During the coronavirus pandemic, the Georgia Labor Commission has processed more initial unemployment claims than in the last eight years combined. That is over 3.3 million claims and climbing. Since so few people have substantial savings accounts, most unemployed people use credit cards to pay monthly living expenses. With an average rate exceeding 20 percent, this approach is not sustainable more than a few weeks.
In the spring and summer of 2020, many credit card companies were at least somewhat patient with regard to past-due payments. Yet as fall approaches and financial support for coronavirus victims wanes, that patience is quickly wearing thin.
Chapter 7 bankruptcy is a legitimate alternative to continual credit card payments, from both an emotional and financial standpoint. But if you have never done consumer bankruptcies before, how do you get started?
What Tools Do I Need?
Back in the old days, and by that we mean 2005, Chapter 7 petitions and schedules (more on that below) had to be filled out almost by hand. Today, Bankruptcy Pro and other platforms have completely automated the process. Simply enter the debtor’s Social Security number and most of the information populates automatically.
Most of these platforms offer free trials, so startup costs are essentially zero. Get to know the program by preparing a dummy bankruptcy petition for yourself. Just don’t file it.
How Do I Get Paying Clients?
If you have not figured this out already, online presence is critical to success. Frequent blog posting is the best way to improve your SERP (Search Engine Results Page) rankings. Be sure the content adds value to the reader and follows SEO best practices.
How Much Can I Charge?
Technically, attorneys can charge whatever they want for a Chapter 7. However, bankruptcy trustees routinely challenge excessive fees. Typically, anything over $1,500 for a Chapter 7 is considered excessive. It is customary to charge one-third or one-half upfront and allow clients to pay the remining balance in installments.
The written fee contract should specifically state the covered bankruptcy services. Typically, such services are preparing the petition and schedules, filing the petition and schedules, and representation at the 341 meeting of creditors. A clause in the contract should state that any additional bankruptcy-related services are available at a rate to be negotiated between attorney and client. If they must file an amended petition, represent the client in a motion for turnover, or do anything else, most lawyers charge their normal hourly rates.
What is the Difference Between Chapter 7 and Chapter 13?
During the initial consultation, you are legally required to inform potential clients of the difference between a Chapter 7 and Chapter 13. Here is the rough script we typically use.
Chapter 7 filers essentially say, “I cannot pay my debts, so come take all my nonexempt assets to pay my debts.” Most people do not have nonexempt assets, unless they have vacation homes and boats. Chapter 13 filers essentially say, “I can pay my debts, but I cannot pay them all at once, so I need a payment plan.” The trustee evaluates the debtor’s income and sets up a repayment schedule.
How Do I Complete the Petition and Schedules?
As mentioned above, this portion of a bankruptcy filing is now relatively straightforward. So, if the client faces a collection lawsuit or other adverse action, you can probably prepare an emergency filing (petition, Social Security Number statement, creditor matrix, credit counselling certificate, and attorneys’ fees declaration) the same day.
The categories are relatively straightforward. As for the amount, the Bankruptcy Code requires debtors to declare the as-is, cash value. The “garage sale” value is often significantly different from the fair market value. For example, most home investors offer a maximum sixty cents on the dollar for an as-is sale. Their initial offers are typically much lower than that.
The trustee will almost certainly ask for documentation of the lower price, so be sure such evidence is available.
On a related note, the trustee usually wants to review a number of financial documents, such as tax returns for the last three years and recent paystubs. Other documents, such as insurance declaration pages and divorce decrees, might be required as well. Be sure your clients know about this requirement in advance. Also, be sure they have government-issued photo IDs and their Social Security cards.
What’s My Role at the 341 Meeting?
Most Chapter 7 trustees’ meetings are basically like family law prove-ups. The debtor answers a few yes/no questions and produces the requested documents. If the trustee saw any red flags, they might discuss these as well.
What Should I Do in a Complex Bankruptcy?
Common adversarial actions in a Chapter 7 include motions for turnover and objections to discharge. Turnover motions often involve savings accounts and other nonexempt assets. Many obligations, such as student loans and back taxes, are only dischargeable in some situations.
Adding Chapter 7 bankruptcy to your professional repertoire can greatly increase the clientele that your organization can service. Unfortunately, in a time of economic turmoil like the coronavirus pandemic, Chapter 7 bankruptcy may become a very sought-after service.
Lee Paulk Morgan
With more than 41 years of experience in the areas of Bankruptcy, Disability, and Workers’ Compensation, Lee Paulk Morgan is one of the most respected Bankruptcy and Disability attorneys in Athens, Georgia. His tireless dedication to serving clients has gained him the reputation of a premier attorney in his areas of practice at Morgan & Morgan, P.C., as well as the trust and respect of other legal experts, who often refer clients to him.