I often encounter prospective clients who are regretting having selected the wrong attorney to represent them in their bankruptcy case. I often hear in dismay, “if I knew the trustee was going to try and sell my house, I would not have chosen to have filed a bankruptcy case in the first place.” Or, “my attorney said I could keep the investment annuity; he told me it would be completely exempt.” “He also didn’t tell me that the trustee would go after my mom to reimburse the estate for the money I borrowed and repaid her last year.” Unfortunately, many times when I get the call, I have the unenviable task of having to tell the client that we cannot undo the harm that has already been done. “I wish I had a time machine.” Let me illustrate with one of many examples that I have witnessed.
A few years ago I was asked by a civil litigation attorney to consult on a bankruptcy malpractice case. The bankruptcy attorney in the case had spent little or no time with his clients. The case had been prepared by the administrative staff with apparent nonexistent supervision. In addition, important communications by the clients were ignored both before and during the case. The attorney did not appear at the meeting of creditors. Instead he used an appearance attorney as was his practice. The appearance attorney was making a modest supplemental living in his semi-retirement by sitting outside of the trustee’s hearing room and doing appearances at these hearings as a hired gun. Most of his cases came from “bankruptcy mill” attorneys who filed high volumes of cases with minimal attorney involvement and little or no supervision over the work that was being performed by their non-attorney staffs. The appearance attorney was usually handed the file just prior to the hearing without any prior review. It was not unusual for the appearance attorney to be appearing in more than 30 cases in a day without ever having met the clients beforehand. The client had tried to communicate with the attorney that a relative had passed away and that hey had been left a house as their inheritance. The communications were ignored with disastrous consequences.
As a result of the missed communications the inheritance was not disclosed on the clients’ bankruptcy schedules. Upon discovery of the omission the trustee had the house turned over to the estate and sold to pay the creditors as well as the incurrence of large administrative expenses to be paid from the sale proceeds. In addition the case was turned over to the U.S. Attorney’s office for bankruptcy fraud, and the clients’ were charged.
After significant sums were paid on the criminal defense the charges were eventually dropped. The attorney was sued for legal malpractice and shortly thereafter the appearance attorney filed his own bankruptcy. I cannot emphasize the importance of having a competent attorney who is thorough, diligent and personally involved with your case.
4 Comments
The what if’s will rarely deter a price shopper. I have seen many occasions where I counseled about potential issues regarding inheritances and preferential payments. I tell them these items must be disclosed on the petition. The client leaves never to be heard from again until I see them at a 341 with another attorney who was not told about the transactions I had identified as problematic. No doubt some lawyers are less capable. On the other hand some clients only hear what they want to hear.
It’s true that some clients are taken in by low prices. However, it’s not all low-priced attorneys doing a bad job on bankruptcy cases. I think another issue is that there are a lot of dabblers looking for bankruptcy clients. Many consumers will go with a referral from a trusted source. Although the attorney may be charging upwards of $2500 for a no-asset Chapter 7, it is not disclosed to the client at the outset that the attorney really doesn’t know much about bankruptcy but is relying on the idea that some clients have, that a bankruptcy case is just “filling out forms.”
Clients have also told me that they were asked to pay $6,000 up front for a Chapter 13 case. In that case a non-attorney solicitor had initially contacted the clients, on behalf of the law firm, who had located the clients by means of the 90-day Notice of Default recorded by the foreclosing mortgage servicer. The attorneys even told the clients to put part of the attorney fees on a credit card! These people sensed that something was wrong, looked around and found me. But there must be some consumers out there taking this kind of advice.
With the ral estate market being non-existant and therefore closing down to nothing, real estate attorneys are turning to bankruptcy as a way to make up lost income. Also – how harad can it be- numbers are numbers. The influx of non-experienced bankruptcy counsels is staggering and dangerous. The simple Chapter 7 (” I only have 5 credit cards and no house and a regular job at $9.00/hr and no children and never married”) priced at $750 plus filing and counseling fees* often does not turn out that way. *(“we may charge additional fees if the attorney has to talk at the creditors’ meeting or avoid a lien or send any documents to the trustee or actually explain anything to you – We mean – like – what is the internet for?”).
The horror stories about lost houses etc are just the tip of the trustee’s sword (I am tired of “iceberg” references). It is the routine cases were the Debtor(s) should have not problem that become an asset case because of a failure to ask about pensions, life insurance, PI cases, transfers, loans paid-back to mom/dad/brother/sister with “exempt” property that make my hair fall out (good excuse for those of us getting folliculally challenged).
We all err from time to time – but ignorance is not bliss – just a good malpratice case