Friday, May 28, 2010

2d Circ.: Bankruptcy Law Doesn't Stifle Attorney's First Amendment Rights

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In Diana G. Adams, U.S. Trustee Region 2  v. Zenas Zelotes, Esq. (Case No. 07-1853cv), the United States Circuit Court of Appeals for the Second Circuit this week ruled that a Bankruptcy Code Provision [11 U.S.C. sec. 526(a)(4)] did not violate the First Amendment freedom of speech rights of attorney Zenas Zelotes.

Citing the March 8, 2010, decision of the U.S. Supreme Court in Milavetz, Gallop & Milavetz v. U.S. (Docket Nos.  08-1119, 08-1225), the Second Circuit reversed the trial court ruling. Zelotes alleged the  bankruptcy court provision at issue that prohibits debt relief agencies from advising clients to assume additional debt in contemplation of filing for bankruptcy violated his First Amendment right to advise clients freely.

The appellate court cited the Supreme Court's Milavetz decision that said the Bankruptcy Abuse Prevention and Consumer Protection Act should be interpreted narrowly as prohibiting debt relief agencies and attorneys from emboldening clients to "load up" on debt before filing for insolvency with the expectation that the debt would be discharged by the bankruptcy.

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