Who Should I Hire To File a Chapter 7 Bankruptcy?
A GUIDE TO HELP INDIVIDUALS FIND THE RIGHT PERSON TO SUCCESSFULLY AND COMPETETENTLY DISCHARGE THEIR DEBTS IN BANKRUPTCY.
I have been practicing consumer bankruptcy law for the past 25 years in the Central District of California and have filed over 8,000 bankruptcies. I started as a sole practitioner. I personally met every client, reviewed their schedules, attended every hearing, went to battle against Chapter 7 Trustees, and argued cases in front of the judges. When the recession started in 2007, my clientele grew; I bought law firms from attorneys that were disciplined by the United States Trustee and eventually became managing partner of a law firm consisting of 10 attorneys and 40 support staff members.
Due to the number of cases and workload, it was impossible for me to personally work on each case; I needed to rely on other attorneys to assist in the day to day case management, while I focused on running the law firm. Four years ago, I decided that I was done dealing with the legal and personal issues of such a large firm, so I downsized and opened a small office with my office manager, two paralegals and a part time attorney that made all my court appearances. When Covid-19 closed the court to in person hearings, I was able to personally appear at court hearings via zoom or telephonically.
At first, I disliked waiting, sometimes for hours, for my client’s case to be called and examined by the Chapter 7 Trustee at the Meeting of Creditors. Since cases are scheduled hourly, I had no idea what time my client’s case would be called, so I was forced to listen to other people’s (Debtors) cases while they were examined by the Chapter 7 Trustee. The Chapter 7 Trustee’s primary goal is to liquidate a debtor’s unprotected assets on behalf of creditors.
I soon became fascinated listening to these other cases: I began to analyze how other attorneys prepared their cases, the importance of prepping their clients for the Trustee’s questions, how important a good reputation and relationship with the Chapter 7 Trustee and his/her staff was and what potential harm attorneys and petition preparers were doing to Debtors without the proper analysis and review before filing a Chapter 7 case. Professionalism, preparing documents correctly, explaining legal issues and making sure your client’s assets are protected is why a person is hired to file bankruptcy on behalf of their client. I was honestly shocked at how many attorneys put their clients into Chapter 7 cases and put their clients at risk to allow the Chapter 7 Trustee to liquidate their assets.
My Impression and Experience
The whole point of filing Chapter 7 Bankruptcy for people is to get a “fresh start” and to eliminate the financial, emotional, and psychological effects that debt has on a person and their family. Bankruptcy filings are at a 17-year low, so a person seeking help to file a Chapter 7 case has all the leverage, as attorneys and petition preparers spend thousands of dollars on advertising to retain a single client. With all the negotiating power that a prospective Chapter 7 debtor has, why are so many people spending thousands of dollars for substandard legal representation that borders on malpractice? The answer I hear all the time is that a person has limited knowledge of the bankruptcy process so they just rely on what the attorney tells them. Keep in mind attorneys are trying to make a sale and be paid. You have the right to ask questions and speak to a number of attorneys that offer free consultations. You also have access to the internet. You do not need to be a “google attorney,” but you can find out a lot of information about Chapter 7 bankruptcy that can provide you with knowledge specific to your situation.
ACCORDINLGY, I PRESENT MY DO’S AND DON’TS OF FINDING THE RIGHT PERSON TO HIRE IN FILING A CHAPTER 7 BANKRUPCTY
An Attorney vs. a Petition Preparer
You should always use an attorney to file your Chapter 7 or Chapter 13 bankruptcy in the current market where cases are at a 17-year low; attorneys will often work with you on fees and allow payment plans. A petition preparer has no oversight or formal training. They charge $350.00 to $500.00 to prepare the paperwork only. You will also be responsible for paying the $338.00 filing fee, running a credit report and completing credit counseling. Accordingly, you are paying a minimum of $750.00 to navigate the process yourself. Experienced attorneys charge as little as $1,300.00 total, many will also allow you to make a payment plan over 2 to 3 months to pay the fees. They will appear at you hearing and make sure that any issues are dealt with. Is saving $500.00 worth having the Trustee liquidate some of your assets or you’re home? Moreover, the Trustee and Judge will make it very clear that if you elect to file on your own, you are solely responsible for any repercussions. Some Judges may even make you appear in front of them just to question you on who prepared your case. If you want to keep your car, you may be required to personally attend a hearing. If your case has issues, the Judge will suggest finding an attorney, who will charge a lot more at that point knowing there are problems with the case.
Google and Yelp Reviews
Google and Yelp reviews can be helpful to find a good attorney, however attorneys always seem to have 4.9 – 5 star ratings. How do you know that the reviews are legitimate? My suggestion is to actually read all the reviews to see if the person makes references to specific people or situations in their case. Disregard the review that says “I highly recommend the firm and they helped me.” These boilerplate reviews can mean nothing; often a legitimate review will state the attorney’s name, reference employees and specific acts the firm did to help the client. I audited a highly “ranked” lawyer who did not have the best reputation, but somehow had over 100 positive reviews. When I cross-referenced the names on the reviews with the bankruptcy court docket, I could not match the reviewer’s name with actual people that filed bankruptcy. How do you know if the reviews were made by friends, family or purchased?
