Judge rules against 2005 bankruptcy law - Restrictions on lawyers' advice, ads cited

A portion of the new U.S. bankruptcy law unfairly restricts attorneys and violates the First Amendment, a U.S. District Court judge in Minneapolis ruled this week.

Ruling in a lawsuit that challenges the bankruptcy law's provisions, Judge James Rosenbaum noted that part of the law "forbids truthful and possibly efficacious advice" from an attorney to a client. "If this is the government's view of legal ethics, it is a form of ethics unfamiliar to the Court."

Rosenbaum's ruling, unveiled on Thursday, denied a motion by the U.S. government to dismiss the case that was brought by bankruptcy attorneys and two anonymous plaintiffs. The attorneys are from Milavetz, Gallop & Milavetz, a Twin Cities bankruptcy firm well-known for its advertising.

In 2005, President Bush signed the bankruptcy law that makes it harder for debt-ridden Americans to get rid of their financial obligations.

"This law was drawn up by credit card companies," Robert Milavetz, an attorney representing the plaintiffs, said Friday. "Congressmen didn't carefully read this act" before making it law, he said.

Specifically, Rosenbaum's ruling addressed a provision in the 2005 law that says attorneys can't advise their clients to take on more debt as the clients consider filing for bankruptcy. The law also dictates what attorney advertisements must say, and Rosenbaum noted that such regulation is done at the state level. He said the provisions would be unconstitutional if applied to attorneys.

The next step in the case is now up to the U.S. Department of Justice. Officials with the department couldn't be reached for comment Friday.

"I think it will go up through the appeals process," said Larry Ponoroff, dean of the law school at Tulane University in New Orleans. In its broadest sense, he said, Rosenbaum's decision "reveals how internally inconsistent and frankly poorly drafted the 2005 act is."

For the moment, Ponoroff said, bankruptcy lawyers practicing in Minnesota could take comfort in the decision if they choose to pass such information on to their clients.