What Is It Like to Practice Consumer Bankruptcy Law?

Attorney and client
A bankruptcy attorney consuls with his new client. Getty Images

What is it like working with consumer bankruptcy clients?

This is a question I get more from other lawyers than I even get from laypeople. There is a mystique about bankruptcy that some lawyers just don’t get. I think it’s part technical and part emotional. Let’s explore.

I have practiced bankruptcy law for most of the last 25 years. Even before I went to law school, I spent a number of years as a deputy clerk working for the bankruptcy court in my hometown and as many years working for a boutique law firm there as a bankruptcy paralegal.

Even after law school, I spent a challenging and rewarding year as a law clerk to the Honorable Jacques Wiener, judge on the federal U.S.Fifth Circuit Court of Appeals, which I followed up with a year clerking for the Honorable Steven Felsenthal, then Chief Judge of the U.S. Bankruptcy Court for the Northern District of Texas.

I have seen the practice of bankruptcy law from many different perspectives, and I have seen a lot of changes over those years. Changes in the laws, changes in the way we conduct and manage our cases, and even changes in the way we market our law practices. When I started, we were filling out bankruptcy petitions - form by form - with IBM Selectric typewriters. Once those forms (produced in at least triplicate, often by employing carbon paper inserts) were typed, proofread and signed, they had to be hand delivered to the Clerk’s Office of the District of Bankruptcy Court where they would be stamped in with a time clock (between the hours of 8:30 am and 4:00 pm, Monday through Friday), placed in file folders and administered by hand.

The Changing Profession of Bankruptcy Law

Many newly hatched fledgling lawyers will appreciate the fact that computers and bankruptcy software rule the roost. Now we use wonderful programs like Bankruptcy Pro and Best Case to keep and track the information needed for each case, manage our dockets and produce our documents, which are converted into PDFs and filed over the Internet 24 hours a day, seven days a week, with each court’s Electronic Case Filing system.

For those of you thinking about going into bankruptcy as a specialty or as a complement to other practice areas, you will wonder what a bankruptcy practice looks like today.

A Litigation and Transactional Practice

I always tell people who ask that bankruptcy is part transactional law and part litigation. The transactional law includes those specialties that are sometimes referred to as “inside” or law office practices. They consist heavily of work product that results in documentation of some kind. Contracts, securities, tax, estate planning, corporate, real estate, intellectual property and employment are some of the areas that many would consider transactional law because the lawyers who practice in those areas often find that they rarely if ever go to court.

In contrast, an attorney who practices litigation will often find herself in court, sometimes on a daily basis, arguing motions in preparation for a trial, or conducting the trial itself. And, when not in court, she’s working on disputes that could either end up as court cases or will be settled before they are filed. Therefore, much of what a litigator does is geared toward the assumption that the dispute will end up before a judge.

Although the “office” practices listed above can and do include disputes that lead to court cases (think probate will contests, contract breaches, employment discrimination, etc.) that require the expertise of a litigator, other specialties are primarily interested in resolving adversarial situations. These would include criminal law, commercial litigation, family law, personal injury and medical malpractice.

A bankruptcy practice melds both of these worlds. Bankruptcy is an inherently adversarial process. Debtors, those people and entities who file bankruptcy cases, intend to discharge (eliminate) liability on a debt they owe or reorganize the terms of the debt. This does not necessarily comport well with the desires of the creditor. Therefore, Congress has enacted a system of laws, called the bankruptcy code, to govern the process and a court to arbitrate it.

While the adversarial nature of bankruptcy makes it a litigation practice, it is also highly transactional. The process of applying the bankruptcy code requires the debtor to provide a full spectrum of information about his debts, assets, financial dealings over the previous few years, income and expenses. This information is consolidated into a series of documents called the bankruptcy schedules and statements.

Schedules are filed in every bankruptcy case. The time necessary to gather and put that information into a form as required by the bankruptcy code will often be the bulk of the time the lawyer and her staff spends with the case.

The bankruptcy code is complex, but not quite the labyrinth you’ll find in any tax code, however. It is detailed in part to set out the process as clearly as possible so that much of the decision-making is avoided and what is left is streamlined. For instance, instead of a judge having to separately decide whether each individual debt is discharged, the bankruptcy code in effect states that every debt is discharged unless it falls within a small subgroup of debts, or unless a creditor objects to discharge.

The Initial Consultation

Most cases will start with an initial consultation. Expect during the initial consultation to

  • Have the debtors sign the initial disclosures required by Congress.
  • Allow the client to vent and providing reassurances. This is at least 50% of the initial consultation. The attorney gains the trust of the client with her calm but authoritative manner. Clients need to know that the attorney knows her stuff. Attorneys should also be aware that about 50% of what they tell their clients during this meeting will not register. I always suggest that the attorney keep a cheat sheet with the important points in an easy to read bulleted list for the client to take away from the meeting.
  • Assess the client’s goal, for example, eliminate unsecured debt, save a house from foreclosure, save a car from repossession. 
  • Elicit basic debt, income and expense information and run a preliminary means test to get a rough idea whether the client will qualify for Chapter 7
  • Learn from the client whether other debts, like nondischargeable taxes or domestic support obligations, might make a Chapter 13 case preferable. 
  • Explain the bankruptcy process. 
  • Review worksheets that the client will use to gather information necessary for the schedules. Do not give the client a blank set of schedules. Those forms are extremely intimidating and full of legalese. There are many examples of worksheets on the Web. The major bankruptcy software vendors will also include a worksheet packet in their forms library. Here’s an example of a set of worksheets. Here’s another.  
  • Quote fees and court costs and include a frank discussion about how the client will come up with the money, and an explanation of any retainer agreement.

Using Paralegals

A word about paralegals. Many firms, especially high volume filers, use paralegals to screen clients. While this is not inherently a bad practice, potential clients will not appreciate the cost savings, even if you try to convey that it will save them money in the long run. Most have never met an attorney professionally before. They want to know they’re in good hands and that they attorney cares. They’re hiring you, not the paralegal, after all. So, even if you use your staff to make the initial contact or help gather the information, it is your ethical duty to your client to discuss those items in the initial consultation that could even hint of legal advice, like application of the means test, choice of chapter, fees and the decision to represent.   

Once the client has paid the fee, provided all the information and documents necessary to file a case and the documents are produced, it will be necessary for the lawyer to review the documents with the client. Note that I did not say to give the documents to the client to review. The best practice (the only practice in my opinion) requires that the attorney sits down with the client and review each page to explain what the client will be attesting to when the client signs the documents under penalty of perjury.

Find out what happens next in the life of bankruptcy case at:

What is it Like to Practice Consumer Bankruptcy Law? Part 2 - Filing the Paperwork through Discharge