Look Closely at the Website
When researching an attorney, make sure their website is actually the attorney’s and not a universal website that the attorney pays to join. Number one clue: does the website state the name and background of the attorney or does it ask you for your zip code, then it directs you to an attorney? A lawyer should have their own website that provides information about the attorney, their background, and the values the attorney holds about their practice.
I recommend only hiring an attorney that has their name or initials on the name of the law firm. You are more likely going to get greater accountability from a lawyer, who puts their name on the firm vs. an attorney that hides behind a clever phrase to name a law firm.
Finally, I do not suggest filing a case with somebody that requires you to input all your information into a portal, as a lot of information must be personally asked. Many questions in the bankruptcy schedules consist of legal terms that a person will not understand and other questions require a discussion to fetter out the answer. When I ask 50% of clients during a consultation if they are planning to sue or are in a lawsuit, they will answer “no” until I start giving examples. Thereafter, my clients start remembering potential lawsuits that must be put into the schedules. Failure to list these potential lawsuits can result in the lawsuit being dismissed later on. This is why you need verbal interaction with the person you hire to file the case so the paperwork and analysis can be done correctly.
Make Sure You Talk to and Meet With Your Attorney
During the free consultation, you meet and talk to an attorney, preferably the attorney that will be working on your case. When you go into the office make sure the attorney meets with you, answers all your questions and you feel comfortable with the person. If the attorney only spends 5 minutes with you and then passes you to an assistant, you should question how much involvement the attorney will actually have in your case, and the possibility that important issues may be missed, causing you problems. Make sure the attorney answers all your questions and does not rush the consultation. If the attorney is not willing to spend the time with you before you retain them, what the response will be once you pay them.
Responding to Calls and Emails
When deciding on an attorney, makes sure they are responsive to your calls and emails. If it takes the attorney or office more than 48 business hours to respond to your questions or they always punt your questions to someone else to answer, then think about how responsive the attorney will be once they have been retained. If they are not responsive to you, this might show their pattern and practice dealing with other people like the Chapter 7 Trustee. Failure to comply with the Trustee’s and court’s rules can jeopardize your case.
A bankruptcy attorney hears people’s problems all day, but you need to feel they are compassionate about your situation, as this is a crucial financial, emotional and psychological time for you. If you do not feel that the attorney cares about you, then find another attorney. Knowing the attorney cares about you and your case will make the process legally and emotionally more smoothly.
Make Sure You Speak to 3–4 Attorneys
I estimate that 50% of consultations I have with prospective clients, who have consulted with other attorneys beforehand, have been given the wrong advice or given unequivocally incorrect information. If you are given information from one attorney that is later contradicted by another attorney, asks the attorney specifically why you got two different opinions. A quality attorney should be able to easily explain why, give examples or provide case law to support their opinion. I recently spoke to a woman whose attorney put her into a Chapter 7 case and made promises he factually and legally could not honestly make to a client about the results. She paid the attorney $3,800.00 to file her Chapter 7 case, and she lost over $70,000 of equity in her property. My first question was why would the attorney ever put you in a Chapter 7 case and why did he make those promises? She did not have an explanation, as he never went through the process of the case; he only told her the result. I then asked if she consulted other attorneys prior to filing, and as I suspected, her answer was “no.”
Does the Attorney Specialize in Bankruptcy?
Ask the attorney if they specialize in bankruptcy, how long have they been filing cases and how many Chapter 7 cases have they filed. Ask if the Chapter 7 Trustee ever filed a lawsuit or liquidated their client’s assets. Ask the attorney which Chapter 7 Trustees they like or do not like dealing with. If the attorney will not answer these questions to your comfort, find another attorney. You are more likely to have a successful bankruptcy outcome if the attorney only practices bankruptcy.
Many attorneys dabble in bankruptcy and file Chapter 7 cases, but this could cause issues in your case. They may not be familiar with new laws, how the District where your case is filed works or know the Chapter 7 Trustees. The bankruptcy community is small so reputation and past working relationships with the Trustee is very helpful. After a hearing recently, I spoke to my client, who listened to over 20 matters before his case was called. His first response was how he could tell which cases were done by attorneys that had a working relationship with the Trustee, as the hearings went more smoothly and faster.
Does the Attorney Go Over the Petition With You Prior to Your Hearing?
