As a new law takes effect this week, an updated look at the benefits and risks of filing without a lawyer
October 15, 2005, 8:30 PM EDT
Already mired in debt, Charles Holmes decided against adding yet another bill to his pile. So, he filed for bankruptcy without hiring an attorney.
"I can't afford a lawyer," said Holmes, 62.
A series of expensive repairs for a tractor-trailer the Brooklyn resident used in his work helped cause a run-up of debt, including credit card bills of about $11,000, Holmes said. So, on Tuesday, he asked his daughter to deliver the forms to U.S. Bankruptcy Court in the borough, the beginning of his quest to eliminate many of his debts.
The course Holmes chose reflects a drive toward legal self-help, with many consumers seeking assistance that stops short of hiring a lawyer. Their options include buying a guide, turning to a nonprofit organization, as Holmes did, or paying a for-profit form-preparation service.
One Berkeley, Calif.-based company, Nolo Press, says on its Web site (www.nolo.com) that it sells "affordable, plain-English books, forms and software on a wide range of legal issues." Those issues include wills, taxes, real estate -- and bankruptcy.
An overhaul in federal bankruptcy law that takes effect Monday has increased the attention given the recourse consumers seek through a Chapter 7 filing to eliminate many "unsecured" debts, including most credit card bills, or a Chapter 13 filing to arrange a creditor-payment plan.
Information, not advice
Nolo plans to start selling a guide to the new law next month, but a disclaimer on the Nolo site hints at the controversy surrounding self-help in legal matters. The disclaimer says, "Legal information is not the same as legal advice"; it recommends consulting with a lawyer "if you want professional assurance that our information, and your interpretation of it, is appropriate to your particular situation."
Attempting to file without representation would be foolish, said Heath Berger, a lawyer with Steinberg, Fineo, Berger & Fischoff in Woodbury. In a Chapter 7 proceeding, he said, a filer's treasured possessions could be at risk for sale to satisfy debts, depending on the circumstances. "If you're not versed in the exemptions or the law," he said, "you could end up losing your assets. You could lose your house; you could lose your car."
And if the price quoted by a lawyer isn't right for you, Berger said, "Look for somebody who is competent in a price range you can afford."
Travis Plunkett, legislative director of the Consumer Federation of America, an advocacy group based in Washington, D.C., said doing without legal help may work for some consumers "when the issues are fairly cut-and-dried."
But Plunkett has concerns about doing without representation, particularly in bankruptcy, with a new law adding new issues.
Creditors' new advantage
The new law, he said, strengthens the hand of creditors who seek dismissal of a bankruptcy petition "because of technicalities like not submitting the right paperwork at the right time. I'd say that at this moment it's fairly risky for consumers to represent themselves [in bankruptcy]."
The new law will likely mean higher legal fees, because of added responsibilities and costs. "I know prices are going to go up," Plunkett said. "Whether some lawyers take advantage and charge an arm and a leg, we'll be looking out for that."
Consumers who cannot afford normal legal fees may be able to take advantage of programs that offer a lawyer's help at a reduced cost or no charge, the advocate said. One such service is a project of the nonprofit Nassau-Suffolk Law Services Committee, which offers the help of volunteer lawyers to consumers in the two counties who want to make a Chapter 7 filing and qualify for the free assistance based on their income and other criteria.
To use the service, the annual household income of a family of four cannot exceed $24,188, for instance, according to Miriam Pismeny, managing attorney for the project. (For information, call 631-232-2400 in Suffolk and 516-292-8299 in Nassau, 9 a.m. to 5 p.m. weekdays.) The program does not cover court filing costs for a Chapter 7, which will rise Monday from $209 to $274.
Apart from such programs, the average fee for "a simple, no-problem" bankruptcy is about $800 to $1,000, excluding court filing costs, according to Joseph Hurley, clerk of the Bankruptcy Court for the Eastern District, which covers Nassau, Suffolk, Queens, Brooklyn and Staten Island.
