Re: Bankruptcy Filings Rise

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1) The new law does not just affect one half of the population. It
affects everyone. Those above the median are held to stringent IRS
expense standards, meaning their bankruptcy petitions inflate their
disposable income, meaning the overwhelming majority of 13 plans will
fail. The new fees are hiked on two fronts, for all clients: The
court fee has risen 40% (and scheduled to go up again soon).
Attorney's fees have to go up because of rising malpractice rates and
because of more paperwork and due diligence. More work equals more
fee.

2) The problem with "poorer" clients is that they are less likely to
be able to afford the higher fees. I have "poorer" clients come in
all the time, and they can't afford the fees. Not only that,
but "poorer" clients HATE paying fees to begin with. Solid middle
class clients are the best clients, and they are hurt the most by the
new law.

Are you thinking about doing bankruptcy? It really is tough out
there, and despite predictions of economic collapse, you have to
consider that damn near everyone with a finance problem, or potential
problem filed in October, or before. Many of my clients
were "defensive" filers, meaning that filed because they had a lot of
debt, and even though it was manageable, they feared losing the
bankruptcy option in the future. Just things to consider.

On 3/28/06, FordhamGrad wrote:
> Question: I understand that the new law only applies to half the
> population - namely, those that make more than the median income of
> their particular state. This being the case, are any attorneys
> charging these clients the same fee as before? Or are the new fees
> hiked for everybody?
>
> And as a side thought, since poorer people are presumably more
> likely to go bankrupt, would it be safe to say that the majority of
> potential clients are not impacted by the new law?
>
> I'm not practicing yet, just curious.
>
> On 3/28/06, Dante wrote:
>> I admire the optimism of both Jiff and rrr to predict the future
> of
>> bankruptcy. What do we really know? The practice area has now
>> dropped off a cliff in terms of business. Will this trend
>> continue? The U.S. household savings rate is the lowest ever.
>> Housing prices are the highest ever, and oil is now over $60 per
>> barrel. Add into that an aging population, foreseeably massive
> tax
>> increases both at the federal and state level, and the financial
>> picture darkens.
>>
>> Short-term, our business looks bad; over the longer haul, one has
>> to think that there's hope. I am told that the Chinese character
>> for "crisis" and "opportunity" is the same.
>>
>> We are diversifying over the short-term, and keeping an eye on the
>> long-term opportunity for consumer liquidations that is sure to
>> arise in the deepening morass that is our national economy.
>>
>>
>>
>>
>>
>>
>>
>> On 3/28/06, Jiff wrote:
>>> I admire your optimism, but I just don't see it that way. The
>>> problem I see with your analysis is that you assume debtors are
>>> actually going to defend against collection suits. In reality,
>>> they don't, not in large enough numbers to make it a viable
>>> practice add on. As far as independent paralegals, they never
>>> really took hold in my area, and as far as easy, cheap work,
>>> attorneys were more than happy to do it. Client comes to me and
>>> offers $400-500 for about 2 hours (at most) of my time for a
>>> simple 7, and I take it happily over and over again. Well, I
>>> used to, under the old law. I share the sentiment voiced by
>>> others on this board that bankruptcy's glory days are behind
>>> us. It was the easiest money I ever made, now, back to those
>>> pesky divorce clients!
>>> On 3/28/06, rrr wrote:
>>>> On 3/28/06, Jiff wrote:
>>>>>
>>>>> Read these thoroughly. Bankruptcy filings are "rising", but
>>>>> from virtually nothing. The current and projected caseload
>>>>> for the next twelve months will not support the current
>>>>> number of bankruptcy attorneys. 2/3 of the bankruptcy
>>>>> attorneys will go out of business in the next year, in my
>>>>> view.
>>>>
>>>> I think its going to push the Independent Paralegals out of
>>>> Bankruptcy business since they were the ones doing most of the
>>>> fast & easy petitions (at least they were the ones here in
>>>> California). I've already seen it in the local advertising.
>>>> Not a Paralegal advertising for BK at all. The Attorney
>>>> who "occassionally" did a bankrutpcy will no longer do them,
>>>> and the mills will have to change their methods, but the core
>>>> Debtor-Consumer Attorneys are going to come out ahead. And we
>>>> haven't even started to see the fallout from the slow down in
>>>> real estate and consequences from aggressive mortgage lending
>>>> practices. When the foreclosures start to hit in a stagnant
>>>> market, it will be time to feed again. Not to mention there
>>>> will be more Collections Defense Litigation from those who
>>>> can't Chapter 7 because of the Means Test and lack the
>>>> financial stability to Chapter 13, and have no foreclosure to
>>>> prevent. This new law may actually be great news for Debtor-
>>>> side Practitioners after we shake off the immediate mental
>>>> shock and adapt to the change. Time to be patient and time to
>>>> be visionary, the greedy shylocks might have just made us all
>>>> rich.