Thursday, Nov. 27, 2008 | 2 a.m.
These are rich times for bankruptcy lawyers.
- Rush to bankruptcy (10-3-2005)
Beyond the Sun
“We don’t like to celebrate that fact,” one well-dressed attorney said this week outside Courtroom 2 of U.S. Bankruptcy Court. “You don’t go to cocktail parties and, while everybody is commiserating about how bad it is, bring up that your business is good.”
You might not see bankruptcy lawyers cartwheeling down the courthouse halls or dashing to the nearest Lamborghini dealer, but the simple truth is most bankruptcy lawyers do best when the economy is at its worst.
And Nevada leads the nation in the per capita increase of bankruptcy filings compared with a year ago. In October, bankruptcies were up 70 percent compared with the same month last year, according to Automated Access to Court Electronic Records, a company that tracks bankruptcy data. Other Western states, including California and Arizona, are also high on the list.
The crash of the housing market, which punctured Las Vegas’ building bubble with particular force, is driving the increase. Law firms report a majority of their clients are resorting to bankruptcy because of foreclosure. (Nevada also leads the nation in the rate of home foreclosures.)
“People are using credit cards to hold onto their houses and getting cash advances to try and catch up. They do what they have to do to stay in the house. It’s a never-ending cycle,” attorney Ellen Stoebling said.
Adds Melissa Cain, of Cain Law Group: “It’s not like they come in with bills for TVs or clothing. They’re just trying to scrape by.”
On any given day, in the high-ceiling, wood-paneled courtrooms, rows and rows of lawyers wait for their turn before the judge. Many of the motions take less than a minute because much of the docket is full of unopposed motions to, in lawyer speak, lift stay. To the rest of us that means the homeowner is willingly surrendering the house.
“People are just in droves giving up their homes,” Stoebling said.
The owners don’t have to be in court for the swift but, one would imagine, gut-wrenching action.
“... the motion is brought forward ... pursuant to terms set forth ... fees are approved for the realtor...,” the judge says in a dry monotone, leaning with both arms folded on the bench.
And it’s done. The lawyer presenting the motion books it out of the courtroom.
Sometimes only one lawyer is presenting the case, but frequently a case will attract multiple attorneys, representing the debtor, the banks, the trustee and other interested parties.
Michael Brooks, an attorney with Jolley, Urga, Wirth & Woodbury who represents institutions such as banks, said he has never been so busy. He has had the same list of bank clients for the past eight years, but says the number of files per client has jumped from single digits to 50 or more.
Cain took advantage of these heady times to leave one of the larger firms in town to branch out on her own.
“Now is a pretty easy time to start a law firm and stay afloat,” she said. “Getting through the first year is the big thing.”
Cain has also decided the timing is right to hit the television waves advertising her services. Her first commercial airs in January.
Bankruptcy lawyers, staid as a rule, certainly don’t seem to swagger through the courthouse lobby in the notice-me fashion notorious of criminal-defense lawyers.
Henry Sommer, president of the National Association of Consumer Bankruptcy Attorneys, said although bankruptcy firms are experiencing a boom because of the economic downturn, “I don’t think any of them are becoming fabulously wealthy from this.” In consumer bankruptcy the lawyer is paid upfront for Chapter 7 filings that lead to the sale of all assets — with some lawyers advising clients preparing for bankruptcy to stop making payments on their debt and instead save for the fee, Sommer said.
In Chapter 13 bankruptcy fillings, when a structured debt repayment plan is blessed by the court, the attorney’s fee is part of that payment plan.
Some lawyers say the bankruptcy market is saturated with competing lawyers — witness the use of television commercials, a practice that attorney David Krieger said was unheard of where he last worked, in New Jersey.
The booming economy brought Krieger here, but it’s the downturn that is really helping his business take off. Still, he remains sober.
“I don’t like to talk about the economy going down the drain,” he said. “While I’m busier, it’s incredibly disheartening to see this happening. I’m happy that I’m busy but very sad for the reason why.”
And some bankruptcy lawyers — the ones who represent banks — worry about getting paid. The banks had budgeted for a few filings a month, not tens and tens of filings.
“Probably a lot of the work I’m doing will be for free,” Brooks said. “It’s not all party hats and balloons.”