Most debtors in the district pay for legal representation in bankruptcy, but court records show that many do not. In the 12 months ended Sept. 30, according to data provided by Bill Milkman, administrative analyst for the court, 20 percent of 26,600 Chapter 7 bankruptcy filers made their submissions without hiring a lawyer. The percentages by county were: 9 percent in both Nassau and Suffolk, 17 percent in Staten Island, 22 percent in Queens and 26 percent in Brooklyn.
Hurley said that while the figures may mask instances in which the hiring of a lawyer is not recorded, basic economics offers one explanation for decisions like the one made by Holmes. "They don't have the money to pay an attorney," said the court official.
One man's quest
Holmes decided against hiring a lawyer when one quoted him a price of about $1,500, he said; fees vary markedly, based on such factors as complexity and the volume of cases a lawyer handles. Holmes next turned to the Coalition for Consumer Bankruptcy Debtor Education (www.debtoreducation .org), a nonprofit based at New York Law School in Manhattan. The group is mentioned on the Web site of the Bankruptcy Court for the Eastern District (www.nyeb.uscourts.gov/debt or_education.htm).
Under the supervision of Keith Walsh, a 2004 graduate of Rutgers Law School, students of New York Law School and Fordham Law School answer questions at no charge about filling out bankruptcy forms. But they do not offer legal advice.
The service assists those who come to the small office it staffs from 9 a.m. to noon and 1 to 4 p.m. Wednesdays and Fridays on the first floor in the Bankruptcy Court at 271 Cadman Plaza E. in Brooklyn. (For further information, call 212-431-2100, ext. 4412, to leave a message.)
Information only
But the service does not provide bankruptcy forms, and no reservations are accepted, so debtors must visit and wait for a law student to be available. Walsh said two students drawn from a pool of volunteers are usually in the office.
"Our goal," Walsh said, "is to help them understand these forms and the bankruptcy-filing process. They come in with this pile of paperwork, and they don't understand how to get through it. Unfortunately, a lot of these forms are written in legalese."
Walsh, 47, offered this illustration of what can be done through this service: If debtors want to know the difference between a Chapter 7 filing and a Chapter 13 filing, he said, "I can explain that. If they ask, 'Which is better for me?' I can't do that."
He added that some home.owners ask if they could lose their house in a Chapter 7. "The answer is, 'It depends,'" he said. "You should see a lawyer. We stay below the bar of giving any legal advice or any recommendations."
In some cases, federal officials have alleged that a company that charges fees for preparing documents for legal matters, including bankruptcy, has gone too far. One suit by the U.S. trustee offers an example of other legal actions against We The People Forms and Service Centers USA Inc.
Service on the defense
The Berwyn, Pa.-based chain has about 175 franchises and company-owned stores in 32 states, including three franchises on Long Island and 28 company-owned stores in the five boroughs.
That suit, pending in Manhattan, seeks an injunction against allegedly illegal practices and asserts that the company didn't just prepare documents but also gave legal advice, which was beyond the scope of its permissible services. Further, the suit charges that the advice was "often detrimental" to debtors, causing some to place their assets at risk.
Jason Searns, general counsel for the We The People USA chain, argues that the suit stemmed from disagreement over what the company could do.
"We do not permit our stores to give legal advice," he said. "I anticipate that we will come to a full and satisfactory resolution [with the U.S. trustee] that takes into account the concerns of both sides."
With Monday's implementation of the new bankruptcy law, the company will prepare Chapter 7 filings, but not Chapter 13s, and for now will continue its charge of $199 for the basic service, Searns said.
At the offices, customers get a workbook to be filled out with the information necessary for a bankruptcy filing, the company lawyer said.
The workbook is then sent to a central processing center in Salt Lake City, where the data is recorded and sent back electronically to the store as a bankruptcy petition to be given to the customer for filing, he said.
"Ninety-nine percent of the bankruptcies that come into us," Searns said, "are very simple."
One franchise owner, Cheryl Zeranti, executive director of an office in Lake Ronkonkoma, added that most of the debtors who come to her store haven't talked to an attorney. "These people are very desperate," she said. "If they had money for an attorney, they probably would get an attorney."
