Bankruptcy Clients Earn More Than Bankruptcy Judges or Bankruptcy Lawyers!
Written by Charleston Bankruptcy Lawyer, Russell A. DeMott
Bankruptcy clients earn more money than bankruptcy lawyers. And in some cases, they earn more than bankruptcy judges.
Now I know some of you are convinced I’ve officially gone off the deep end. But it’s true. (And I’m referring to the statement about earnings, not me going off the deep end!)
If you owe me $200,000 and I say, “you don’t owe it; it’s forgiven,” that’s income. Just ask any IRS agent if you don’t believe me. However, in bankruptcy, there’s an exception to this. Discharge of indebtedness through bankruptcy is not considered income.
Still, let’s face it, if you file bankruptcy and rid yourself of $200,000 of debt, it’s like getting $200,000 tax free. And that’s more than bankruptcy judges earn. Their pay is low considering their experience–they’ve usually practiced for 20-30 years prior to becoming judges–and the fact that they could work for large law firms earning considerably more money. I’d also bet that the average bankruptcy judge works no less than 60 hours a week and frequently up to 80 hours a week. And bankruptcy lawyers, on average, earn far less than $160,000. And we work hard, too! I put in at least 60 hours a week.
What’s Your Point?
My point is that, as a debtor, you’ll get more out of the system than your bankruptcy judge, your bankruptcy lawyer, or anyone else who works in the bankruptcy system. If I file your bankruptcy, I’ll be doing you a whole lot more good than you’ll do me. I might get a fee of $2000 or $3000, perhaps more if your case is complicated. Those of you who run businesses know I don’t keep all that. I must pay staff, health insurance (ugg!), rent, software, computer hardware, and a myriad of other operating expenses before I get a dime. And after all that, I obviously pay federal, state, and local taxes on that money. I’m thankful for the fee, of course, but there are a lot of hands outstretched who want a cut of that money before I see any of it.
What About Me?
But as for you, you’ll rid yourself–tax free-of your debts. Obviously, the amount of debt clients discharge varies. For some clients, it’s relatively low–$50,000 for example. For others, however, they discharge over a million dollars in debt. Some discharge several millions.
Keep the huge benefit you’re getting in mind when you respond to requests for information from your bankruptcy lawyer. Our new Bankruptcy Code, BAPCPA (“Bankruptcy Abuse Prevention and Consumer Protection Act“), imposes many needless homework assignments on debtors. Because of this, your bankruptcy lawyer must get your tax returns, pay stubs, bank statements, and many other pieces of information. And if you have a complicated situation–say you run a business, or two, or three–that adds to the documentation required.
Through all this keep in mind that it’s you, not your lawyer, your judge, your trustee, or the court clerks who gain the most from this process! Think about how much you “earn” by going through this. If you have a messy case and work on it 60 yours (which would be rare), how much are you earning per hour? Let’s say you discharge $500,000 of debt. That’s over $8,300 per hour worked on your case! And that ain’t bad! By the way, if anyone wants me to do some legal work for them at $8,300 an hour, please, please contact me!
Think of the Bankruptcy Process as Another Job
Treat this as another job. Do the job right! Get your lawyer what he asks for. Respond to his calls and emails. Completely fill out the forms he gives you. When you come in with empty forms, your bankruptcy lawyer wants to bang his head against the wall. After that urge passes, he’ll calm down and figure you don’t care, can’t follow instructions, and that he’ll need to charge you more for all the extra, needless work he’ll need to put into your case. As President Abraham Lincoln said, “A lawyer’s time and advice are his stock in trade.” And if you must take more stock, you’ll be charged for it. (Side note: Lincoln had a very large bankruptcy and debt collection practice.)
I recently had a client in my Charleston bankruptcy practice who was so cooperative and organized that I reduced my fee by $1500. He had a business case but was a pleasure to deal with, and he saved himself $1500. (And this was my idea, not his. He didn’t even have to ask.) However, I’ve also had clients where I’ve charged significantly more because their work was so sloppy and careless. So do yourself a favor and keep this process as pain-free as it can possibly be! It might even save you some money.
Don’t get me wrong. I’m not making light of your situation or trying to be insensitive. I’ve never met anyone who gleefully filed bankruptcy. It’s a last resort, and it’s emotionally painful. I keep a box of tissues in my office for a reason: clients regularly use them. But don’t forget to keep the big picture in mind. Bankruptcy benefits you the most. And that’s what it’s there for: To give the “honest but unfortunate debtor a fresh start.” And don’t forget: Your bankruptcy lawyer will do more for you than you’ll ever do for him in return!
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