Are bankruptcy lawyers biased towards chapter 13?
Are Consumer Bankruptcy Attorneys Biased?
In my experience, absolutely not. In fact, consumer bankruptcy attorneys are among the most dedicated the legal profession has to offer, performing what is sometimes a thankless job for people who are under tremendous stress both financially and emotionally.
However, like any large group, there are areas that the consumer bankruptcy bar could certainly improve upon. A few months ago on this forum, Charlotte bankruptcy attorney, Jason Witt wrote an excellent post describing the added incentive for attorneys to put debtors in chapter 13 bankruptcy who may not belong there. Jason’s article makes a point that is certainly well taken and that consumers meeting with bankruptcy lawyers should keep in mind. The fact of the matter is that attorney’s fees for Chapter 13 bankruptcy are considerably higher than those charged for a chapter 7 case. Busy firms with hundreds and even thousands of chapter 13 cases in the pipeline receive a steady stream of revenue that is often the lifeblood of the office. As Jason points out:
Although a few debtors are no longer eligible to file Chapter 7 (due to BAPCPA) some attorneys are giving up too easy on whether they can find a way qualify clients to file Chapter 7, instead recommending they file Chapter 13. Although this might not necessarily sound like a bad thing, it can be for people with little or no reason to enter a long term debt repayment program.
Does Race Play a Factor in Chapter 13 Bankruptcy?
In addition to any financial motive, a new study suggests that there may be unconscious racial bias in the way that consumer bankruptcy attorneys counsel clients on their options when facing bankruptcy. Race, Attorney Influence and Bankruptcy Chapter Choice was written by Robert M. Lawless, a bankruptcy expert and law professor, and Dov Cohen, a psychology professor, both with the University of Illinois; and Jean Braucher, a law professor at the University of Arizona. The study concludes that blacks are twice as likely to file for Chapter 13 bankruptcy as are their white counterparts even assuming similarities in background, income and socio-economic status.
According to a New York Times story about the study:
A survey conducted as part of their research found that bankruptcy lawyers were much more likely to steer black debtors into a Chapter 13 than white filers even when they had identical financial situations. The lawyers, the survey found, were also more likely to view blacks as having “good values” when they expressed a preference for Chapter 13.
Prof. Lawless conducted his study using to distinct methods. First, with the help of the Consumer Bankruptcy Project, data was compiled from samples of actual bankruptcy case filings. An additional study was then done with a national random survey of bankruptcy attorneys. Although the number of cases studied wasn’t overwhelming, both studies confirmed that blacks were more likely to file chapter 13 bankruptcy than whites. It should be noted that the study stopped short of suggesting that the bias in recommending chapter 13 was deliberate.
We would love to hear opinions from bankruptcy attorneys in different jurisdictions. Are you seeing this trend? Do you agree or disagree with the study?
Image credit: WES Solutions
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