October 15, 2005, 8:30 PM EDT
Already mired in debt, Charles Holmes decided against adding yet another bill to his pile. So, he filed for bankruptcy without hiring an attorney.
"I can't afford a lawyer," said Holmes, 62.
A series of expensive repairs for a tractor-trailer the Brooklyn resident used in his work helped cause a run-up of debt, including credit card bills of about $11,000, Holmes said. So, on Tuesday, he asked his daughter to deliver the forms to U.S. Bankruptcy Court in the borough, the beginning of his quest to eliminate many of his debts.
The course Holmes chose reflects a drive toward legal self-help, with many consumers seeking assistance that stops short of hiring a lawyer. Their options include buying a guide, turning to a nonprofit organization, as Holmes did, or paying a for-profit form-preparation service.
One Berkeley, Calif.-based company, Nolo Press, says on its Web site (www.nolo.com) that it sells "affordable, plain-English books, forms and software on a wide range of legal issues." Those issues include wills, taxes, real estate -- and bankruptcy.
An overhaul in federal bankruptcy law that takes effect Monday has increased the attention given the recourse consumers seek through a Chapter 7 filing to eliminate many "unsecured" debts, including most credit card bills, or a Chapter 13 filing to arrange a creditor-payment plan.
Information, not advice
Nolo plans to start selling a guide to the new law next month, but a disclaimer on the Nolo site hints at the controversy surrounding self-help in legal matters. The disclaimer says, "Legal information is not the same as legal advice"; it recommends consulting with a lawyer "if you want professional assurance that our information, and your interpretation of it, is appropriate to your particular situation."
Attempting to file without representation would be foolish, said Heath Berger, a lawyer with Steinberg, Fineo, Berger & Fischoff in Woodbury. In a Chapter 7 proceeding, he said, a filer's treasured possessions could be at risk for sale to satisfy debts, depending on the circumstances. "If you're not versed in the exemptions or the law," he said, "you could end up losing your assets. You could lose your house; you could lose your car."
And if the price quoted by a lawyer isn't right for you, Berger said, "Look for somebody who is competent in a price range you can afford."
Travis Plunkett, legislative director of the Consumer Federation of America, an advocacy group based in Washington, D.C., said doing without legal help may work for some consumers "when the issues are fairly cut-and-dried."
But Plunkett has concerns about doing without representation, particularly in bankruptcy, with a new law adding new issues.
Creditors' new advantage
The new law, he said, strengthens the hand of creditors who seek dismissal of a bankruptcy petition "because of technicalities like not submitting the right paperwork at the right time. I'd say that at this moment it's fairly risky for consumers to represent themselves [in bankruptcy]."
The new law will likely mean higher legal fees, because of added responsibilities and costs. "I know prices are going to go up," Plunkett said. "Whether some lawyers take advantage and charge an arm and a leg, we'll be looking out for that."
Consumers who cannot afford normal legal fees may be able to take advantage of programs that offer a lawyer's help at a reduced cost or no charge, the advocate said. One such service is a project of the nonprofit Nassau-Suffolk Law Services Committee, which offers the help of volunteer lawyers to consumers in the two counties who want to make a Chapter 7 filing and qualify for the free assistance based on their income and other criteria.
To use the service, the annual household income of a family of four cannot exceed $24,188, for instance, according to Miriam Pismeny, managing attorney for the project. (For information, call 631-232-2400 in Suffolk and 516-292-8299 in Nassau, 9 a.m. to 5 p.m. weekdays.) The program does not cover court filing costs for a Chapter 7, which will rise Monday from $209 to $274.
Apart from such programs, the average fee for "a simple, no-problem" bankruptcy is about $800 to $1,000, excluding court filing costs, according to Joseph Hurley, clerk of the Bankruptcy Court for the Eastern District, which covers Nassau, Suffolk, Queens, Brooklyn and Staten Island.
Most debtors in the district pay for legal representation in bankruptcy, but court records show that many do not. In the 12 months ended Sept. 30, according to data provided by Bill Milkman, administrative analyst for the court, 20 percent of 26,600 Chapter 7 bankruptcy filers made their submissions without hiring a lawyer. The percentages by county were: 9 percent in both Nassau and Suffolk, 17 percent in Staten Island, 22 percent in Queens and 26 percent in Brooklyn.
