By Ryan C. Wood
There are many questions you can ask an attorney you are meeting with that can tell a lot about the attorney and what they are about. There is a little known question that I believe, in my humble opinion that can tell you a lot about the bankruptcy attorney you are meeting with. The question is: “What kind of software do you use to draft your bankruptcy petitions?” If the bankruptcy attorney does not use software or a computer program to draft bankruptcy petitions it is my opinion that you should probably not retain their services. Let me explain why.
The Chapter 7 Means Test and Chapter 13 Statement of Monthly Disposable Income are Complicated
I will start with the most important issue regarding not using bankruptcy petition preparation software. In 2005 Congress changed bankruptcy laws and created what is known as the Means Test and Chapter 13 Statement of Monthly Disposable Income. It is an attempt to use a formulaic approach to determine who is eligible to file a Chapter 7 bankruptcy and receive a complete discharge of their eligible debts and in a Chapter 13 how much someone has to pay back to their general unsecured creditors. Using software is just faster, is more accurate and the only way to go in my opinion.
The Means Test compares a bankruptcy filers six-month average gross income to the median income of the state they live in based upon the number of people in their household. In California for example the median income for a household of four is $78,150.00 a year or $6,513.00 per month. Then expenses are deducted from the average monthly gross income to figure out if there should be money left over to pay anything back to general unsecured creditors. Taxes and any repayment of secured debts or priority debts are factored in also. All of the local and national expense deductions are determined by the number of people in the bankruptcy filer’s household and increase accordingly. The higher the number of people in the household the higher the standard expense deductions will be. The standard expense deduction for food/apparel/personal care/misc. for a household of one is $583 a month while for a household of four the expense deduction is $1,482.00 per month. There are a number of categories of expenses that change based upon the number of people in your household and the expense deductions need to be accurate. If a bankruptcy attorney is not using software they have to manually do the math on at least ten categories of expenses to deduct. If the calculations are not accurate then the bankruptcy attorney may tell you that you do not qualify to file a Chapter 7 bankruptcy case according to the Means Test, but actually could qualify if the deductions were accurate. When using a petition software the deductions automatically increase accurately based upon the number of people in a household that is entered into the software program. The math is completed automatically for every expense category and there are no errors. On the other hand, if someone is just filling out the Means Test and Chapter 13 Statement of Monthly Disposable Income manually it is much more difficult to make sure all of the expense deductions are accurate for every category. Bankruptcy petition preparation programs also usually will automatically update the forms required in the jurisdiction the attorney is practicing in. The forms used must be current and the median incomes and various standardized expense deductions do change periodically.
Before retaining a bankruptcy attorney ask them what software they use to prepare bankruptcy petitions.
You Will Most Likely Be Charged Higher Bankruptcy Attorneys’ Fees
First and most important is the bankruptcy attorney will most likely charge you more money to represent you in your bankruptcy case. The whole point in using a computer program is to make the drafting of the bankruptcy petition accurate, easier and faster. Faster means less time and that should translate in paying lower attorneys’ fees. Given that all bankruptcy filers are having some sort of financial issue, who wants to pay more for filing bankruptcy than necessary? For some reason I have notice attorneys that do not actually practice bankruptcy law regularly charge more for their services than those of us who have more experience and regularly file cases. If you think you get what you pay for there are limits. I also cannot recommend retaining the services of an attorney charging $700 for a Chapter 7 case. That is just scary for so many reasons.
The Bankruptcy Attorney Probably Does Not Practice Bankruptcy Law Regularly
If the attorney is not using a bankruptcy petition preparation software then they do not file enough cases each year to justify the yearly cost of the software. This is not a good sign. You really do not want to use a bankruptcy attorney that does not file many cases each year. How many filed cases is a lot is not easy to answer though and it is a matter of opinion. Twelve or less in a year is not a lot. At the same time thirty-six or more is at least three a month, so that is not too bad. The attorney could be having a down year though and in their lifetime filed over a thousand bankruptcy cases. Again, not using petition preparation software is just an indication the attorney does not regularly practice bankruptcy law. I am sure there are some lawyers out there that do not use software and regularly file cases for clients. I am just of the opinion that they charge higher fees and the documents they file are not usually accurate.
You Need to Continually File Bankruptcy Petitions to Stay on Top of Changes
Things change and the only real way to stay on top of it is to practice regularly in an area of the law. There are certain expenses deductions that are no longer allowed due to decisions by the Ninth Circuit Court of Appeals and the Ninth Circuit Bankruptcy Appellate Panel. It is important to know what is allowed for the benefit of clients. Chapter 13 trustee’s regularly change their procedures and do not send out a newsletter to provide attorneys with the changes. You find out the changes as you file cases regularly and adjust accordingly.
The bottom line is you want to retain an attorney to file bankruptcy for you that knows what they are doing and that you are comfortable with.
