The Bankruptcy Lawyers Blog

The consumer bankruptcy business is booming, and that presents a dilemma for many solo and small firm consumer bankruptcy attorneys.  As we discussed recently, flexible solutions like LPO, virtual assistants or contract lawyers may be the answer for many small law firms. But working with outside attorneys and paralegals is new ground for many bankruptcy lawyers, and the options and possibilities may seem endless.  If contracting work out is going to benefit your firm and help you grow your practice, it's important that you understand exactly what benefits you'll be receiving from your assistant or LPO provider and what efforts will be required on your part.

As with any service or software, the right provider for you depends on your firm's needs and priorities.  Here are some questions to ask before selecting an outside attorney, paralegal, or LPO company:

-What, exactly, will this provider be taking off my plate?

-How much time will this save me?

-Is the price reasonable in terms of the amount of time it will free up for other work?

-What kind of training and experience do the people actually performing the work have in my particular area?

-How will I fulfill my obligation to supervise?

-How is information exchanged with my office?

-What is the time commitment for me or my staff in preparing files for the outside provider or coordinating with them?

-Whose time will be freed up in my office and how can I use it profitably?

-Is the provider flexible enough to meet your specific needs, or is it a one-size-must-fit-all service?

-Is the contract flexible enough to allow your usage to fluctuate with the demands of your business?

Some providers offer only petition preparation services, while others offer a broader range of services.  Some focus on consumer bankruptcy cases while others are jacks of many trades.  Some providers offer real-time online monitoring of case progress, while others simply present you with a completed file when their work is done.  Before making a decision about the right kind of support for your bankruptcy firm, take time to think through these questions and consider the concrete benefits to your firm.

• Email This
• Print
• Comments
• Trackbacks

In 1997, when the first version of what would become BAPCPA was drafted, non-business bankruptcy filings reached 1,313,112.  The consumer credit industry fought for years and spent hundreds of millions of dollars to ensure that bankruptcy reform became law.  In 2005, it did, and non-business bankruptcy filings dropped...briefly.  Now, in BAPCPA's fifth year, non-business bankruptcy filings stand at 1,344,095 (FY 2009).

 

These numbers don't come as much of a surprise to most bankruptcy lawyers.  While Congress was apparently believed that complicating the bankruptcy process would make Americans better able to meet their financial obligations, we'd seen the reality in our offices.  Filings began to rise again almost immediately, and experts were predicting that we'd soon see pre-BAPCPA filing levels even before the worst of the economic crisis hit. 

 

Unfortunately, when Congress opted to shake up the bankruptcy process, it shook up the practice a bit, too.  Some general practice attorneys stopped taking bankruptcy cases altogether, unwilling to accept the added time investment and legal responsibility.  Some bankruptcy attorneys were forced to expand their practices into other areas of law, let associates and paralegals go, or even close their doors. 

 

Now, the National Bankruptcy Research Center is estimating that 1 in 80 U.S. households filed for bankruptcy protection during 2009.  With more than 110,000 new cases filed per month, many of those who remained in bankruptcy practice are seeing a tidal wave of new client inquiries.  While "more business than I can handle" is a good problem to have, it's still one that requires a solution. 

 

Many attorneys see the options as limited:  either turn away cases or increase your staff.  There are, of course, upsides and downsides to both.  Turning away cases means not having to make any changes, but limits revenues at a time when growth is at your fingertips.  Adding staff means you increase your capacity for revenue growth, but also your obligations and time investment.  You'll have to take time away from your already busy practice to recruit, interview, train and supervise.  You'll be committing to additional overhead in order to meet a demand that may or may not continue.  The open questions and up-and-downsides lead many lawyers to preserve the status quo, but there is another option.

 

Contract lawyers, contract paralegals and outsourcing of petition preparation and other tasks all provide an opportunity to increase volume and revenues without a significant investment of time or a commitment to increased overhead.  Working on a contract basis allows you to adapt your investment to demand, so that you can keep pace with new business while ensuring that you aren't paying people to sit in your office and wait for the phone to ring during quiet times.

 

Next week, we'll talk about how to choose the right virtual assistant, outsourcing company or contractor for your firm.  Until then, give some thought to how you could expand your practice and grow your revenues if you were able to free up some attorney and/or paralegal time in your office.

• Email This
• Print
• Comments
• Trackbacks

Adam Levitin at Credit Slips takes an interesting look at some of the changes subprime credit card issuers are making in order to keep profits up while complying with the Credit CARD Act.  It's not surprising that lenders are already applying all the creativity they can hire to finding ways to work around the new law and keep profits high, but Levitin does turn up one piece of information that may come as a surprise to many of our clients (and maybe even many of us):  First Premier Bank's new 79.9% interest rate, combined with lower fees, actually makes the card cheaper to use than the old, 9.9% version.

