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Great Scheme to Scalp a Bankruptcy Client!

By Joseph McDaniel, Esq.

You know, since I've been doing this for thirty years, you'd think I'd seen it all.

But you would be wrong.

Today, for instance, I got to talk to a pretty, smart young woman with a nice husband and a bundle of children.

And she explained that I wasn't her first rodeo. She had previously visited with a big law firm and they had told her that she had no choice whatsoever; she had to file a Chapter 13 Bankruptcy case, not a Chapter 7 Bankruptcy case.

Why would that surprise me?

BECAUSE SHE WAS A PERFECTLY GOOD CANDIDATE FOR A CHAPTER 7!!!!!!

THE LAW FIRM HAD LIIIIIIIIIIIIIIEEEEEEEEEEEEEEDDDDDDDDD TO HER!!!!!!!!!

BECAUSE THE PRESUMPTIVELY REASONABLE FEE FOR A CHAPTER 13 IS LARGER THAN THAT FOR A CHAPTER 7!!!!!!

Now, I'm just an old-fashioned small-town bankruptcy lawyer, but I expect vultures to have good table manners, at least.

Obviously, I expect too much.

But wait, there's more!

Not only did they want four thousand dollars for a Chapter 13 in a case with small debt, they also wanted to charge her to scrape off a second mortgage that was totally underwater on her house.

BUT WAIT! THERE'S MORE! They also signed her up for a "mortgage modification program" that she could clearly have done for herself.

And the total tariff for these projects in a small, simple case that cried out for a Chapter 7 filing?

A shade under ten thousand dollars.

Now, sometimes I think another lawyer has forgotten something. It happens.

And sometimes I think another lawyer could have taken a different approach. Opinions differ.

But this looked to me like another high-pressure sales job on a defenseless debtor with a houseful of kids and earnings that were not astronomical.

Call me irresponsible, but that seems to be a little high and hard and to the inside for a fair strike, you know?

Now, I have previously suggested that it would be a good idea if folks used the Nolo Free Online Means Test Calculator as a first cut at the ball to determine whether they would qualify for a Chapter 7 or a Chapter 13.

But THAT'S ONLY THE FIRST CUT AT THE BALL. That just tells a debtor that if he files TODAY, he doesn't qualify for a Chapter 7.

It doesn't address what can be done with a certain amount of thought and focus.

But in a post, soon, I'll discuss how to tell whether you qualify for a Chapter 7 without too much work, so if you're told you MUST file a Chapter 13, and you DO qualify for a Chapter 7, you'll know that the guy on the other side of the desk may not have your best interests at heart.

Sure irritates the heck out of me, though. That's the kind of thing that gives lawyers a bad name.

Growl.

p.s. The reason a scheme like the above can work, and even make the mark grateful to the schemer, is that the initial retainer amount is modest; but the rest of the dough is getting paid out through a plan, so the poor debtor is trapped and can't escape the legal fees. Ingenious trick, no?

.

Full post as published by Arizona Bankruptcy Attorney Blog on September 15, 2010 (boomark / email).