One of the most important things an attorney can do to help their clients is to personally go over the case with you prior to the meeting with the Trustee. A short 15-minute conversation may save you thousands of dollars litigating with the Trustee. When listening to the meeting of creditors with the Trustee, it is very obvious which debtors spoke to their attorneys and understood the questions prior to the meeting. I personally speak to each client before the hearings and look at the case as if I was the Trustee. I discuss with my clients how to answer questions and will intervene if an issue occurs. I appeared the other day at a hearing and it was painfully obvious that some debtors had not been prepped appropriately by their attorneys. The Trustee could immediately tell that the person was not prepared to answer questions about a property they owned in another country. Suffice to say, the matter was continued for the debtors to provide all documents regarding their property and its value, with the Trustee keen on requiring the debtors to pay him equal to the value of the property or force them to sell the property.
Will Your Attorney Appear at the Meeting of Creditors or Do They Hire Another Attorney on Your Behalf
Ask the attorney if they will personally be on the telephonic hearing or do they hire somebody else, called an “appearance attorney” to be on the phone on your behalf. If a case is easy, meaning you have no property and no pending lawsuits then it probably will not be an issue. I use appearance attorneys if I have a conflict, but only on cases that are very straight forward. If a case is more difficult, and I have a conflict, I will request a continuance from the trustee, as I will not allow a client to appear without my ability to intervene or straighten out a potential issue. You need the attorney on the phone that prepared your case and can intervene if needed when a case has potential issues. Knowing the case and being able to intervene if a question arises can many time stop an issue right away before the Trustee gets more involved. The trustee gives a lot of credence to the attorney who filed the case, knows potential issues beforehand and can immediately intervene to explain an issue to the trustee. At a hearing recently, I knew beforehand that an issue would arise regarding my client transferring a property in a divorce for less than the value. Once the trustee started inquiring, I immediately responded the issue was explained in the divorce decree, and I could have it to the Trustee within 15 minutes. Issue resolved.
Your Attorney Should Make It Clear That There Are No Stupid Questions
Your attorney should always invite you to ask questions, as this is a new experience for you. I always tell my clients that there are no dumb questions, and they are always invited to ask them, regardless how many times. As your attorney, I want you to understand what you are doing and feel comfortable the whole time. If your attorney refuses to answer your questions or often pushes you off to an assistant, you need to decide if this is the person that you want helping you for the next 4 months.
Reputation, Reputation, Reputation
The bankruptcy community is very small, so an attorney’s reputation is very important. Trustees, judges, and creditor attorneys that have strong working relationships with a debtor’s bankruptcy attorney help many cases run smoothly due to the years of mutual respect that have developed. It is human nature to trust and respect a person’s word that you have known for years and have never had reason to question their integrity. This holds true in our small bankruptcy community. It is a logical question for a Trustee to wonder why a debtor has hired an attorney in Orange County when they live 75 miles away in the San Fernando Valley. If an attorney does not file cases in certain jurisdictions and knows the Trustees, the best advice they can give you is to find an attorney who practices in front of the Trustee and Judges in that location all the time.
Ask Family Members, Friends and Professionals for Referrals
People are many times embarrassed to ask family members and friends for bankruptcy referrals, as they think that they are the only ones in financial difficulty. I have had clients refer 20 family members after initially telling me how embarrassed they were filing bankruptcy. As is common, the clients saw family members at an event and were shocked at their demeanor—how calm and at peace they were—so they told them about filing for bankruptcy. I even had a spouse not tell her husband about the bankruptcy out of fear for having $35K of credit card debt. Two years later, to my shock the husband came in with his wife, as he had over $50K of debt. If you do not feel comfortable asking a family member or friend, ask an accountant, other attorneys or real estate professionals for a referral. Make sure the professional has actually worked with the attorney before and has actual knowledge of their professionalism and ability.
I know people do not want to file bankruptcy, but many times it is the right financial planning for individuals who are drowning in debt, which is causing emotional and psychological harm. Bankruptcy dates back 2,500 years and is in the Old and New Testament. As a society, we want people to get a fresh start and not feel they are in “debtor’s prison” forever. But just because a person has the label of “attorney” or “lawyer” does not mean they are experts in filing Chapter 7 cases and looking out for your best interest.
There are a lot of outstanding bankruptcy attorneys that have practiced many years and take great pride in their job. They charge reasonable fees and will work with you on a payment plan. If you decide to file bankruptcy, please do your due diligence and if you do not feel comfortable, contact more attorneys. You should be treated with respect and candor, and the attorney fees should be under $2,000 for a basic Chapter 7 case. Remember, you are seeking the best representation at a fair price. Cases are at a 17-year low, so you are in a good negotiating position to find the attorney best for you and your situation.
Written By: Kevin T. Simon, Esq.
Kevin T. Simon is a practicing consumer bankruptcy attorney with over 25 years of experience. He has helped nearly 8,000 clients to file cases over the years.
Mr. Simon currently runs his own firm, the Law Offices of Kevin T. Simon, APC since 2018. Previously he was the Managing Partner of Simon Resnik Hayes LLP, from 2013 to 2018. Prior to that he was the Managing Partner of Simon & Resnik LLP, from 2003 to 2013. He began his private practice, the Law Offices of Kevin T. Simon, APC in 1996 to 2003.