So, the last two years have seen record low Bankruptcy filings, primarily because there have been a number of government programs that have helped consumers to stave off collections and assist with gaps in employment.
As the effects of Covid-19 has receded these programs have been coming to an end, and many experts have opined that the economy is poised for a recession.
I've been a Bankruptcy attorney since the 1990's, so I've seen the ups and the downs. Since Bankruptcy is not the most lucrative practice many attorneys who dabble in Bankruptcy move onto other areas of practice during down times like we are having now. But there are times (such as during the 2008 housing crisis) when Bankruptcy filings become red hot, and that is when a lot of amateurs get into the business hoping to make some fast cash.
This is where you have to be a careful consumer. One of my most frustrating common experiences is someone who calls me for a second opinion after it is too late and to hear them say “I wish I went with you.” There are lots of great attorneys out there. You just need to find the one that is right for you.
First, in my opinion, you should never trust a “paralegal” or “document preparation” service. Such services have historically been run by people with little to no legal experience, and clients suffer as a result. Because many cases are of people who have literally nothing in the way of complexities, these services can get away with helping consumers because they know even if the paperwork is prepared in an incorrect way, the court is not very likely to punish the client for their poor choice in using a document preparation service, paralegal, or “notario”. The problem happens when you have a very small, but fixable, problem and the doc service or paralegal doesn't know how to handle it, and you end up ruining your life because you trusted an amateur.
Sadly, you don't always alleviate this problem when you hire an attorney. Some attorneys jump between practice areas because they are not very successful in any one area of law. The best attorneys are specialists, because they know a particular area of law, the judges, and all the court players and they can fix a problem before it's a problem.
So, if the economy takes a dive and suddenly Bankruptcy really looks like it might be your only option, here are some things to look for:
1) Beware of an attorney who is too young, or who just passed the bar exam. The truth is that they are not bad people but Bankruptcy is a very technical area of the law and it takes years of practice to get good at it. Young attorneys who want to do technical legal specialties end up working for a more experienced attorney for several years before striking out on their own. If they are just starting out (less than 3 years of experience), you should take a pass.
2) Beware of an attorney who has just started filing Bankruptcies. Bankruptcy filings nationwide are computerized and any attorney should be able to immediately show you how many bankruptcy filings that they have done. If they have only filed a handful of cases, you should pass.
3) Beware of a Bankruptcy attorney who does not give you concrete reasons why you should file for Bankruptcy, and why the Chapter they are recommending is the correct one for you, especially if they are insisting on a Chapter 13 Bankruptcy. This should be more than just “you are a great candidate for Bankruptcy” and should entail a detailed explanation of why your non-Bankruptcy options are insufficient to solve your problems.
4) Never be shy about asking an attorney about his or her credentials. Where did they go to law school? Where did they get their training in Bankruptcy? How many Bankruptcies do they typically file in a month? Have they been in front of all the Bankruptcy Judges in your jurisdiction? Do they have a good working relationship with the Bankruptcy Trustee's?
Lastly, you might think that you are saving money by going to a document preparation service, paralegal, or a less experienced attorney, but the truth is that you are not. Most Bankruptcy attorneys charge similar fees (however, if you run into a fee that seems high, you should definitely get a second opinion). If you compare an attorney's billable rate to what a doc prep service or paralegal charges you will find out that they are charging you at a similar rate as an attorney, but because they are only helping you up to the point of case filing (and not helping you to complete the case) they are charging about half the total cost. You might be saving some money, but that is because you are only paying for half the service. You can go to a car wash and have them throw soap on your car and pay them less, but if they don't actually scrub the dirt off and rinse the car, you didn't accomplish anything.
Always be a careful consumer before you commit to anything.