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Don't ask, don't tell?

Suppose you are in deep financial trouble and are meeting with an attorney to see what options are available.  You probably have lots of questions you would like to ask the attorney.  These questions may very well include:

Should I refinance my home before I file bankruptcy?

Can I finance a car before I file to replace one which is not running or which will have to be surrendered in the bankruptcy?

Since credit may be more expensive or not even available immediately after you file bankruptcy, and because neither of those actions is illegal, immoral or prohibited, a responsible attorney may want to answer "yes,"  But he can't!

Congress sealed your attorney's lips

When Congress passed the The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 it included some very unusual restrictions on your attorney and what he or she can tell you. 

First, it called your attorney a Debt Relief Agency 101(12A)

Then Congress restricted Debt Relief Agencies from doing a number of things.  One of these restrictions is that a Debt Relief Agency shall not advise the client "to incur more debt" in contemplation of filing a bankruptcy case.  526(a)(4)

Congress made no exceptions.  Your attorney cannot advise you to incur more debt even if it is perfectly legal, even if it will benefit you, or even if it will benefit your creditors (as reducing your mortgage expense might in a Chapter 13 by allowing a greater plan payment).

Congress sealed a lot of lips

You may want to talk with a counselor, paralegal, and others that provide bankruptcy assistance for a fee.  They are also likely to be classified as Debt Relief AgenciesThe Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 also prohibits them from advising you to incur more debt.  526(a)(4)

If the counselor, paralegal, attorney or other person you're talking with determines that your best solution is to file bankruptcy, and that you really should hire an attorney, or a paralegal to protect your interests, the bankruptcy code prohibits him or her from telling you to hire an attorney or a paralegal!  526(a)(4)

Why did Congress do this to you?

It could be a case of sloppy law making and unintended consequences.  The more cynical among us might say that it's because your lobbyist didn't contribute millions of dollars to your Senators and your Congressmen, and help draft revisions like this one to the bankruptcy code.  The cynic would note that the lobbyists for your banks, credit unions, and finance companies sure did contribute millions...and millions.

What do the courts say?

As bankruptcy cases under the new code make their way through the courts, not all of the courts have interpreted the code in the same way.  Some have concluded that attorneys are not Debt Relief Agencies.  Others have found attorneys to be Debt Relief Agencies, but that the restriction on what they attorney may tell the client is in violation of the United States Constitution.  For a review of some of these cases, follow this link:  Case Law.