Posts Tagged ‘attorneys’

Knowledge is Power, Sort of

I find that many people who are thinking about it will want to investigate some facts about bankruptcy, and get some information about the process before they pick up the phone and speak with me.  And certainly, there’s much information and content on this website – and it’s here for just that reason.  But every lay person needs to maintain some perspective when researching, reviewing and digesting information about bankruptcy and the bankruptcy process.  Today, I had a conversation with a client that reminded me to remind you to keep that perspective.

The most important thing to remember is that research should not replace speaking with counsel and getting a full and fair opinion.  Nothing on this site is designed to be legal advice.  As a matter of fact, you’re unlikely to find anything that amounts to legal advice on the internet.

What you will find is information.  But sometimes, that information can lead to overload – and overload and can lead to confusion.  And today I encountered confusion.

I spoke with a client on the phone who “had done a lot of research” about bankruptcy.  He knew and understood terms like the “Means Test” and “Discharge.”  But he did not quite understand how the Means Test worked – or that the Means Test applied in not just Chapter 7, but that a different version of the form (with entirely different consequences) applied in Chapter 13.

He asked what most might think is a rather straightforward question: “In a Chapter 13, how will they determine how much I can afford to pay back?”  The problem with this seemingly straightforward question is that there is no straightforward answer.  There are many variables, including whether you are over the state’s median income, whether you have payments on secured debt and the status of the case law at the time (and because it is ever-evolving, I tend to view the case law as a moving target).  The other problem is that I cannot answer the question in a phone call or a short initial consult meeting.  It requires information, documents, and an assessment of all of the factors at the time of the filing.

The client is already frustrated, and I can understand why.  Struggling to make ends meet, the client is trying to determine what more will be expected of him and his family in the bankruptcy process.  Yet, there is no easy answer I (or for that matter anyone else) can provide.  At least not an honest one.  The fact I could not provide a quick answer only fed that frustration.

I would not think of going to WedMD to learn how to perform a medical procedure on myself.  I don’t call my dentist to explain why my mouth hurts (which is a good thing, because as I recently learned, it wasn’t what I thought it was).  So with that said, please know  I do not recommend using this site, or any others as a substitute for sitting down with a bankruptcy attorney and giving them all of the information they require.  Then, armed with the facts and sound legal counsel, you can then make the best decision to protect your family from the oppressive debt you find yourself struggling with.  After all, that is why you’re calling me.  And that is why you’re researching bankruptcy information on the internet.

  • Share/Bookmark

Why Bankruptcy Lawyers Require Fees Before Filing

There really is a good reason. And to help prove my point, I turn to an October 2008 decision out of the US Bankruptcy Court for the Eastern District of Pennsylvania: In re Mansfield. In that case, the court was called upon to ask what it viewed as a “deceptively simple question:” may an attorney who charges a “flat fee” for services pursue the uncollected balance due?

In this case, the attorney charged a flat fee for preparing the necessary documents and schedules, but also for attending the first meeting of creditors (which occurs after the case is filed). The fee was paid in one large installment, with the remaining balance divided into smaller installments which were paid or due after the case was filed.

The US Trustee sought a review of the fee practice as well as disgorgement of the fees collected after the case was collected. The attorney claimed there was no authority supporting the relief sought by the US Trustee, and he was entitled to collect at least the value of the services he rendered.

The court did not agree. Under Section 727(b) of the Bankruptcy Code, a “debtor’s obligation under a fee agreement to pay a fixed or flat fee to his attorney for legal services rendered pre- and postpetition in a Chapter 7 case, regardless of how the fee is scheduled to be paid, is a prepetition debt that is dischargeable. The attorney avoided having to return the fees paid because there is a difference of opinion among Bankruptcy Courts throughout the country as to whether the practice of collecting fees post-petition is permissible….and if permissible, the circumstances they are permissible.

