§526 — Title 11 Bankruptcy | U.S. Code

Summary

A debt relief agency must do what it tells a person it will do about a bankruptcy case. It cannot lie or give false or misleading advice. It cannot hide facts about the services it offers or about the good and bad things that might happen if the person files for bankruptcy. It also cannot tell a person to take on more debt or to pay extra fees to get ready to file bankruptcy. Definitions: debt relief agency — a person or business that helps people with bankruptcy. assisted person — someone who gets or asks for that help. If a person signs a contract that breaks the rules in this section or in sections 527 or 528, that contract is void and only the assisted person can enforce it. If the agency breaks these rules on purpose or by carelessness, a court can make the agency return any fees it got, pay the person’s actual losses, and pay reasonable lawyers’ fees and costs. States can sue to stop violations, recover damages for their residents, and get costs and lawyers’ fees. Federal district courts share the power to hear these state suits. A court can also order the agency to stop breaking the rules or charge civil fines for intentional or repeated violations. These rules do not override state laws unless they conflict, and they do not limit a State’s or federal court’s power to set rules for who can practice law.

Title 11, §526

Bankruptcy — Source: USLM XML via OLRC

(a)A debt relief agency shall not—

(1)fail to perform any service that such agency informed an assisted person or prospective assisted person it would provide in connection with a case or proceeding under this title;

(2)make any statement, or counsel or advise any assisted person or prospective assisted person to make a statement in a document filed in a case or proceeding under this title, that is untrue or misleading, or that upon the exercise of reasonable care, should have been known by such agency to be untrue or misleading;

(3)misrepresent to any assisted person or prospective assisted person, directly or indirectly, affirmatively or by material omission, with respect to—

(A)the services that such agency will provide to such person; or

(B)the benefits and risks that may result if such person becomes a debtor in a case under this title; or

(4)advise an assisted person or prospective assisted person to incur more debt in contemplation of such person filing a case under this title or to pay an attorney or bankruptcy petition preparer a fee or charge for services performed as part of preparing for or representing a debtor in a case under this title.

(b)Any waiver by any assisted person of any protection or right provided under this section shall not be enforceable against the debtor by any Federal or State court or any other person, but may be enforced against a debt relief agency.

(c)(1)Any contract for bankruptcy assistance between a debt relief agency and an assisted person that does not comply with the material requirements of this section, section 527, or section 528 shall be void and may not be enforced by any Federal or State court or by any other person, other than such assisted person.

(2)Any debt relief agency 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 if such agency is found, after notice and a hearing, to have—

(A)intentionally or negligently failed to comply with any provision of this section, section 527, or section 528 with respect to a case or proceeding under this title for such assisted person;

(B)provided bankruptcy assistance to an assisted person in a case or proceeding under this title that is dismissed or converted to a case under another chapter of this title because of such agency’s intentional or negligent failure to file any required document including those specified in section 521; or

(C)intentionally or negligently disregarded the material requirements of this title or the Federal Rules of Bankruptcy Procedure applicable to such agency.

(3)In addition to such other remedies as are provided under State law, whenever the chief law enforcement officer of a State, or an official or agency designated by a State, has reason to believe that any person has violated or is violating this section, the State—

(A)may bring an action to enjoin such violation;

(B)may bring an action on behalf of its residents to recover the actual damages of assisted persons arising from such violation, including any liability under paragraph (2); and

(C)in the case of any successful action under subparagraph (A) or (B), shall be awarded the costs of the action and reasonable attorneys’ fees as determined by the court.

(4)The district courts of the United States for districts located in the State shall have concurrent jurisdiction of any action under subparagraph (A) or (B) of paragraph (3).

(5)Notwithstanding any other provision of Federal law and in addition to any other remedy provided under Federal or State law, if the court, on its own motion or on the motion of the United States trustee or the debtor, finds that a person intentionally violated this section, or engaged in a clear and consistent pattern or practice of violating this section, the court may—

(A)enjoin the violation of such section; or

(B)impose an appropriate civil penalty against such person.

(d)No provision of this section, section 527, or section 528 shall—

(1)annul, alter, affect, or exempt any person subject to such sections from complying with any law of any State except to the extent that such law is inconsistent with those sections, and then only to the extent of the inconsistency; or

(2)be deemed to limit or curtail the authority or ability—

(A)of a State or subdivision or instrumentality thereof, to determine and enforce qualifications for the practice of law under the laws of that State; or

(B)of a Federal court to determine and enforce the qualifications for the practice of law before that court.

Notes & Related Subsidiaries

Editorial Notes

References in Text

The Federal Rules of Bankruptcy Procedure, referred to in subsec. (c)(2)(C), are set out in the Appendix to this title.

Amendments

2010—Subsec. (a)(2). Pub. L. 111–327, § 2(a)(20)(A), substituted “that is untrue or” for “that is untrue and”. Subsec. (a)(4). Pub. L. 111–327, § 2(a)(20)(B), inserted “a” after “preparer”.

Statutory Notes and Related Subsidiaries

Effective Date

Section effective 180 days after Apr. 20, 2005, and not applicable with respect to cases commenced under this title before such

Effective Date

, except as otherwise provided, see section 1501 of Pub. L. 109–8, set out as an

Effective Date

of 2005 Amendment note under section 101 of this title.

§526 Restrictions on Debt Relief Agencies

Summary

Title 11, §526

Notes & Related Subsidiaries

Editorial Notes

References in Text

Amendments

Statutory Notes and Related Subsidiaries

Effective Date

Effective Date

Effective Date

Citations & Metadata