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Corona Virus and Hiring Experienced Bankruptcy Counsel for Chapter 7 and Chapter 13 Cases

There is a very good likelihood that in the coming months the economic contraction from the corona virus pandemic will result in a new waive of bankruptcy filings. In 2008, after the great recession when the United States banking system almost came to collapse, there was a significant spike in bankruptcy filings. In this new economic downturn, it is with great confidence that we can predict we will again see a spike in bankruptcy filings.

This is not the first economic downturn to hit the United States economy. For those with many years of experience representing debtors in bankruptcy, this is at least the third major economic downturn in the last 35 years. On October 19, 1987, the Dow Jones Industrial Average fell by 22.6% in one afternoon. This day would later become known as Black Monday. World markets soon followed and the economic downturn resulted in a significant increase in bankruptcy filings here in eastern Massachusetts. During that downturn those of us practicing bankruptcy law, saw a huge increase in clients who filed bankruptcy. Of course, at that time the bankruptcy rules were different. The standards for verifying information in the petition were less stringent compared to the bankruptcy reform laws of October 2005. There was no software that you could use to complete the petition. In 1987 each petition was completed using pre-printed forms, where you would type in the information for each schedule in the petition. It often took a large staff in the office to complete the petitions. Once the petition was completed, counsel for the debtor would actually make five copies of the petition, put them in an envelope and mail them to the Clerk of the Bankruptcy Court for filing along with the filing fee which was approximately $79.00 from my memory. In the event that there was an emergency and the petition needed to be filed before a foreclosure auction or the like, counsel often would hop in the car and drive the petition to the clerk’s office at the Bankruptcy Court and hope to get to the clerk’s desk before 4:00 p.m. the closing time for filing, to stop a foreclosure auction or garnishment of wages. The 1987 downturn kept us bankruptcy lawyers busy for a number of years. Eventually, as it always over history has happened, the economy rebounded and the number of cases again leveled off. In the 1987 surge there was not a great number of lawyers who jumped into representing bankruptcy clients from other practice areas as the office infrastructure could not be ramped up very quickly or easily.

A similar scenario played out in 2008, when the economy again entered a significant downturn due to the health of the United States banking system. Again attorneys who practice bankruptcy law remember that the downturn resulted in several years of heightened bankruptcy filings. My office saw the increase last through 2012. One difference between the crash of 1987 and 2008 was the invention of bankruptcy software that meant that it was relatively easy for an attorney to transition from other practice areas like real estate, personal injury, criminal defense or family law to now practice bankruptcy law, even if they had no experience handling bankruptcy cases. You no longer needed a big staff to handle the preparation of the petitions. The forms are completed with the software and easily updated. The cases are electronically filed and it is relatively inexpensive for counsel to transition to a bankruptcy practice.

During the 2008 spike several non-bankruptcy lawyers began to advertise for bankruptcy clients and represent them for chapter 7 and 13 bankruptcies. During that time, we long time bankruptcy attorneys were witness to many cases where the inexperience attorneys opened their newly purchased software and completed the forms and paid the filing fees. To the inexperienced lawyer they proceeded as if the filing out of the forms was the extent of the knowledge they needed to represent their clients through a chapter 7 or 13 bankruptcy. Nothing could be further from the truth.

The most obvious example of the lack of their understanding of the bankruptcy laws and rules was evident at the meeting of creditors. The meeting of creditors (341A Meeting); is the meeting where a trustee appointed to administer your case asks the debtor’s about their petition and examines it for truthfulness, completeness as well as the correct application of the bankruptcy laws and rules. At these meetings the inexperience of counsel came through loud and clear. Customarily a trustee will spend anywhere from 7 to 10 minutes conducting the meeting of creditors. During the 2008 downturn, we witnessed inexperienced counsel attempting to represent debtors and completing the forms in the software without any real understanding of the applicable bankruptcy rules and laws. Trustees would spend an overwhelming amount of time 20 or 30 minutes asking the debtor’s about their petitions and the omissions or misapplication of the law and rules for the means test, asset exemptions, income, expenses and the like. Often times the misapplication of the laws for exemptions, mixing of state and federal exemptions, what is included as income, what are allowable expenses, the correct application of withholding of federal and state income tax and the failure to calculate yearly refunds from the Department of Revenue and the IRS that affect real net monthly income. Often, what should be the the end of the inquiry on a chapter 7 bankruptcy at the end of the creditors meeting would lead to the trustee requesting multiple amendments of the petitions. An experienced bankruptcy attorney will prepare the petition applying the correct law and rules to get the chapter 7 meeting of creditors closed and move towards the ultimate goal of the debtor in their filing, which is a discharge signed by the judge discharging all of the debt listed in their petition and a fresh start to come out of the other side of the downturn with a brighter future.

Therefore, there are a few things that people looking to hire a bankruptcy lawyer should be asking of counsel they are thinking of hiring. First, what percentage of your practice over the time you have been a lawyer is devoted to bankruptcy? For how many years have your been practicing bankruptcy? How many chapter 7 cases have you filed in the last ten years? Over the course of your career? How many Chapter 13 cases have you filed in the last ten years? How many Chapter 13 cases have you filed over the course of your career? These questions will help potential debtors understand the scope and breadth of the experience that counsel brings to their situation and will allow them to make better informed decisions when hiring a bankruptcy lawyer.

I have been a lawyer since 1986. I have represented clients throughout my years as a lawyer with a heavy emphasis on bankruptcy and have continued to practice bankruptcy law even during the years when there is not a surge of bankruptcy filings. The knowledge, skills and experience necessary to guide a client smoothly through a chapter 7 or chapter 13 bankruptcy are not derived from buying bankruptcy software. The skills and knowledge of the bankruptcy procedures comes from years of practice, filing hundreds of petitions over the course of time, not just when the economy turns bad. Bankruptcy lawyers are practicing in the Bankruptcy Court in front of the Judges even in years when the economy is not bad.

Clients need to be selective when hiring counsel to represent them. If you have any questions regarding a way forward in light of the corona virus crisis, please feel free to call our office. We are offering a free one hour consultation via telephone, so that we can comply with the current social distancing procedures outlined by the CDC.

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