| In these times of economic woe, some Texas attorneys probably are wondering how difficult it would be for them to start practicing bankruptcy law. Before jumping into the world of adequate protection payments, §341 meetings and everything else found in Title 11 of the U.S. Code, here is some advice.
1. Take a bankruptcy CLE, then take another one. If the practice of law is full of potholes, then the practice of bankruptcy is full of punji pits. Think of all the intricacies of bankruptcy law as the sharpened sticks at the bottom of these traps. Miss one of the legion of deadlines, and the client loses valuable rights. File a petition without the debtor going through the required pre-petition credit counseling, and the judge will dismiss the case. Fail to timely object to a debtor's Chapter 13 plan that does not provide adequately for the treatment of a vehicle loan under 11 U.S.C. §1325(a)(9), and the creditor may lose thousands of dollars that otherwise would have been paid in the plan.
The U.S. Bankruptcy Code is not user friendly, and it does not lend itself to figuring out its intricacies alone. Even with help from experienced practitioners and diligent self-study, learning to practice bankruptcy law can be an intellectually humbling experience.
Finding a bankruptcy law mentor who can answer questions and give advice dramatically will shorten the learning curve for a new practitioner, with the added bonus of minimizing the chances of committing malpractice. Sitting in the courtroom gallery to observe a few docket calls in the local bankruptcy court also is useful. But, most importantly, a lawyer considering delving into bankruptcy law must take a couple of continuing legal education courses on bankruptcy law. The field has a host of interdependent rules and concepts, some of which are not connected intuitively. Attending a CLE will expose the would-be bankruptcy practitioner to a wide sampling of bankruptcy topics and, at a minimum, provide an idea of where to start looking in the code for answers to specific questions.
2. Polish people skills, as negotiations are critical. Bankruptcy law is not as black and white as many think. In fact, negotiations keep the process moving forward. I often have heard the bankruptcy process referred to as "Let's make a deal."
Take, for instance, a debtor who files a Chapter 7 case. The debtor has a car worth only half the amount of the note the car secures. The debtor would like to keep the car, but he cannot afford the payments at their current level. The bank does not want a 2002 Buick LeSabre with 95,000 miles. The debtor, who will soon have a Chapter 7 bankruptcy on his credit report, knows that it may be difficult to obtain another vehicle. Both parties have incentive to negotiate and reach a middle ground, somewhere between the value of the car and the amount of the note.
Another thing to consider is the impact of negotiations on the client's expenses. If an attorney is not able to reach an agreement with opposing counsel, then the judge must decide the issue at hand, which means a contested hearing and increased expense for the client. An attorney representing a bank who must have a contested hearing for every objection he files to the plan confirmation soon will find that the client, tired of paying large fees for seemingly simple cases, will take its business elsewhere.
Doing Business
A little known fact about bankruptcy is that it is not just for the bankrupt. In some situations it is easier to accomplish a business transaction under the Bankruptcy Code than outside of it. For example, a sale of assets in bankruptcy is much less likely to have any successor liability attached. If an asset purchaser can avoid becoming liable for the seller's obligations, bankruptcy may be the right choice. For example, imagine a client that wants to purchase the equipment of a business currently under investigation by the Environmental Protection Agency for allegedly transporting waste to an illegal dump site. If successor liability attached to the equipment sale, the purchaser could become liable to the EPA for the seller's prior conduct. If the deal occurs in the context of the seller's bankruptcy, the client could obtain the asset without also acquiring the seller's obligations. Because negotiations play such a big role in this kind of deal, an attorney interested in bankruptcy law should brush up on negotiating skills.
3. Be nice, the bankruptcy bar is a small world. The bankruptcy bar is relatively small. Litigators with a general practice probably can get away with occasionally being unnecessarily difficult. Unless there are only a handful of trial lawyers in the community, the odds are such lawyers will not have to deal with the same opposing counsel again.
That is not the case in bankruptcy practice, which is somewhat of a niche with relatively few full-time players. The attorneys involved often spend years dealing with the same opposing counsel over and over again. The best way to ensure a difficult path to a successful bankruptcy practice is to get branded a jerk early on. Negotiations will become difficult and time-consuming. Referrals will be slim to none. Also, the bankruptcy judge, who may have practiced in the jurisdiction before taking the bench and personally knows many of the practicing attorneys in the local bankruptcy bar, will hear rumblings about a new, uncooperative bankruptcy attorney in town. Nothing good will come of that.
Anyone considering a bankruptcy practice should do a lot of homework first. Just because any licensed attorney admitted to the applicable federal district court can file a bankruptcy pleading, that does not mean he or she should. Bankruptcy is a technical practice, replete with traps for the unwary and inexperienced. It also can be a rewarding practice, and with the current state of the economy, it can offer some highly coveted job security.
Harley Caudle is an associate with Sprouse Shrader Smith in Amarillo. His practice consists primarily of creditor representation in bankruptcy proceedings, creditors' rights and collections.
