The Bankruptcy Lawyers Blog

The Chicago Tribune ran an interesting article about attorney salaries last week.  Of course, the general public has a vision of attorneys as lining the walls with money--and maybe once upon a time many of us did, too.  In the 1980s, law was widely rumored to have the highest starting salary of any profession, and law schools quickly filled up with future professionals eager to partake of that benefit.

The reality, however, turned out to be very different for many attorneys, and one reason for that--and for the general misperception that a law degree is a ticket to easy street--is the gap between the highest earning attorneys and everyone else.

The Tribune article cites a study indicating that the bottom 3/4 of the legal profession has been steadily losing ground since 1975.  And "bottom" doesn't mean a whole heck of a lot when you're talking about 75%. That's most attorneys.  Of the roughly 44,000 graduating this year, about one-fifth is projected to earn "well into six figures" at their first jobs, while most will earn less than half of that.

There's good news, though.  One prevailing theory about the income gap in the law--and in many other fields--is that technology allows the "best of the best" a longer reach.  The high-powered among us can serve more clients as technology allows them to work more efficiently, and can reach a broader clientele as technology allows them to get in front of more people.

And that's true for all of us.

While the average attorney won't ever see the economies of scale that increase profits at the top level of the mega-firms to levels beyond the average wage-earner's comprehension or have a private jet at the ready to make it easier to serve clients around the world, improved technology does open up possibilities for all of us.

The explosive growth of the Internet and the increasing number of average citizens who seek information and services online has opened up a new and cost-effective means of expanding your marketing reach.  The ready availability of affordable case-management software , centralized sources for electronic delivery of your required documentation, and virtual assistants makes it manageable to handle a higher volume of cases.

If technology is, in fact, widening the income gap in the legal profession, perhaps it's only because the "bottom" 75% haven't fully taken advantage of those opportunities yet.

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The Chicago Tribune ran an interesting article about attorney salaries last week.  Of course, the general public has a vision of attorneys as lining the walls with money--and maybe once upon a time many of us did, too.  In the 1980s, law was widely rumored to have the highest starting salary of any profession, and law schools quickly filled up with future professionals eager to partake of that benefit.

The reality, however, turned out to be very different for many attorneys, and one reason for that--and for the general misperception that a law degree is a ticket to easy street--is the gap between the highest earning attorneys and everyone else.

The Tribune article cites a study indicating that the bottom 3/4 of the legal profession has been steadily losing ground since 1975.  And "bottom" doesn't mean a whole heck of a lot when you're talking about 75%. That's most attorneys.  Of the roughly 44,000 graduating this year, about one-fifth is projected to earn "well into six figures" at their first jobs, while most will earn less than half of that.

There's good news, though.  One prevailing theory about the income gap in the law--and in many other fields--is that technology allows the "best of the best" a longer reach.  The high-powered among us can serve more clients as technology allows them to work more efficiently, and can reach a broader clientele as technology allows them to get in front of more people.

And that's true for all of us.

While the average attorney won't ever see the economies of scale that increase profits at the top level of the mega-firms to levels beyond the average wage-earner's comprehension or have a private jet at the ready to make it easier to serve clients around the world, improved technology does open up possibilities for all of us.

The explosive growth of the Internet and the increasing number of average citizens who seek information and services online has opened up a new and cost-effective means of expanding your marketing reach.  The ready availability of affordable case-management software , centralized sources for electronic delivery of your required documentation, and virtual assistants makes it manageable to handle a higher volume of cases.

If technology is, in fact, widening the income gap in the legal profession, perhaps it's only because the "bottom" 75% haven't fully taken advantage of those opportunities yet.

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It’s the time of year when many high school seniors are deciding which college they will be attending in the fall. In 2008, this decision-making has been marked by growing concerns about student loan availability during these troubled times for the U.S. economy. 

In the midst of the credit crunch, foreclosure crisis and housing market collapse, investors are staying away from asset-based securities that are often the source of funding for student loans, thus making it more difficult to obtain student loans, especially from private lenders. 

Just yesterday, The Education Resources Institute (“TERI”) announced that it voluntarily filed for Chapter 11 bankruptcy. Unfortunately, similar developments to what happened with TERI – the oldest and largest non-profit guarantor of private education loans in the country – have been witnessed with other lenders in the past couple of months:

• On February 27^th, the Pennsylvania Higher Education Assistance Agency announced that it would suspend federal-guaranteed loans beginning in early March;

• the Missouri Higher Education Loan Authority has temporarily stopped offering private loans not guaranteed by the government;

• the College Loan Corporation recently left the federal loan program; and

• Sallie Mae—the largest student lender—recently tightened its lending standards.

So in addition to becoming more difficult to obtain, student loans may also become more expensive to pay off as lenders like Sallie Mae tighten their lending standards and demand higher returns, which will likely translate to higher interest rates on these loans.

With private lenders struggling to get financial backing, it appears that many universities are going to have to turn to federal direct programs, once again indicating that students will likely have to foot an even larger bill since private lender rebates will not be as readily available.

A recent Wall Street Journal story detailed that, despite the growing need for a solution, the Department of Education has yet to outline emergency financial aid plans for those students unable to get loans from traditional sources. Congress has since urged the DOE to come up with a “lender of last resort” plan.

So How Does All of This Affect Bankruptcy Lawyers?

As bankruptcy lawyers, we often get questions about whether student loans are dischargeable in bankruptcy.

And while we’d tell consumers that most student loans cannot be discharged through a bankruptcy case, we’d also let them know that filing bankruptcy may help with a student loan situation through several different means:

• the automatic stay will essentially freeze any action by the student loan collection agency;

• Chapter 13 bankruptcy may help consumers consolidate student loans with the rest of their outstanding bills; and

• discharges of all unsecured debts in bankruptcy cases may free up expendable income for consumers to devote to their student loan payments.

With these things considered, we shouldn’t be surprised if we get more questions from consumers about the dischargeability of student loans, especially when those loans were from private lenders that may be forced out of business in the future as a result of the economy’s struggles.

Thus we need to be prepared for a great variety of questions on student loan dischargeability.

For example, could student loans be discharged if a school closes down? Find out by checking out this resource on the Federal Student Aid website.

In anticipation of such questions, please feel free to comment on this post and send any other information on the dischargeability of student loans that you think will be helpful to both attorneys and consumers.

We’d be happy to post such information and share your insight to help consumers wondering about obtaining or discharging student loans.

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