The Practice Of Bankruptcy Law – Adapting To The New Normal

road in mountains

If you’re a bankruptcy lawyer and expect filings to return to the way they were, it’s time to readjust your expectations. It’s never going to be the way it was. In fact, it hasn’t been that way for over 8 years.

For the first decade of my bankruptcy practice, you could set tell the time of year by the balance of my bank account and the flow of new clients through my doors.

From mid-January through mid-May, the clients came for help. They paid their legal fees with tax refund money, and my office was busy. Things slowed the week prior to Memorial Day, and typically remained a bit low from them until Independence Day.

July was a lean month, but things picked up a bit in the beginning of August. Then things went quiet again until after Labor Day, which is when the phones began to ring off the hook until Thanksgiving. From Thanksgiving until the second week in January, we wrapped up loose ends and cleaned the office.

The bankruptcy law changed in 2005, so that was a crazy year in terms of filings. But as of October 17, 2005 the practice of bankruptcy law as we knew it changed forever.

Welcome To The New Normal

You will probably argue that 2008-2012 were the typical boom in bankruptcy filings, but you’d be incorrect. Those years represented the byproduct of a catastrophic economic situation the likes of which our country hasn’t seen since The Great Depression. We weren’t seeing a rebound in bankruptcy filings, but rather a group of people filing who would never have considered doing so in the absence of the housing market meltdown.

For example, look at your client base in 2004. Now look at your clients in 2011. I’m going to bet that they looked a lot different in terms of income levels and complexity of problems.

That’s because the people who needed our help before 2005 don’t need us anymore. They don’t have a stack of credit cards, and those who do simply don’t have the ability to afford legal fees that are twice or three times as high as they were before the bankruptcy laws changed.

We didn’t notice it because in 2008 we started dealing with a new breed of client – the person who would have been able to get by had the bottom not dropped out of the economy in such a drastic and sudden manner.

Now the economy is recovering, and that new breed of client no longer needs us. They’re getting back to work, and either no longer own a home or hung on long enough to make it work. They don’t have any retirement savings left, but that’s not a debt issue.

“Wait And See” Isn’t Going To Cut It

You’re tempted to tell me I’m wrong, that all we need is some good old-fashioned credit expansion in the hands of the American consumer to bring the bankruptcy filing numbers up to where they were. Hold on for a few more months and we’ll be just fine.

I’d love it if you were right, but you’re not. And if you look at the numbers, Professor Bob Lawless agrees with me. Lawless did a chart on Credit Slips in November 2013 showing the number of people per capita who have filed for bankruptcy in the period of 2008-2013. Here’s his chart (reproduced without permission, but I can’t figure out whether the University of Illinois permits reproduction of charts such as these. If not, I’m sure Professor Lawless will contact me):

Second Derivative Bankruptcy Filings Rate

The 12-month moving average on bankruptcy filings is 3.34 per 1,000 persons. The last time it was this low was in 1995, when I started practicing (and, interestingly enough, right after the law changed to the one in use prior to the 2005 Act).

In 1995, we were coming out of a recession that hadn’t wiped out the retirement plans of millions of people, nor had as many lost their homes and savings to a foreclosure meltdown that left the population distrustful of the entire financial system. We’d taken some lumps, but weren’t battered and bruised. We started buying houses and took out credit cards.

Because It’s Different This Time

Total household debt, though rising, is 9.1% below 2008 levels.

Foreclosures are at the lowest level since 2005, and many parts of the country have begun to see a stabilization of property values. In New York City, San Francisco and some parts of Southern California, values are going up quickly.

But US home sales are declining, down 5.1% in January 2014 after investors came in and snapped up cheap properties in the latter part of 2013.

Let me be clear – the rush of bankruptcy filings you need to keep your doors open is not coming. Not now, not soon, and perhaps not for many years if at all.

You Have Choices

If you want to survive in The New Normal, you’ve got to:

  1. Hone your skills by attending – and paying attention at – events such as the annual convention for the National Association of Consumer Bankruptcy Attorneys;
  2. Include other complementary areas of practice such as student loan law, FDCPA, FCRA, or collection lawsuit defense;
  3. Reduce your overhead through the use of technology, outsourcing and increased productivity so you need less income to get by;
  4. Learn how to bring in business by strengthening your online and offline networking and promotional efforts (a good place to start is my Google+ video course);
  5. Remember that you can invest money or time – but that success doesn’t come unless you are willing to do one or the other;
  6. Treat your law practice as a business rather than using a, “build it and they will come,” mentality; and
  7. Recognize the importance of outstanding client service in an era of online reviews and increased word-of-mouth.

You do have a choice. If you’re not up for the challenge of The New Normal, you should consider an exit strategy from the practice of consumer bankruptcy law. Because for the foreseeable future, you won’t be able to feed yourself without making these changes.

