Las Vegas Business Press :: News : Bankruptcies, costs to file on the rise

Bankruptcies, costs to file on the rise

Even as lawyers leave the field, 'monster year' expected in '08

BY VALERIE MILLER

Bankruptcies are increasing locally and nationwide. But some filers may be left without adequate representation because reforms have driven swarms of bankruptcy attorneys from the field.

Many local lawyers said they've seen the number of bankruptcy attorneys shrink, although there are no statistics to measure the exodus. The State Bar of Nevada does not count lawyers by specialty.

Nancy Allf, an attorney and president of the State Bar of Nevada, is one such attorney who gave up representing people in bankruptcy after passage of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.

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Philip Goldstein said he and other lawyers continue to take personal bankruptcy cases, although changes in the law from 2005 have increased paperwork in those cases and required lawyers to make 'reasonable inquiries' into clients' veracity.

JEFERSON APPLEGATE | BUSINESS PRESS
Bankruptcy lawyers such as Goldstein may be busy in 2008. Data show that for 2007, there were 9,962 bankruptcy filings in the Nevada District as of Nov. 30.

Attorney verification requirements, which require lawyers to make "reasonable inquiries" into whether their clients are being accurate and truthful, have put off more than a few attorneys. Allf said the liability issue was part of the reason she left.

Randolph Goldberg, one lawyer who stayed in the personal bankruptcy field, decried the mountains of requisite paperwork.

"It is just so much more work since the tort reform," he said. "Everything for the last six months (before the filing) has to be documented."

Among the other changes: A credit counseling course is required before filing, and a debt-management course is a prerequisite to a bankruptcy discharge. Goldberg recalls lawyers quitting as a result of the changes in the law.

"I know five or six guys who got out because they couldn't handle it," he said.

The margins have been squeezed as a result of the additional workload.

"Chapter 7s don't generate much profit anymore for lawyers," Goldberg said. "Chapter 13s are where we make our money."

Under the new law, a Chapter 13 bankruptcy will not be granted if the debtor has obtained a discharge in Chapter 7, 11 or 12 in the four years before filing.

Philip Goldstein, another longtime bankruptcy lawyer, said the full-time bankruptcy practitioners have stuck it out.

"Some have left, but there is no considerable exodus," he said. "Those dabbling in it have left. Just those who have a stake in the law are still in it."

The additional work required under the new law also may have made it especially difficult for part-timers in the field, who were juggling other practice areas, Allf said. At the same time, she added, bankruptcy work was leveling off after the reform took effect.

"Bankruptcy has been slow for a couple of years," she said.

That's changing.

The rush of bankruptcy filings, which included personal and corporate bankruptcy filings, right before the October 2005 reform took effect -- 23,182 that year in the Nevada District -- was almost a third more than 2004's 16,921, U.S. Bankruptcy Court records show. Bankruptcies are again rising. As of Nov. 30 there were 9,962 filings in the Nevada District, up from 5,529 in 2006. Observers attribute last year's lower number to the rush in filings in 2005.

Attorneys who remain say the increased requirements of the bankruptcy reform law has driven up costs when the demand is at its highest in years, and expected to increase.

"Next year, 2008, is going to be a monster year for bankruptcy," Goldberg said. "I'll file 140 a month. Right now, I am filing 110."

Allf agreed with Goldberg.

"Bankruptcies are on the rise again, and I am seeing that now, because of the economy," she said.

The coming year could make 2007 pale in comparison. Goldberg said he is close to his 2004 pace in filings. He has pushed back business into the new year.

"I cut back 33 percent on ads in November and December and I still stayed busy," Goldberg said. "I pushed people away."

Those same filers are paying more than before the reform. Chapter 7, which is the simplest and quickest type of personal bankruptcy, now runs $1,250 to $1,500 at Goldberg's firm. That's up from $800 to $900 before the reform.

Allf suggested background checks on clients' assets to make sure "everything is documented, because there are audits," she said.

Fresh faces are entering the bankruptcy field, attorney Shelley Krohn said.

"I know several who have gotten out, but as the filings pick up, there are brand-new attorneys picking it up," she said.

Krohn has a warning for them concerning changes to the law: "It can be a minefield if you don't have all the requirements," she said.

vmiller@lvbusinesspress.com

387-5286

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