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Solicitation Letters - "You've been sued"


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Thought I'd provide some useful current info on bankruptcies.

Technology. Yes, it can be wonderful, but it's also a headache. There 3,007 counties, boroughs and parishes in the US that have courts and then 1,000s of municipalities that operate their own municipal courts. All records are digitized now, and many records can be viewed online and attorneys can file electronically in the majority of those counties and muni courts.

There are several companies that "data mine" that info and sell it. Specifically, they sell it to bankruptcy mills.

What is a bankruptcy mill?

You know how cars are made on an assembly line? Well, bankruptcy mills assemble your bankruptcy petition in the same way.

When a law suit is filed against you, you are likely to receive a half dozen to a dozen advertisements from these bankruptcy mills and often you'll receive them before you get served with a copy of the summons and complaint.

The process starts when you call the number on the letter. Someone will read from a script, "Blah, blah, blah" and ask you for a 7- or 9-digit code. Then they will hand you off to an intake attorney. The intake attorney's job is to sell you something, anything, and like all good sales people, they use top-down selling starting with a Chapter 13.

Why? Because Congress limits what attorneys can charge for preparing a bankruptcy petition, but in the case of Chapter 13, they can charge you for billable work and include it in your payment plan. Yeah, that's right. They profit off of a Chapter 13 but generally lose money on a Chapter 7. If they can't get you into a Chapter 13, they'll try to get you into a Chapter 7 and if they can't do that, they'll try to get you into a debt settlement/debt negotiation thing.

Once you sign up, you'll be handed off to a customer service rep who will hound you for the documents necessary to prepare your petition, and then you'll be handed off to the attorney will actually file your petition and then handed off a legal assistant or maybe even a paralegal who will deal with you to the end.

They offer payment plans which are very attractive, but also very misleading.

The bankruptcy mills are very cold and impersonal. The customer service reps spend 7 hours a day in 15-minute blocks calling clients to get documents. They don't care that you work. If they schedule a phone conference (often called a "meeting") at 2:00 pm and you're at work and can't answer your phone, or your phone has bad reception in your work-place, or you're at home and can't get to your phone in time, then it sucks to be you. If you call back, the customer service rep is likely in another "meeting" because they're job is to call as many clients as possible during the day, so you'll have to wait another week to talk to them, or even longer if you're considered to be a "slow pay."

To talk to an attorney or paralegal, you'll have to make it past the "gate-keepers" who screen all calls.

The point being, if you decide to file bankruptcy -- and some people should given their circumstances -- you would do well to go with a small law firm of 2-7 attorneys. Your team -- the attorney and a paralegal/legal assistant -- will see you through from beginning to end without changing hands 20 times, and they'll be more accessible and responsive to your needs and that alone is worth it.

If at some point you decide to cancel and not file bankruptcy, don't expect to get a refund on any money you paid toward your retainer, filing fee, or court costs.

I'll address 13s, 7s, and debt settlement in other posts.




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In response. . .

I do not take issue with your concerns over the use of mill firms.  Some are good and others are bad.  We have several such firms in my State that are under scrutiny by the bankruptcy court, but others do just fine.  The consumer needs to interview and research many attorneys before making a choice.  If it is a "simple" case, a good mill firm may be just fine.  We get plenty of referrals from the good ones.  A good mill firm will recognize a case that is not "cookie-cutter" and send it to a firm more suited to handle it.

I do take issue with this:


“Congress limits what attorneys can charge for preparing a bankruptcy petition. . .”

This comment is absolutely false.  Congress has nothing to do with what an attorney can and cannot charge.  That is up to the free market with oversight by bankruptcy court judges.  A Chapter 7 is typically less expensive than a Chapter 13, as a Chapter 7 is over in about 4 months.  Chapter 13s run 36 to 60 months.  What attorney in his/her right mind would agree to represent someone for up to 5 years for a mere $2,000?  Certainly not me. Further, some bankruptcy courts have set what is called a “no-look fee" for Chapter 13s.  If an attorney charges more than such a fee, the attorney must file a fee application and it is up to the judge (not Congress) to determine the reasonableness of fees.

I also take issue with this:


“If at some point you decide to cancel and not file bankruptcy, don't expect to get a refund on any money you paid toward your retainer, filing fee, or court costs.”

If a client elects to “fire” the attorney, the client is entitled to the return of any unearned retainer and the return of court costs that have not been paid out.  Certainly, the law firm is entitled to be paid for the time it put into the file before it was “fired” (we don’t work for free - nor should we be expected to work for free).  Further, if the client takes issue with the amount of funds returned, he/she can call the State Bar for assistance.  



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