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Time is Money

By Lois R. Lupica

A consistent theme running through the Consumer Bankruptcy Fee Study focus group discussions is the increased time it takes attorneys, post-BAPCPA, to take a consumer debtor from initial consultation to filing. As one attorney observed,

[BAPCPA has] ... triple[d] ... the time it takes to prep a case. I mean, in lots of cases, where you could have gotten a couple of months of pay stubs, put them in there, seeing the [the debtors]  don't make any money right now and filed a bankruptcy case within a fairly short period of time, now it takes ... a lot more staff time ... to chase down six months of pay stubs, to get them entered into the system, to look at [them, and] if they are over median, that increases the time. So in a case ... they are over median and close to that line, it probably triples or quadruples the time it takes to get them ready to file.

In a preliminary analysis of Fee Study data (and I stress, preliminary) 87% of attorneys "strongly agreed" that it takes more time to represent a Chapter 7 consumer client now, than it did before BAPCPA's enactment. 

It was also repoerted that the most time consuming parts of representing consumer debtors in Chapter 7 cases are (in order) (i) meeting with clients and explaining the consumer bankruptcy process, (ii) client "handholding" throughout the process, and (iii) gathering the required documentation.

With respect to Chapter 13 cases, 76% of attorneys reported it takes between 25% and 50% more hours to represent a Chapter 13 debtor now than before BAPCPA. 47% reported that the increased time can attributed to more attorney hours within the same time frame, AND the fact that each case file is open longer. 66% of lawyers reported that a Chapter 13 case is typically open between 25% and 50% longer. As was the case under Chapter 7, the most time consuming parts of representing consumer debtors filing under Chapter 13 are, (i) meeting with clients and explaining the process, (ii) gathering the required documentation, and (iii) client "handholding." Completing the means test, and addressing trustee objections and requests come in a close fourth and fifth.

This increased attorney time spent translates into increased fees. Among those lawyers who reported charging higher fees post-BAPCPA, the top reasons cited are, (i) the law is more complex, so it takes a higher level of skill to practice consumer bankruptcy, (ii) the process generally takes more time, (iii) creditors are more aggressive, (iv) more mortgage modifications/foreclosures, (v) more client contact, (vi) consumers are in more severe financial crisis, (vii) the increased documentation requirement, and (viii) a greater call for more strategic thinking about each case.

Another interesting finding. 60% of lawyers reported a "higher stress level" practicing consumer bankruptcy law under BAPCPA, and 30% reported a "much higher stress level." 

Full post as published by Credit Slips on March 30, 2011 (boomark / email).