He thought he got a great deal on his Chapter 7 bankruptcy by hiring the attorney with the lowest fee. However, after the meeting of creditors, he realized just how much it cost him.
A few years ago, back when bankruptcy court hearings were held face-to-fact, I was waiting with a client for their meeting of creditors to be held. It was the typical setup: lots of nervous people, a few lawyers scurrying around, and me – talking nonsense with my client.
My client was prepared, ready to go, and all set. We had reviewed the petition together and covered potential questions, and he was holding his Social Security and driver’s license as he waited to be called.
For me, this was just another day in bankruptcy court. For my client, this was a momentous occasion. He was nervous, but I knew he had nothing to worry about and that it would be over quickly.
However, as I heard from the corner of my ear, it didn’t go nearly as well for one of the other people sitting in that big room.
The Meeting Of Creditors Revealed the Cost of a Cheap Bankruptcy Lawyer
A man was sitting in front of the Chapter 7 trustee with his lawyer by his side. The lawyer’s face was bright red, and the client looked as if he was ready to run for the exit.
As the trustee asked the guy routine questions about his schedules, it became more apparent that something wasn’t adding up.
What is the value of your house? Gee, I have no idea.
Did you sign the petition before it was filed? Well, I did sign a bunch of stuff. No, I didn’t read it – my lawyer told me it was alright.
Are you current on your car payments? I don’t have a car. The vehicle listed on those papers isn’t mine.
This went on until the Chapter 7 Trustee adjourned the meeting and told the debtor to come back.
Revealing the Inexperienced Bankruptcy Lawyer
I’m naturally curious, and I review other cases to ensure I don’t make the same mistakes as other bankruptcy lawyers. Naturally, this train wreck of a case was interesting enough that I immediately removed it from the bankruptcy court’s website.
I had to figure out what the hell had happened in that room – and how things went so wrong for what appeared to be an honest debtor.
The first red flag was the legal fee. I’m not one to judge how other bankruptcy lawyers price their services, but this attorney charged less than half the going rate for a Chapter 7 bankruptcy case. The debtor was employed and earning a modest salary, but not so little as to warrant a reduced fee from most attorneys.
I hadn’t seen that low of a fee in over twenty years, so I dug deeper into the attorney’s history.
Looking at the bankruptcy lawyer’s record with the court, he’d been admitted to practice law for about a year and had been filing bankruptcy cases for about six months. Newbies are welcome, but this attorney had filed more Chapter 7 bankruptcy cases in that time than most lawyers filed in five years.
The lawyer was clearly working with a huge marketing machine rather than taking the time to amass experience and a steady referral base.
The Docket Reveals More
Reading the rest of the bankruptcy case docket revealed a lawyer who was clearly over his head and determined to go down with the ship rather than seek help.
The client sent a letter to the court indicating that he’d never signed the petition nor had he been allowed to review it. To his knowledge, it was signed and filed by a paralegal.
His attorney never took his calls and had dodged every attempt to contact him since the meeting of creditors.
Ultimately, the Chapter 7 bankruptcy trustee filed a motion to dismiss the debtor’s case and prevent him from filing for bankruptcy again.
In sum, it was all a giant storm of badness.
A Cautionary Tale
You’re probably wondering what this guy was thinking. The lawyer was incompetent and dishonest, and the client’s financial future was compromised.
If you’re thinking about filing for bankruptcy, you’re convinced you’d never be a sucker like THAT guy was.
I hope not, but let’s untangle the knots before armchair quarterbacking this one.
The person looking to file for bankruptcy went with the lawyer offering the lowest price.
There was no investigation into the lawyer’s credentials or experience.
The client was unclear on how the process worked, including filing papers with the bankruptcy court.
Nobody prepared the client for the creditors’ meeting. If someone had done so, he would have realized that he should have known about the whole “sign your bankruptcy petition before filing ” thing.
Don’t Be That Guy
Talk with a bunch of bankruptcy lawyers before you decide who to hire.
Check out their credentials with the state bar (my California bar information is here; my New York bar information is here).
Once that’s done, Google them. Then, look at reviews on Google to see what others say by typing “[name of lawyer] reviews.”
Finally, ask a bunch of questions. And if you don’t get every single one of them answered in a way that makes you trust the attorney, walk out the door.
ABOUT THE AUTHOR
Meet Jay
Since I became a lawyer in 1995, I’ve represented people with problems involving student loans, consumer debts, mortgage foreclosures, collection abuse, and credit reports. Instead of gatekeeping my knowledge, I make as much of it available at no cost as possible on this site and my other social channels. I wrote every word on this site.
I’ve helped thousands of federal and private student loan borrowers lower their payments, negotiate settlements, get out of default and qualify for loan forgiveness programs. My practice includes defending student loan lawsuits filed by companies such as Navient and National Collegiate Student Loan Trust. In addition, I’ve represented thousands of individuals and families in Chapter 7 and Chapter 13 bankruptcy cases. I currently focus my law practice solely on student loan issues.
I played a central role in developing the Student Loan Law Workshop, where I helped to train over 350 lawyers on how to help people with student loan problems. I’ve spoken at events held by the National Association of Consumer Bankruptcy Attorneys, National Association of Consumer Advocates, and bar associations around the country. National news outlets regularly look to me for my insights on student loans and consumer debt issues.
I’m licensed to practice law in New York and California and advise federal student loan borrowers nationwide.
