counsel. At 10:00 a.m. the Court hears argument in the case of Milavetz, Gallop, & Milavetz v. United States (08-1119; 08-1225), which involves whether attorneys are “debt relief agencies” under the Bankruptcy Code and are thus restricted in what they may advise a debtor or potential debtor in bankruptcy, including the incurrence of debt in anticipation of a bankruptcy filing, such as buying a vehicle or obtaining other items of necessity by use of credit. The Bankruptcy Code places other restrictions on debt relief agents, including a required disclosure in any advertisement effectively announcing that the attorney is a debt relief agent who assists in the preparation and filing of bankruptcies. Lawyers are challenging the restrictions on First Amendment free speech grounds and maintain that the restriction precludes attorneys from offering otherwise sound legal advice to prospective clients.

At 11 a.m., the Court is to hear argument in United Student Aid Funds, Inc. v. Espinosa (No. 08-1134), another bankruptcy case dealing with the dischargeability of certain student loan obligations in a Chapter 13 case. The cases involves the issue of whether a debtor may obtain a discharge of certain student loan obligations by simply stating his or her intention to do so her Chapter 13 plan and obtaining a discharge after her plan was completed, but who did not offer evidence of “undue hardship” which is required by the Bankruptcy Code. The debtor obtained four student loans to attend technical school. In his Chapter 13 case, he listed the principal owed to the United Student Aid Funds (USAF) as being due and payable through the plan, but did not include any of the accrued interest. After not receiving the interest payments and after more than three years had passed since the Chapter 13 case was discharged, USAF commenced collection action against the debtor, who argues that the USAF is barred by the Chapter 13 discharge and the delay in objecting to the content of the plan before the Objection to Confirmation deadline.

Belsky, Weinberg & Horowitz is presently required to state that it is a debt relief agency assisting individuals in the filing of bankruptcies to discharge and/or reorganize their debts. We represent only debtors and offer free consultations by phone or in person.



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