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VOL. 123 | NO. 178 | Thursday, September 11, 2008

Judge Says Part of Bankruptcy Law Unconstitutional

By JOHN CHRISTOFFERSEN | Associated Press Writer

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NEW HAVEN, Conn. (AP) - A federal judge Tuesday partially blocked one element of the nation's recently overhauled bankruptcy law, saying that a provision restricting the advice lawyers can give is unconstitutional.

Organizations representing thousands of attorneys filed the lawsuit in 2006, objecting to a requirement that they give specific advice to bankruptcy clients, including not to go deeper into debt.

U.S. District Court Judge Christopher Droney in Hartford ruled that the restriction was too broad because it prohibits attorneys from advising their clients to incur any debt, including debts that are legal and desirable in some cases.

"A lawyer who represents consumers contemplating bankruptcy bears the duty of zealous representation and the prohibition on giving legal advice unnecessarily interferes with this duty," Droney wrote. "If the government seeks to prevent manipulation of the bankruptcy system, a more narrowly tailored approach would be to penalize those who take on certain types of debts."

Droney granted a preliminary injunction that prohibits enforcing that provision on the attorneys who sued.

Droney ruled in favor of the government on other issues, including an objection to a provision of the law suggesting that a person does not need an attorney to file for bankruptcy.

"The ruling in several parts is very gratifying in that it upholds the constitutional rights of attorneys and their ability to represent their clients," said Barry Feigenbaum, attorney for the plaintiffs, who include the Connecticut Bar Association and the National Association of Consumer Bankruptcy Attorneys.

A spokesman for the U.S. Justice Department said it is reviewing the decision.

The law, the most sweeping overhaul of the U.S. Bankruptcy Code in a generation, took effect in 2005. It bars those with above-average incomes from Chapter 7 - where debts can be wiped out entirely - except under special circumstances.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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PROPERTY SALES 81 217 5,290
MORTGAGES 94 276 6,985
FORECLOSURE NOTICES 22 72 1,628
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