It's an excellent illustration of just how misleading that bold print can be, and well worth a read.  While it appears that the high-risk, high-cost issuers are going to find a way to keep on doing what they do, perhaps this change will at least make the costs more obvious to consumers up front.

• Email This
• Print
• Comments
• Trackbacks

Earlier today, the House Rules Committee agreed to allow the mortgage modification in bankruptcy provision to be considered as an amendment to the broader financial services reform bill.  The issue could reach the house floor as early as this afternoon, so please take a moment to contact your U.S. Representative.  It's simple and only takes a minute. Just:

1. Phone toll free at: 877.354.4958

2. Put in your zip code

3. When you reach the receptionist:

• State your name
• Say that you are a constituent
• Ask the Representative to vote FOR the Conyers-Turner-Lofgren amendment (#201) to the Financial Services Reform bill.
• This amendment will cost taxpayers NOTHING and will save millions of homes from foreclosure

(Thanks to NACBA for the quick and easy instructions)

The provision would allow bankruptcy judges to modify mortgages in bankruptcy, and could help millions of people facing foreclosure--and not just those who file bankruptcy.  The ability of bankruptcy judges to make such adjustments would finally provide motivation for mortgage holders to enter into good-faith voluntary modifications that would allow hardworking people to remain in their homes.

• Email This
• Print
• Comments
• Trackbacks

Just weeks after the Bankruptcy Abuse Prevention and Consumer Protection Act took effect in 2005, the small Minnesota law firm of Milavetz, Gallop & Milavetz P.A. challenged the Constitutionality of the statute.

In April of 2007, the U.S. District Court for the District of Minnesota granted the plaintiffs' motion for summary judgment, finding:

1.  Sections 526 (a) (4), 528 (a) (4) and 528 (b) (2) are unconstitutional, "as applied to attorneys in the District of Minnesota".

2.  Attorneys in the District of Minnesota are excluded from the term "debt relief agency" as defined in 11 U.S.C. section 101 (12A) and, as such, are not subject to any of the duties relating to BAPCPA defined debt relief agencies.

Later  that year, the 8th Circuit Court of Appeals affirmed in part and reversed in part, finding that Congress did intend to include attorneys within the definition of "Debt Relief Agencies" for purposes of the statute, but that the restrictions set forth in 526(a)(4) were unconstitutional as applied to attorneys.  The provisions of 528(a)(4) and 528(b)(2), however, passed muster under the rational basis test. 

Earlier this week, more than four years after the law took effect and the initial challenges were filed, the United States Supreme Court heard arguments in the case. Anna Christensen at SCOTUS Blog provides an overview of the hearing, along with questions posed by each Justice.  The Court appears divided, with Chief Justice John Roberts focused on the conundrum presented to attorneys who are both required to (by state ethical canons) and prohibited from (by BAPCPA) giving certain advice.  Justice Scalia, according to both the New York Times and Washington Post, conceded that the law was stupid but asked "Where is the prohibition of stupid laws in the Constitution?"

The high court's ruling will finally lay to rest the conflicting application of the provisions, which have been struck down or partially struck down as applied to attorneys in some areas of the country but not others.

 

 

• Email This
• Print
• Comments
• Trackbacks

Challenges to the application of certain provisions of the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act began the very day the law took effect.  One of the first to bring suit to have the law declared unconstitutional was the law firm of Milavetz, Gallop & Milavetz.  Now, nearly four years later, the United States Supreme Court has agreed to decide the Constitutionality of language prohibiting attorneys from advising clients to take on debt in advance of a bankruptcy filing.

The Eighth Circuit Court of Appeals decided last year that the legislature had intended to include paid bankruptcy attorneys in the definition of "debt relief agency", and that the 526(a)(4) restrictions were overly broad as applied to bankruptcy attorneys.  The court ruled, however, that the section 528 disclosure requirements passed the rational basis test.

