by Meg McKenzie Feist and Megan B. Felter
Our potential client is visibly nervous as we show her to the conference room where we will hold an initial meeting to discuss her financial situation. She looks alternately at us, the view out the window, the stack of invoices and bills she has brought with her, and her cell phone, which vibrates periodically to announce yet another creditor collection call. Following introductions, we ask simply, “What brought you here?” She is taken aback for a moment, obviously unused to the opportunity to offer her story without interruption. With some encouragement, however, she reveals the events and circumstances that brought her to our offices. Listening carefully, we realize that finances are but one aspect of the difficulties in her life, which include mental and physical disabilities and a history of having been physically abused. Unable to work, she relies on government benefits and feels powerless beneath the weight of her debts. By the end of the initial meeting, we have gathered the information necessary to determine whether we can represent her on a pro bono basis to consider debt relief, potentially through bankruptcy. As we walk her to the elevators and shake her hand goodbye, it is clear that she already feels a sense of relief. The rest is up to us.
The Volunteer Lawyers Project
Our experiences advising needy individuals on a pro bono basis with respect to their debt relief options under federal bankruptcy law have been deeply rewarding. In the greater Boston community, there exists a great need for lawyers to volunteer this service. Congress enacted bankruptcy laws to provide “honest but unfortunate” debtors with a “fresh start” from burdensome debts. For individuals who cannot afford a lawyer, however, this relief may be beyond reach. The Volunteer Lawyers Project (VLP) of the Boston Bar Association (BBA) facilitates access to justice by pre-screening and referring qualified individuals to a volunteer lawyer. The lawyer advises the individual in considering bankruptcy relief typically under Chapter 7, which is a court-supervised procedure by which a debtor receives a discharge of debts after his or her “non-exempt” property has been liquidated to pay creditors.
Individuals in Need
A volunteer lawyer can usually expect a pro bono case to have certain common features. First, most clients have very limited, often fixed, income. Some may be relegated to sporadic or part-time work after having lost a more stable job. Others may be forced to live on government benefits after becoming unable to work due to disability. Second, most clients have very limited assets. Typically, they do not own their homes and instead rent, sometimes with the assistance of a federal housing program. Although some clients own cars, many instead rely on public transportation. Indeed, in many cases, a client’s only assets may be clothing and household goods (e.g., bed, television, table, small appliances). These limited assets will likely be deemed “exempt” in the bankruptcy—that is, the client will be entitled to keep them instead of being forced to sell them to pay creditors. Finally, credit card debt is a common feature of most pro bono cases. Unsurprisingly, clients with limited income often use credit cards to make purchases when they do not have sufficient cash. Some clients may feel forced to use credit cards to pay for groceries at the end of the month or to cover unexpected expenses, such as car repairs. When a client misses a monthly payment, late charges and interest can quickly turn a modest balance into an unmanageable burden.
How Can Lawyers Help?
A volunteer lawyer may be able to assist a low-income debtor in finding a way out of overwhelming debt. At the initial meeting with the potential client, the lawyer must remember that the individual likely feels demoralized by his or her financial problems and anxious from creditors’ collection efforts. In many instances, the lawyer can help the situation initially simply by listening respectfully to the individual’s story.
The first step in any potential pro bono engagement is for the lawyer to check conflicts. Mindful of the high likelihood that a volunteer lawyer belongs to a law firm that in unrelated matters represents financial institutions who are creditors in the potential client’s bankruptcy case, the BBA in 2008 issued an ethics opinion analyzing conflicts in the unique context of bankruptcy. The opinion has served to encourage the participation of attorneys from large law firms in the VLP program and should be reviewed by attorneys seeking pro bono bankruptcy opportunities.
Once retained, the lawyer helps the client determine whether bankruptcy is appropriate and, if so, what type of relief is needed. At the outset, the lawyer must explain the benefits and burdens of bankruptcy. While the central goal of bankruptcy is to obtain a discharge of debts, bankruptcy also provides the benefit of the “automatic stay,” which is a federal injunction against all collection activity that takes effect when the petition is filed. The stay provides a debtor with a much needed “breathing spell” while dealing with his or her financial affairs. On the other hand, once a client obtains a Chapter 7 discharge, he or she is prohibited from obtaining additional Chapter 7 relief for the next eight years. Additionally, the bankruptcy filing can remain on a client’s credit report for up to ten years. Finally, some debts (e.g., taxes and student loans) are difficult to discharge in bankruptcy.
The lawyer must also counsel the client in selecting the appropriate type of bankruptcy relief. Under Chapter 7 of the Bankruptcy Code, a debtor’s “non-exempt” property is liquidated to pay creditors. In contrast, under Chapter 13 of the Bankruptcy Code, a debtor has the opportunity to protect his or her “non-exempt” property from the reach of creditors by paying defaulted debts over time through a repayment plan funded by the debtor’s excess income. Typically, a low-income debtor will opt for relief under Chapter 7 because the debtor does not have any “non-exempt” property to protect or because he or she does not have any excess income to fund a repayment plan.
Finally, the lawyer should be sensitive to the client’s non-legal concerns. For an individual debtor, the moral implications or social impact of walking away from debts may weigh as heavily in his or her decision as anything else. While there are no easy answers to these concerns, the lawyer should not underestimate their importance and should engage with the client in addressing them.
Following the decision to file bankruptcy, the lawyer helps the client complete and file the petition, which details the client’s assets, liabilities, income, expenses, and other financial information, and accompanies the client to the Section 341 meeting of creditors, at which creditors and the bankruptcy trustee are given the opportunity to ask the client questions before the bankruptcy court enters any discharge order. The lifespan of a typical Chapter 7 pro bono case is three to four months from initial interview to discharge.
An Enriching Experience
In our experience, helping low-income debtors obtain a “fresh start” in their financial lives through debt relief is its own reward. While we are happy to serve the community in this manner, we have also found that pro bono representation enriches our own experiences and careers. Particularly for developing attorneys, pro bono representation provides an opportunity to increase substantive legal knowledge, to sharpen client counseling skills, and to gain exposure in the local legal community. We are grateful for the VLP’s resources and support, which have afforded us these opportunities.
The BBA provides training for lawyers who would like to represent pro bono clients in Chapter 7 bankruptcy cases. For more information on opportunities with the VLP, please visit www.vlpnet.org.
Meg McKenzie Feist and Megan B. Felter are associates in the Finance & Restructuring Group at Choate, Hall & Stewart LLP in Boston.