Who is an “Assisted Person” and Why Does it Matter?

To understand who an “assisted person” is and what that term’s impact is, one must first understand the term’s relationship to a “debt relief agency.”  “In 2005, Congress enacted the Bankruptcy Abuse Prevention and Consumer Protection Act (the BAPCPA), Pub.L. No. 109–8, 119 Stat. 23 (2005).”  Hersh v. U.S. ex rel. Mukasey, 553 F.3d 743, 746 (5th Cir. 2008).  BAPCPA made a variety of changes to the Bankruptcy Code including the addition of sections 526, 527 and 528 which provide various regulations for “debt relief agencies.”  11 U.S.C. §§ 526-528.  See also Milavetz, Gallop & Milavetz, P.A. v. United States, 559 U.S. 229, 130 S. Ct. 1324, 176 L. Ed. 2d 79 (2010) (discussing application of § 526).  A “debt relief agency” is “any person who provides any bankruptcy assistance to an assisted person in return for the payment of money or other valuable consideration.”  11 U.S.C.A. § 101(12A).  Notably, the lynchpin of a “debt relief agency” requires that the bankruptcy assistance be provided to an “assisted person.”

Attorneys that provide assistance to “assisted persons” constitute “debt relief agencies.”  Milavetz, Gallop & Milavetz, P.A. v. United States, 559 U.S. 229, 130 S. Ct. 1324, 176 L. Ed. 2d 79 (2010); see also Hersh v. U.S. ex rel. Mukasey, 553 F.3d 743, 750 (5th Cir. 2008) (“[U]nder the plain language of 11 U.S.C. § 101(12A), attorneys qualify as ‘debt relief agencies.’”); In re Brown, 505 B.R. 716, 723 (Bankr. W.D. Va. 2014) (“an attorney representing a consumer debtor who qualifies as an ‘assisted person’ is a ‘debt relief agency.’”).  So what is so significant about being a “debt relief agency?”  “Section 526(a)(2) is violated when a debt-relief agency ‘counsel[s] or advise[s] any assisted person’ to make a fraudulent or misleading statement in a document in a bankruptcy case.”  In re Clink, 770 F.3d 719, 723 (8th Cir. 2014).  This is true regardless whether the document is actually filed.  Id.  “If a debt relief agency is determined to have ‘intentionally or negligently’ violated any provision of §§ 526, 527 or 528, such entity shall be liable ‘to an assisted person in the amount of any fees or charges in connection with providing bankruptcy assistance to such person that such debt relief agency has received, for actual damages, and for reasonable attorneys' fees and costs.’” In re Brown, 505 B.R. 716, 723 (Bankr. W.D. Va. 2014) (citing 11 U.S.C. § 526(c)(2)).

The Bankruptcy Code defines “assisted person” as “any person whose debts consist primarily of consumer debts and the value of whose nonexempt property is less than $186,825.”  11 U.S.C.A. § 101(3).  (Pursuant to § 104 of the Bankruptcy Code, this dollar amount is adjusted every three years.  11 U.S.C. § 104.)  Thus, by definition, any person whose nonexempt property exceeds the statutory amount will not be an “assisted person” and thus the appropriate regulations under 11 U.S.C. §§ 526-528 will not be applicable.

Michael D. Fielding
Husch Blackwell LLP