In flat fee cases (and it is fair to say most, if not all consumer Chapter 7 cases are flat fee), the court found that the “division of a flat fee arrangement into prepetition and postpetition parts to be conceptually inconsistent and therefore untenable. The Court therefore joins those other courts which hold what when a flat or fixed prepetition agreement is at issue, the fee must be paid in full prior to the commencement of the debtor’s case or the fee is discharged under Section 727(b).”

So in reality, when an attorney requires fees and costs prior to the filing of the petition, it’s because they need to get paid…unlike creditors in a Chapter 7 who in many cases do not get paid at all. There’s case law all over the country that supports it, and other case law that suggests that it can be done. While the current code and the case law leave room for creative argument, debtor’s attorneys can be expected to be wise and take the path of least resistance: earn the fee and serve the client. Certainly, there are bigger battles for debtor’s attorneys to engage in for their clients other than fighting for a fee for postpetition services.

In re Mansfield, US Bankruptcy Court, Eastern District of Pennsylvania, No. 08-11648 SR (Ocobter 2, 2008)

  • Share/Bookmark

When Things Go Very Wrong

Last week I received a phone call from someone who wanted to know about the status of a bankruptcy case. It was not their bankruptcy, rather the case of another person. Apparently, the caller was a creditor of the bankruptcy debtor. The caller had a case pending in state court and wanted to know if the claim was discharged in the bankruptcy. While we were chatting, I pulled up the case on PACER. As I started to get more information and I was reviewing the documents, I came to realize that not only was the claim discharged, but the attorney representing the caller in the state court matter committed malpractice. What happened here is a lesson for anyone finding themselves brought into a bankruptcy case.

In May of 2007, the debtor filed bankruptcy which put the automatic stay into effect. In August, the caller’s attorneys filed a Motion for Relief from Stay. By a look at the document, the attorneys did not have experience in bankruptcy matters: the motion was barely two pages long and presented nothing substantive for the court to consider. Their lack of experience was also evident by the fact that they did not file electronically (Bankruptcy Courts – like all federal courts – use electronic case filing). And finally, they also did not pay the requisite filing fee (a fact which is readily available from a number of sources, including the court’s website).

The Clerk issued a Notice of Filing Fee due, and ordered that the payment be made by 8-27-07. The Certificate of Service from the Clerk stated the Notice was mailed on August 19, 2007 to the local attorney. However, payment was not made until 9-5-07. As a result, the motion was denied.

(more…)

  • Share/Bookmark

First Circuit: Attorneys Fees Cut in FDCPA Suit

Yesterday, the First Circuit Court of Appeals affirmed a lower court’s ruling that slashed a request for legal fees sought by counsel representing plaintiffs in a Fair Debt Collection Practices Act matter. The FDCPA allows attorney fees on successful claims, and the plaintiffs in this case were successful, but for a variety of reasons, attorneys fee award ended up being a little more than 10% of what was sought. The case should serve as a wake-up call for consumers, attorneys and Congress.

The plaintiffs, a married couple, sued Corporate Receivables, Inc. and one of its employees for abusive debt collection practices (the husband owed the debt). They took their case to a jury and presumably did so with the hopes of getting a significant award of actual damages.

(more…)

  • Share/Bookmark

Thinking About Representing Yourself?

It sounds tempting. Representing yourself in a bankruptcy case rather than hiring an attorney. You save the legal fees. You save the time involved dealing with a lawyer, meeting in the office and responding to requests for information. Plus, if they sell “do it yourself” kits in office supple stores, how hard can it be?

If you’re not going to “do it yourself”, why not get the cheapest lawyer around? If lawyers are advertising bankruptcy services for just a few hundred dollars, why spend more?

Readers might think it is disingenuous for me to tout the reasons why one needs a competent attorney guiding them through the bankruptcy process. They might even think it more disingenuous for me to remind them that “you get what you pay for.” Over my morning coffee I happened upon an article at The Sheboygan Press that addresses this important issue. I’ll let it do the talking, and you can decide for yourself.

You’ll find the article here

  • Share/Bookmark