Lawyers are appealing a 2005 law that bars them from giving clients bankruptcy advice.
The Supreme Court has heard a fair share of odd free-speech cases in its day, but it has recently agreed to entertain one with illogical implications.
A 2005 law barred lawyers from giving clients advice on how to legally leverage a declaration of bankruptcy in the business's favor. It was meant to counteract the practice of accruing extra debt in hopes of not having to pay it off, but can hinder the perfectly legal management of debt in a non-abusive fashion.
What should a business owner do in the face of bankruptcy without legal consultation? Some might consider turning to a financial planner, but Janet Tighe, principal and senior financial planner at Mintz Levin Financial Advisors in Boston, said that move would be to no avail.
"We have a fiduciary standard that's a little different than attorneys'," Tighe said. "Clearly, we also can't give legal advice, but we would look at [bankruptcy] from the client's financial interest. We'd be looking at what this would do to a client's future credit and try to make sure their assets are set up in a way that is in their best interest."
But if lawyers are under gag orders and financial planners don't have the necessary legal expertise to give advice; Tighe says clients are held in a catch-22.
"[In that case] I would suggest they talk to a credit counselor first to see what other options are available."
In a time when bankruptcy is becoming an increasingly common evil for business owners, the Court's decision can have a major impact on business owners.