Hurley said that while the figures may mask instances in which the hiring of a lawyer is not recorded, basic economics offers one explanation for decisions like the one made by Holmes. "They don't have the money to pay an attorney," said the court official.
One man's quest
Holmes decided against hiring a lawyer when one quoted him a price of about $1,500, he said; fees vary markedly, based on such factors as complexity and the volume of cases a lawyer handles. Holmes next turned to the Coalition for Consumer Bankruptcy Debtor Education (www.debtoreducation .org), a nonprofit based at New York Law School in Manhattan. The group is mentioned on the Web site of the Bankruptcy Court for the Eastern District (www.nyeb.uscourts.gov/debt or_education.htm).
Under the supervision of Keith Walsh, a 2004 graduate of Rutgers Law School, students of New York Law School and Fordham Law School answer questions at no charge about filling out bankruptcy forms. But they do not offer legal advice.
The service assists those who come to the small office it staffs from 9 a.m. to noon and 1 to 4 p.m. Wednesdays and Fridays on the first floor in the Bankruptcy Court at 271 Cadman Plaza E. in Brooklyn. (For further information, call 212-431-2100, ext. 4412, to leave a message.)
Information only
But the service does not provide bankruptcy forms, and no reservations are accepted, so debtors must visit and wait for a law student to be available. Walsh said two students drawn from a pool of volunteers are usually in the office.
"Our goal," Walsh said, "is to help them understand these forms and the bankruptcy-filing process. They come in with this pile of paperwork, and they don't understand how to get through it. Unfortunately, a lot of these forms are written in legalese."
Walsh, 47, offered this illustration of what can be done through this service: If debtors want to know the difference between a Chapter 7 filing and a Chapter 13 filing, he said, "I can explain that. If they ask, 'Which is better for me?' I can't do that."
He added that some home.owners ask if they could lose their house in a Chapter 7. "The answer is, 'It depends,'" he said. "You should see a lawyer. We stay below the bar of giving any legal advice or any recommendations."
In some cases, federal officials have alleged that a company that charges fees for preparing documents for legal matters, including bankruptcy, has gone too far. One suit by the U.S. trustee offers an example of other legal actions against We The People Forms and Service Centers USA Inc.
Service on the defense
The Berwyn, Pa.-based chain has about 175 franchises and company-owned stores in 32 states, including three franchises on Long Island and 28 company-owned stores in the five boroughs.
That suit, pending in Manhattan, seeks an injunction against allegedly illegal practices and asserts that the company didn't just prepare documents but also gave legal advice, which was beyond the scope of its permissible services. Further, the suit charges that the advice was "often detrimental" to debtors, causing some to place their assets at risk.
Jason Searns, general counsel for the We The People USA chain, argues that the suit stemmed from disagreement over what the company could do.
"We do not permit our stores to give legal advice," he said. "I anticipate that we will come to a full and satisfactory resolution [with the U.S. trustee] that takes into account the concerns of both sides."
With Monday's implementation of the new bankruptcy law, the company will prepare Chapter 7 filings, but not Chapter 13s, and for now will continue its charge of $199 for the basic service, Searns said.
At the offices, customers get a workbook to be filled out with the information necessary for a bankruptcy filing, the company lawyer said.
The workbook is then sent to a central processing center in Salt Lake City, where the data is recorded and sent back electronically to the store as a bankruptcy petition to be given to the customer for filing, he said.
"Ninety-nine percent of the bankruptcies that come into us," Searns said, "are very simple."
One franchise owner, Cheryl Zeranti, executive director of an office in Lake Ronkonkoma, added that most of the debtors who come to her store haven't talked to an attorney. "These people are very desperate," she said. "If they had money for an attorney, they probably would get an attorney."
leaves them at the tender mercies of the statute of limitations for debts -- and, it pushes them even further out in the cold! Thank you, Mr. Bush!
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