Bankruptcy and Attorneys / What You Should Know -
Bankruptcy Cases Require a Variety of Different Disciplines
Bankruptcy cases require that the attorney have knowledge of a variety of different disciplines as well as practical real-life experience. While older attorneys may have more experience, this does not necessarily give them an advantage over younger counsel, who may be more conscientious and zealous in their representation. The attorney's record of success in the client's type of case should be reviewed, before an agreement for representation is signed.
The Attorney Should Understand Bankruptcy Law
Bankruptcy law is a very complicated and specialized area. It takes years of practice to become capable and adept at providing the best service to clients. The attorney needs to be cognizant of many different facets of law: federal statutory bankruptcy law; state laws of exemptions and fraudulent conveyances, real estate mortgage foreclosure including possible anti-deficiency statutes; state law regarding marriage dissolution, support and property rights; franchises; corporate, partnership, and business law; state laws regarding "piercing the corporate veil" and "alter ego" claims; and other federal law, including patents and trademarks.
The Attorney Should Have Malpractice Insurance
Before hiring a bankruptcy lawyer, a debtor should determine if that attorney is covered by an errors & omissions (malpractice) insurance policy, and, if so, the extent of coverage in the event of a claim. Policy limits can run the gamut from $ 35,000, up to millions of dollars. This could be important, because if the case is mishandled by the attorney, the client may have some recourse. Insurance requirements vary from state to state. Some states require attorneys to have malpractice insurance; others don't. Some states have minimum levels of coverage. Other states simply require that if the attorney does not have malpractice insurance, he must disclose that fact to the client in writing before entering into an attorney-client agreement with the client. This is a fact which should come into play in the attorney-selection process.
The Attorney Should Be Aware of Bankruptcy's Consequences
The attorney needs to be aware of bankruptcy alternatives and their upsides and downsides, such as out-of-court debt workouts, assignments for the benefit of creditors, receiverships, and the tax consequences of them. He needs to know which clients can benefit from bankruptcy filings, and which chapter would provide the maximum relief. He must also understand that there are some cases that should not be filed. These might include cases where the debtor is not likely to obtain a discharge of his debts, could face criminal prosecution, where the trustee would be likely to pursue preference or fraudulent conveyance actions or challenge exemptions, or where the filing itself could result in adverse action. An example of this is a business franchise, such as a Taco Bell or McDonald's. If a bankruptcy case is filed by the franchisee/operator, in most instances the franchisor can claim that the filing itself is a default under the agreement, which allows the franchisor to terminate the franchise. That is one area where the so-called "ipso facto" clauses are enforceable, to the detriment of the debtor.
The Timing of a Bankruptcy Filing Can Be Crucial
The attorney must also be cognizant of the timing of the filing. Under certain circumstances, income and other taxes can be completely wiped out. However, if the case is filed too early, before the expiration of various milestones, the tax is not wiped out, the debtor faces administration of his assets by the trustee, and the debtor cannot file another bankruptcy cases for 8 years.
Bankruptcy Cases by Their Nature are Complicated
Most bankruptcy attorneys face a dizzying array of factual
settings every day. There are the low-asset and low debt, simple, uncomplicated
Chapter 7 consumer
cases where the assets are all exempt and the debts
all dischargeable. There are many cases of this type. However, even the simplest
case can present complications, for instance, if the debtor made payments to relatives
during the 1-year period prior to the bankruptcy filing, or transferred assets
to friends or family for less than reasonably equivalent value. These actions
could result in the trustee filing actions against the debtor's family to recover
the payments and assets. Also, even the simplest bankruptcy filing is usually
at least 50 pages long.
The Attorney Should Have Practical Experience
The attorney also needs to have real-life experience in the
community to be able to advise clients about the impact of a bankruptcy filing.
For instance, will the bankruptcy filing result in the loss of a security clearance?
Would it make a difference if the filing was Chapter
13 as opposed to Chapter
7? It really might not do any good for a local business operator to file a
reorganization-type bankruptcy (11
or 13 usually), if that particular community is not receptive to such action,
and would cease doing business with him, and the vendors would stop making deliveries.
In that case, it may be better to try an out-of-court workout with the creditors.
In conclusion, there has been explosion of bankruptcy
cases in recent years, brought on by the burst of the real estate
housing bubble and the general economic decline. More and more inexperienced
attorneys are deciding to enter the field of bankruptcy law, where
there is much work and a promising future, at least in the near-term.
This may be good for the new inexperienced attorney but not so good
for the individual or business filing bankruptcy.
Written by Henry Rendler
Written by Henry Rendler
Discharge of Debts
Types of Bankruptcy
Life after Bankruptcy
US Bankruptcy Courts
341 Creditors Meeting
Find Attorney by State
Selecting an Attorney
Attorneys & Bankruptcy
What You Should Know