I’ve long campaigned for compensation of bankruptcy practitioners that recognizes the practitioner’s skill set and the complexities of this practice. Without real-world compensation, bankruptcy can’t compete for legal talent.
Alongside that campaign, I’ve expressed my concern about what Bill Rochelle calls the overlegalization of consumer bankruptcy. I see that in the increasing, and needless in my opinion, hoops presented in Chapter 13 in practice which increase the time and cost to file for debt relief.
We’re confronted with a dilemma: price ourselves out of reach of many individuals if we pay practitioners fairly. Or make Chapter 13 as presently practiced affordable by underpaying bankruptcy attorneys.
The Northern District of California, admittedly a very high-cost region of the country, just adopted a new no-look fee structure, using the cafeteria approach: a fee for the base case, and additurs for complicating elements like sole proprietorships, car cram-downs, support arrears, etc. I’m both tickled and worried.
I’m tickled at the district-wide recognition that getting a client all the relief that’s available takes more than just filing schedules and a plan. Add a car loan, back taxes, and liens impairing exemptions to a case, and there’s real work ahead.
Worry lies in the cost to the client in that fairly typical case. Under the new fee guideline, that case would merit no-look fees of $9400. We serve a population many of which have never hired an attorney before in their lives and are financially strapped. Ninety four hundred dollars boggles the mind. Yet the way Chapter 13 works these days, it takes that eye-popping amount of money to scramble free of debt.
Alas, I don’t have a quick or independently implementable solution to the tension. But it behooves us, for the sake of the bankruptcy bar and our client body, to work toward a better system. The obvious solution lies in legislation that no longer treats the debtor as an incipient cheat and judges as lacking judgment.
Short of that (or until real bankruptcy reform happens) trustees can examine their procedures to see just what is required to fulfill their duties and eliminate needless additional declarations, document productions, and hoop-jumping. Judges can support trustees when they implement more streamlined administration and support debtor’s counsel when they challenge extraneous and duplicative procedures.
Finally, bankruptcy practitioners need to sharpen their ability to explain to their clientele the benefit of Chapter 13 in light cost of getting relief .
