Admittedly, I have mixed emotions about the sudden reversal the bankruptcy bill received in the House last night. While this bill would be one of the most repugnant acts passed by any Congress, since, well, the Fugitive Slave Act, it would benefit me enormously (see yesterday's post). Not only would there be more filings during the six month period leading into the date the law would take effect, but the law itself would add a necessary step in preparing all future filings, the consideration of means testing the debtor.

In most cases, the new law would require almost no additional work, as most people who file would still fall below (or could be shown to fall below, with some effective legal representation) the income standard imposed by Congress. But anything that could remotely complicate a filing will be justification for increasing the fees charged to clients, which (at least in L.A.) are closely monitored by the bankruptcy court and the appointed Trustee monitoring the case. Locally, the amount a debtor's attorney can charge a client in a Chapter 7 case ranges from $750 to $1500, and from $2000 to $2500 in Chapter 13 cases (the type of bk that WorldCom and Enron filed, a Chapter 11 reorganization, is much more rare, and is not really significant to this discussion). Anything higher than those amounts receive judicial scrutiny, and an attorney must be prepared to justify his receipt of any payments over that amount, an often time-consuming and expensive process. If the "reform" bill passes, it will obviously be much easier to charge a client between $2-3k for a Chapter 7, since thorough consideration of the means test will now be an important aspect of representing a client, not to mention fighting off credit card companies once the case is filed (which may justify even greater fees).

From the perspective of creditor's counsel, the "reform" has even sweeter consequences, since it introduces a new prospective client: the credit card company. For the most part, credit card companies take a relatively low profile in most cases under the current law, preferring to make occasional reaffirmation offers (which I generally advise clients to reject; why incur a new credit card debt that you can't discharge, when the whole point of filing was to acknowledge that you weren't able to pay off your debts) and non-dischargeability lawsuits, where the debtor is sued before the bankruptcy court on the claim that they incurred the debt through fraud, such as a false statement on a loan application, or the maxxing of a card in Vegas the day before the filing. Under the proposed new law, credit card companies are going to become players in just about every new case, and will need attorneys to represent them. Such as me.

Anyways, the "reform" is a bad law. Besides the fact that it would harm many consumers who got suckered in by the illusion of easy credit, bankruptcy law attracts many practitioners who are at the low end of the evolutionary scale for attorneys, in terms of their abilities or their ethics, and their clients could really get screwed. Hopefully, its opponents will marshal its efforts in the next month and find a way to kill it in the Senate, where a filibuster might still be possible if we can find 40 members who haven't whored themselves out to Visa or CitiCorp, and/or are fanatical enough about opposing abortion. And I will cheer them on, because sometimes not even I need the money that badly.