My greatest impact in the foreseeable future is to be a voice in this industry, to help make it easier for you to thrive in The New Normal.

I’m not necessarily in favor of more people needing to file for bankruptcy though; behind each filing is a person, and bankruptcy is never a happy decision to make. Rather, I’m in favor of giving help to more people who what bankruptcy provides. To greater public education. And to more effective ways of reaching those who need us most.

It’s not easy, though it is simple. And it’s not an overnight formula. But it’s effective, and it’s profitable.


Mixed Messages And New Client Calls

mixed messages

In the world of bankruptcy law, it’s common for new clients to dial one lawyer after another until someone picks up the phone.  That firm will usually get the client, or at least the first crack at the new business.

Each time the phone rings, there’s a prospective new client on the other end of the line.  Someone who needs help from you, and who has come to you for a solution to their problems.

Want to win the client’s heart and mind? Just pick up the phone when it rings.

If you don’t answer, you’re telling the world that you’re closed.  This, in spite of the fact that your marketing likely tells people to call you.

That mixed message can kill your practice.

It’s not always possible for someone to be on the other end of the line – bathroom breaks, lunch, evenings and weekends are just some of the times when picking up the phone may not be practicable – but that should be the exception rather than the rule.

Make sure all of your employees are trained in how to effectively deal with a new inquiry.  If need be, hire an assistant on Elance or oDesk to field overflow calls. Even an answering service is a viable, albeit secondary, option.

Think it’s expensive to hire and train an extra set of ears and hands to field new client calls?

It’s far more costly to go the other way.

Debunking The The Great Content Arms Race Myth

content arms race

When I was a kid, it was all about the United States and the dreaded USSR. Bombs on top of bombs, rhetoric and fist-shaking made for an uneasy future.

Now it seems as if the arms race is one of content, at least in terms of business. And it’s just as scary for lots of attorneys.

We’re urged to blog, do videos, tweet, post, plus, like, and on and on.

Spill your guts to the Internet, and the Internet will reward you richly.

The competition is coming up in the rearview mirror, and you’ve got to either move out of the way of get run over.

Better hurry up.

The problems with this line of logic are as follows:

  • most of the lawyers who are creating content of any sort are doing little more than regurgitating the basics of their field of law;
  • most legal content is so chillingly boring that I can’t imagine anyone wanting to read or watch it;
  • the few lawyers who are doing an awesome job of it are likely not practicing in your neck of the woods;
  • in spite of the best efforts of the online marketing squad, there’s nobody teaching lawyers the specifics on how to write online in such a way that makes people even a little interested in what they have to say.

Everyone worries about being found by Google, but more people are finding content by way of their social circles these days than ever before.

If you can’t write for your audience, nobody’s going to pass along your work. Doesn’t matter how lovely your blog looks, or how well lit your videos are.

So as you can see, it’s not such a big race after all. The hill isn’t too steep to climb, and you can topple the giants more readily than you may think.

All you need to do is start.

Shine A Light, Reflect It Back

Idée de génie
Solo lawyers and small practitioners are selfish when it comes to clients. Clients are finite, and hard to come by. So we horde them.

Online, we horde every bit of traffic we can get. Our blog posts reference our other posts, our videos talk solely about our firm. Social media is filled with our stuff or, sometimes, articles in newspapers and other mass-market resources.

We fail to recognize that there’s good work out there being done by others.  Information is being provided by other attorneys in our field, and it’s useful for our potential clients.

But rather than link to that other stuff, we choose to ignore it. Because we’re afraid that our clients will click the link and be taken to another lawyer’s site – and, therefore, to the other attorney’s office.

But consider this: people who find your website are likely searching for information in a variety of place.  If someone finds another lawyer’s information and you’re not referencing it as well, they may wonder why you’re not doing so.

Are you uninformed? Disconnected from the rest of the profession?

Those questions plague the visitor to your site, if not overtly then on a deeper level.

If you refer to good work done by others then that light will reflect back on you.  You look like a hero, well informed and willing to give good information to your potential client regardless of the source.

You become the benevolent stranger, providing assistance even if it provides you with no benefit. That makes people more likely to work with you; after all, people would rather deal with someone who has shown that they have the client’s best interests at heart rather than their own profit motives.

Why not?

To Raise Your Income, Raise Your Value

The day is capped at 24 hours. The best way to make more money is for clients to place a higher value on each one of those hours.

Golden Bars 3D render

A few weeks ago I needed to clear out my garage. I knew it would take me about 4 hours to get it done, and that the only way I could make it happen would be to take time away from client work.

Some quick calculations yielded the conclusion that I needed to hire someone to clean my garage.  $40 later, I had a clean garage. In the time it took for the work to be done, I picked up two new Chapter 7 bankruptcy clients.

Truly, the person I hired for $40 delivered an incredible amount of value to me. [Read more...]