Debt Relief Agencies

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), has added sections to regulate individuals, businesses or other organizations that assist a debtor in filing for bankruptcy or in prosecuting the case. The BAPCPA has defined the term debt relief agency as any person, business, or other organization who is compensated to help with a debtor's bankruptcy, and they must identify themselves as such. The 2 main types of debt relief agencies are bankruptcy petition preparers and lawyers.

However, any individual or organization that simply helps the debtor with his debts, such as negotiating with his creditors, is not considered a debt relief agency, in spite of the name. Probably a more descriptive name for what the law intended would be Bankruptcy Help Agency. Hence, nonprofit organizations or creditors of the debtor who assist in debt restructuring, or even authors of bankruptcy books are not considered debt relief agencies.

So a debt relief agency is restricted to those who provide bankruptcy assistance to an assisted person. Bankruptcy assistance is defined in 101(4A) to cover a variety goods and services, such as advice, document proper preparation, or representation in connection with the bankruptcy case. Assisted person is defined by section 101(3) to mean any person whose debts are primarily consumer debts and with nonexempt property worth less than $150,000.

Within 5 days after a debt relief agency assists the debtor, it must provide a contract to the debtor that clearly explains:

The debtor must receive a copy of the completed and signed contract.

Mandatory Disclosures And Notices

Debt relief agencies must inform the debtor, in writing, of the following:

The debt relief agency must give a notice regarding basic bankruptcy requirements and options for help in filing and prosecuting the bankruptcy within 3 business days after the agency first offers its services. The debt relief agency must also provide plain English written information about bankruptcy requirements, such as dealing with secured debts and choosing exemptions.

Restrictions On Debt Relief Agencies

A debt relief agency may not:

If the contract does not comply with the law, then it will not be enforceable against the debtor. The debt relief agency may be liable to the debtor for costs and fees, including legal fees, if the agency negligently or intentionally failed to comply with the law's restrictions on debt relief agencies, or failed to file the required documents, resulting in dismissal of the case or conversion to another bankruptcy chapter.

The debt relief agency is also prevented from engaging in false advertising that would mislead the public about the nature and purpose of the agency services.