Consumer Bankruptcy Practices and Alternative Practices

by Derek Loosvelt | March 10, 2009

Consumer bankruptcy practices

In many ways, the most business-like of all practices is consumer bankruptcy, regardless of whether it is Chapter 7 or Chapter 13. These are volume practices; consumer bankruptcy attorneys file 50, 100, even 150 petitions a month. Many general practice attorneys devote substantial time to consumer bankruptcy work, and many bankruptcy boutique firms have consumer bankruptcy departments. Many practitioners, however, focus solely on consumer bankruptcies, supervising well-run ships of attorneys and paralegals to handle hundreds of cases.

These can be lucrative practices, and consumer bankruptcy attorneys are as much businessmen as lawyers, dependent on bringing in dozens of cases each month. Consumer bankruptcy cases are generally simpler and far less sophisticated than their corporate counterparts, with most cases substantially identical to the next, and usually without the nuances of corporate proceedings. This can obviously be a pro or con, depending on the interests of the particular practitioner.

Many consumer bankruptcy attorneys also enjoy that this is a "people practice," where attorneys can help actual individuals as opposed to large corporate entities. "It's the small claims court of the federal system, about consumers, your average Joe," says Los Angeles practitioner Leonard Pena. For the new attorney who wants to argue complex legal issues and represent industrial giants, this practice is not for them. For those who would happily trade treatise-like motions for a business-like practice and a client base composed of your "average Joes," in the words of one former consumer practitioner, a consumer practice might be ideal.

Alternative practices

Finally, many firms offer practices in the insolvency and reorganization world beyond pure bankruptcy. In particular, many so-called bankruptcy boutiques or insolvency departments, often with appropriately broader names such as "Workouts and Bankruptcies," also handle such restructuring and insolvency matters as:

  • Out-Of-Court Reorganizations Or Asset Sales: As discussed above, many struggling debtors opt for non-bankruptcy corporate transactions before -- and hopefully instead of -- bankruptcy. Many bankruptcy attorneys assist participants in the reorganization of debtors' debt and equity or corporate structure; renegotiation of credit facilities; or restructuring of debtors' assets, including asset sales. These are largely transactional processes, and are often a substantial component of the work in larger firm's bankruptcy and restructuring departments;

  • State Insolvency Procedures: Other firms work with debtors liquidating their assets via state law procedures, such as receiverships and assignments for the benefit of creditors. This is in particular the province of smaller firms, bankruptcy boutiques and sole practitioners, who represent smaller debtors with less complex issues for whom the bells and whistles of bankruptcy might be too costly or less necessary;

  • International Insolvency: Many large, international firms are involved in foreign and cross-border insolvency work. International practices present their own unique challenges, given the unique nature of each country's insolvency scheme. Whereas United States bankruptcy laws are "framed around the idea that businesses should stay alive," notes James Bromley, who devotes a substantial portion of his practice to international restructuring work, many foreign regimes only contemplate liquidation. These differences make international work intellectually challenging, requiring substantial teamwork between attorneys from different jurisdictions and enough creativity to massage conflicting bankruptcy regimes into place.

While few firms, departments or attorneys specialize in these areas, they are often one component of a practice, ranging from the bankruptcy boutique representing a significant number of receivers and assignees to a commercial financing attorney spending 30% of her time counseling debtors in the restructuring of their credit facility terms to an international firm's restructuring department devoting half it's time to international and cross-border insolvency work.

Filed Under: Finance


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