Series: #3 0f 13
In our previous article of our series, “Restrictions on Debt Relief Agencies: Overview of Bankruptcy: Chapter 13, Section 526“, we looked at the requirements of debt relief agents in terms of the services they provide, and to clarify a few of the issues involved. This time, we take a look at details of sections 527 and 528, which describe both what types of information a debt relief agent is required to disclose to the debtor, and when, including clearly written contracts and fees for service.
Chapter 13; Section 527: Disclosures
Section 527 (titled “Disclosures”) appears clear on its face, but is very tricky to follow in certain circumstances. It requires a debt relief agency to provide very specific written notices to the assisted person “not later than 3 business days after the first date on which a debt relief agency first offers to provide any bankruptcy assistance services to an assisted person.”
Generally the first time an attorney will offer to provide assistance will be on the date that the assisted person calls into the law office (a.k.a. “the debt relief agency”). How is the attorney able to comply with the very strict deadlines if the attorney is unable to meet with the person within the following 3 business days? What happens if a meeting is scheduled within the following 3 business days, but the assisted person fails to attend the meeting? Should an attorney send the notice requirements through US Mail, first-class postage prepaid every time any debtor contacts your office for potential assistance? The notice requirements include the Bankruptcy Court Clerk’s notice under Section 342(b)(1) and the specific notice listed in Section 527. If a debt relief agency does not itself complete the petition schedules and statement of financial affairs, the debt relief agency must provide the specified information to the assisted person regarding how to provide all the information required in Section 521*.
Chapter 13; Section 528: Requirements for Debt Relief Agencies
Section 528* has the final list of requirements with which the attorney may or may not be able to comply.
The first such requirement is that the debt relief agency must execute a written contract which clearly and conspicuously explains the services that will be provided and the fees that will be charged; and that the DRA provide a “fully executed” completed contract to the assisted person.
The difficulty with this requirement is that the contract must be fully executed “not later than 5 business days after the first date on which such agency provides any bankruptcy assistance services to an assisted person, but prior to such assisted person’s petition under this title being filed.” The presumption might be that the five business day requirement starts after the debtor has actually agreed to retain the law office, but that is not what the statute says.
The term “any bankruptcy assistance services” could be interpreted to mean advice on the bankruptcy chapters in general and the risk and benefits of filing. The statute requires then that the fees be disclosed oftentimes before the attorney knows what bankruptcy chapter the debtor is filing or complex facts which the debtor may not have disclosed at the time the first assistance was provided. In addition, a strict reading of the statute required the assisted person to execute the contract within 5 business days or else that person may not be a client.
FINALLY, 11 U.S.C. § 528(a)(3) requires the debt relief agency to clearly and conspicuously disclose in any advertisement of bankruptcy services or of the benefits of bankruptcy directed to the general public (whether in general media, seminars or specific mailings, telephonic or electronic messages, or otherwise) that the services or benefits are with respect to bankruptcy relief and clearly and conspicuously use the following statement in such advertisement: “We are a debt relief agency. We help people file for bankruptcy under the Bankruptcy Code.” As the Code fails to describe “advertisement,” my seminar may discuss benefits of filing for bankruptcy, and these seminar materials may fall into the hands of the general public, I have used the requisite language at the beginning of this materials. Have all the other debt relief agents?
Next: Chapters 7 and 13 – Initial Interview and Deciding Which Chapter to Use