Orlando-based KEL law firm routinely allowed its clients to pay bankruptcy legal fees using credit cards, a violation of bankruptcy law, according to a new lawsuit filed against the firm.

Credit card purchases are basically new debts, and new debts are prohibited in the days before filing a bankruptcy, and during the bankruptcy process. That’s because bankruptcy courts often erase any credit card debt held by the bankrupt person – meaning the nation’s banking system would be stuck with KEL’s legal fees.

The new lawsuit, filed Tuesday, says KEL “uses standardized procedures when attempting to collect attorney’s fees by charging credit cards prior filing Chapter 7 bankruptcy.” (KEL recently changed its name to LawyerASAP.)

The suit is a proposed class action, possibly drawing in thousands of clients for KEL’s busy bankruptcy practice over the past few years. The suit seeks the return of all bankruptcy legal fees paid to KEL with credit cards, which it says are about $1,700. The suit also seeks a $1 million punitive award.

The lawsuit says Orlando resident Loyd Cadwell paid his bankruptcy fees to KEL in January using a Discover credit card and a BJ’s credit card, and his credit card statements attached to the suit have KEL charges on them. But Cadwell decided to switch to a new law firm, which noticed the prior fee payment on credit cards. Jacksonville law firm Mickler & Mickler filed the proposed class action on behalf of Cadwell.

Matt Englett, managing partner of KEL and now head of LawyerASAP, provided a brief statement in response to questions about the lawsuit: “It is KEL’s policy never to take a credit card payment for Bankruptcy retainers.  Due to the active litigation we cannot comment further.”

Incurring new credit card debt just prior to a bankruptcy was a big issue in discussions about the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act. The credit card industry spent millions on lobbying for changes in prior law, to specially state that debt relief agencies, including law firms, cannot advise clients to rack up new debts prior to filing a bankruptcy. Before that reform, it was commonly known that some financial or legal professionals would tell clients to buy things on credit before filing for bankruptcy, because those debts would be erased.