For more on the history of the Milavetz case:

http://blog.startfreshtoday.com/2007/04/articles/practicing-bankruptcy-law/bapcpa-provisions-declared-unconstitutional-as-applied-to-minnesota-attorneys/

http://blog.startfreshtoday.com/2006/12/articles/practicing-bankruptcy-law/section-528-advertising-disclosure-requirements-fail-constitutional-test/

http://blog.startfreshtoday.com/2006/12/articles/practicing-bankruptcy-law/rulings-against-bapcpa-debt-relief-agency-provisions-continue-to-mount/

 

• Email This
• Print
• Comments
• Trackbacks

Last week, the mortgage modification provision passed the U.S. House of Representatives--but it may not come to a Senate vote.  The banking industry is making its voice heard loud and clear (courtesy of the same folks who brought us BAPCPA), and it's critical that those of us who come in contact every day with the people who so desperately need this relief let our Senators know that we support S. 61 and want it brought to a vote and passed.

Contact information for your Senator is available here: http://www.senate.gov/general/contact_information/senators_cfm.cfm

Similar bills have failed before--this one needs your support now.  Take a moment and make the call.  Ask your friends, family, staff and clients to do the same.  Post this information on your firm's blog or website.  Create options for the millions of people facing foreclosure--people who currently sit across the desk from you every day and learn that you can't provide the help they need most.

• Email This
• Print
• Comments
• Trackbacks

H.R. 1106, which would authorize judicial modification of mortgage loans, may go to a vote in the House of Representatives as early as tomorrow.  The future of the bill is uncertain, with solid Republican opposition and a full-court press from banking industry lobbyists.  While the Mortgage Bankers Association and others in the credit industry claim that the provision would ultimately mean more expensive mortgages, Senator Dick Durbin, who sponsored the companion bill in the U.S. Senate, estimates that about 1/3 of homeowners facing foreclosure in the next two years could be helped directly by this bill.  Credit Suisse offers a more conservative but still substantial estimate of 20%.  Given the projected 8 million + foreclosures in the coming years, that's a lot of homeowners.  Just as importantly, it has the potential to slow the foreclosure spiral and help the housing market stabilize.

Obviously, the provision would put a powerful tool in our arsenals as consumer bankruptcy attorneys and allow us to help a sector of our clientele whose options have been sorely limited up to this point.  Another important point is the key contrast between this and most other foreclosure-prevention plans:  no taxpayer dollars are required to put this plan in motion.  Careless lenders and underwriters will bear their share of the burden.

Versions of this bill have failed before, and this may be the "now or never" moment for the modification provisions.

NACBA has assembled this contact information to make it easy to weigh in on the bill:

 

Here's what you can do TODAY:

1. Phone 1-877-354-4958 between 9am and 6pm Eastern time only. You will be given specific suggestions for the substance of your phone conversation and prompted to enter your zip code.

Depending on your Congressional district, your call will be routed to the office of your Senator, your House Rep, or the White House.

2. Get word out to your clients, staff, family, friends, and colleagues who might also be interested in speaking in support of H.R. 1106.  Please email your contacts today to ask them to phone in on our toll-free 877 number.

Tell them why their call in to their legislator is so important. We want word of this effort to spread.

3. If you blog, you may want to consider writing about HR 1106 and encourage readers to phone in support of H.R. 1106 using the toll-free line.

Thank you in advance for helping us to make this 11th-hour push for passage of H.R. 1106.

TOLL FREE LINE: 877.354.4958

 

There is also a contact form available on the NACBA website at http://www.congressweb.com/cweb4/index.cfm?orgcode=nacba&hotissue=1

 

Please take a moment to make contact today.  The vote could take place as early as tomorrow.

• Email This
• Print
• Comments
• Trackbacks

 

After carefully working with your client to complete his or her bankruptcy filing, you breathe a sigh of relief. Nice to have another petition filed and off your desk - until you receive notice that your client forgot to give you the name of a creditor to include in the bankruptcy case. Now what?

11 U.S.C Section 523(a) (3) states that a debt not listed in a debtor's schedule is not discharged if the creditor has a claim for the following:

• fraud
• theft
• willful or malicious act against the person filing bankruptcy
• the creditor would have could have received funds from the bankruptcy estate

Assuming that you have none of the above issues with your client, one thing you can do to curb the problem of a forgotten creditor is to have your client pull a recent credit report prior to filing his or her bankruptcy petition. If your client is filing a joint petition with his or her spouse, both parties should give you copies of their most recent individual credit reports.

However, if a creditor is missing, you must file an amendment to add the creditor to your schedules with the U.S. Bankruptcy Court. You can obtain the form from the clerk's office within your jurisdiction. Keep in mind that there is usually a fee associated with the amendment.

To curtail the dilemma of dealing with a forgotten creditor during or after a bankruptcy filing, just remember that there are certain steps you can take to make sure your client has a complete list of all debts owed. Due diligence in this area will mean less stress for you and your client.

 

• Email This
• Print
• Comments
• Trackbacks