Bankruptcy Article of the Week
The Pit Bull in the Courtroom
On October 2, the House Judiciary Committee's Subcommittee on Administrative and Commercial Law held a hearing on the U.S. Trustee program. The hearing was aptly labeled "Watch Dog or Attack Dog?"
A. Jay Cristol, Chief Judge Emeritus of the U.S. Bankruptcy Court for the Southern District of Florida and a former bankruptcy attorney and trustee, offered testimony indicating, in so many words, that "attack dog" was an insufficient image. Instead, Cristol likened the U.S. Trustee program under its current leadership to a whole pack of dogs…and later to a pit bull. Whether you agree with Cristol's position or not, he argues that the problem is simply a matter of the mindset of those heading up the program.
Cristol goes out of his way, though, to say that most of the trustees he has encountered on a local level are fair and competent people with good intentions who seem reluctant—and sometimes even embarrassed—when carrying out the directives from above. Like many frustrated bankruptcy judges, they feel their hands are tied. Independent decisions of local, hands-on personnel with specific knowledge of the cases at hand have been supplanted by directives from above.
While Cristol has a number of complaints about the current operation of the U.S. Trustee program and the shift of the Trustee's role from that of neutral monitor to adversary of consumer debtors, a few points stand out:
- Disproportionate scrutiny of consumer debtor filings with little attention to the activities of creditors;
- Inconsistent application of real versus statutory numbers in the means test, so that the test is always construed against the debtor's interests; and
- Accusations of"material misstatements" where discrepancies are small and have no impact on the administration of the case.
Cristol also aptly points out that the triumphant reporting of hundreds of millions of dollars in debts not discharged is largely meaningless. There's no indication in the trustee's data that a significant portion—or, in fact, any—of those millions of dollars in undischarged debt was actually collected.
You can't, Cristol reminds us, get blood from a stone.
The impact for society then, is little. The creditors are unlikely to benefit, since the debts that are not discharged remain unlikely to be paid. The only effect appears to be the impact on consumer debtors themselves. That impact, which includes greater difficulty in obtaining employment and housing and an inability to rebuild credit, is hardly positive for either the debtor or society as a whole.
Why, then, is so much time, energy and money devoted to scrutinizing debtors' petitions and schedules and challenging them at every turn? Cristol suggests that it's simply a matter of the mindset of those currently heading up the program. "These gentlemen," he says, "seem to view all debtors with suspicion through prosecutorial eyes as dishonest crooks trying to beat the system and perceive debtor's lawyers as disreputable and untrustworthy."
You can read Cristol's complete testimony, including a disheartening appendix of specific trustee actions, here: Testimony of A. Jay Cristol
SFT at This Weekend's NACBA Workshop
If you're attending this weekend's NACBA workshop at the JW Marriott in Las Vegas, don't forget to check out the various activities going on with SFT.
Remember to view a free demo of SFT products, including our telephonic counseling and debtor education courses, in the JW Marriott's Murcia Room at either 7 or 8 pm tomorrow night (Thursday, October 25th).
Start Fresh Today and Total Bankruptcy will also be hosting a fundraising party for the Clark County Pro Bono Project from 8-11 pm on Saturday night at the Nine Fine Irishmen.
This pub is located inside the New York – New York Hotel & Casino on 3790 Las Vegas Blvd. South.
And how's this for a deal? If you attend one of our half-hour SFT demos on Thursday night, you will get free admission to Saturday's fundraising party, which figures to be a blast!
A Friendly Tip from Your SFT Team
Remember that credit counseling and debtor education certificates expire within 180 days of issuance.
Unfortunately, if something occurs that prevents you from filing the certificate before its expiration date, the client will be required to take a new course in order to receive certification again.
Before a new certificate can be issued, a new client profile has to be created and a new course purchased and completed.
Please call 1 (800) 435-9138 or email info@startfreshtoday.com if you have any questions about this information.
Kevin's Corner
Practice Management Tip of the Week:
"Don't look at your bankruptcy clients as short-term investments.
"While the typical bankruptcy case doesn't last long, professional relationships can last for years, and that's beneficial to you and your clients. It's easy to see a bankruptcy case in isolation and overlook the long term; after all, most clients won't be filing for bankruptcy again.
"That doesn't mean, though, that your bankruptcy client won't have future legal needs. Whether your firm handles other cases and can draw new business directly or you have a referral relationship with another local firm, it's to your advantage to have those past clients looking to you when they need legal help.
"And, of course, word-of-mouth referrals are an excellent source of future revenues. A satisfied client may send 2 or 3 additional bankruptcy clients your way over the next couple of years, and that additional business is pure cream—revenue you didn't have to invest any marketing dollars to generate.
"Just a little bit of extra investment in building a relationship with your client can continue to pay off for years to come, and can triple or quadruple the revenue ultimately associated with that client—and that's assuming that the client only refers a couple of additional bankruptcy cases and not a large personal injury claim or other lucrative case.
"In next week's newsletter, we'll look at some specific tips on how you can solidify that relationship and increase the likelihood of word-of-mouth referrals and repeat business."
- Kevin Chern
President, Start Fresh Today
The Numbers Game
20 percent of Chapter 13 debtors in the U.S. Bankruptcy Court in Massachusetts are handling their cases pro se, according to a Massachusetts Lawyers Weekly story.
Chief Judge Henry J. Boroff was described in the story as noting how the number of pro se cases in the state has climbed from 13 percent in 2004 to 20 percent this year.
In fact, the percentage of pro se cases thus far in 2007 is slightly down from the past two years but obviously still ahead of 2004. Roughly 22 and 23 percent of bankruptcy cases were pro se in Massachusetts in 2005 and 2006 respectively.
Boroff essentially attributed this seven percent increase in pro se filings from 2004 to this year to the high foreclosure rate in the country and more expensive attorney fees post-BAPCPA.
While the Bankruptcy Reform Act has put more obligations on the shoulders of bankruptcy attorneys and ultimately required us to raise fees, it's a shame that people throughout the country are struggling to get the financial assistance that they need because of the new bankruptcy law.
Have you noticed any increases in Chapter 13 pro se filings where you live? Email info@startfreshtoday.com with your observations.
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