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The Need for Specialized Bankruptcy
Paralegal Training

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The field of debtor bankruptcy has become more recognized recently compared to previous years.  One of the main reasons is because the rate of bankruptcy filings by the average consumer debtor has increased by almost 400% between the years 1980 through 2001.  According to the statistics provided by the American Bar Institute (ABI World), approximately 325,000 consumers filed bankruptcy in 1980.  However, in 2001, there were almost 1.6 million consumer filings.  Even if we look at the statistics on a much smaller scale, there was still a large percentage increase of almost 30% between the years 2000 and 2002 comparing the figures from the same 3-month quarter.  These figures result in an average number of 4,384 debtor bankruptcy filings per DAY across the United States and that number is expected to rise considerably in 2003.

What has caused this tremendous increase in bankruptcy filings?  Many attorneys have provided a variety of different viewpoints.  One attorney I interviewed claimed the increase is due to the current state of the economy.  He said that many Americans are unemployed, large industries are eliminating 1,000s of jobs and the “blue collar” market is slowly being eliminated.  Another attorney blamed the increase on credit card companies who push high-interest credit cards on people with poor credit.  These company’s bombard consumers with credit card offers on a daily basis and eventually the consumer “gives in” and gets in debt way over their head.  While another attorney not practicing in the area of debtor bankruptcy law blamed the increase solely upon the fact that some people simply do not know how to manage money.

In conducting research for this article, I found that a large majority of attorneys practicing outside the area of bankruptcy law held the major consensus that bankruptcy is normally considered a “low-end” type of law practice.  These attorneys basically felt that people who do not manage their money well or accept government assistance for their basic needs are considered to be people who are normally less skilled or less intelligent than successful people who do not file bankruptcy.  At least that was the general consensus until just recently.

However, when Enron “broke the mold” and filed bankruptcy, it showed the legal world that wealthy companies (ran by skilled and highly-intelligent people) are also examples of the type of people that file bankruptcy (and commit fraud also.)  In fact, other well-known companies have filed bankruptcy within the past 2 years.  These companies include: K-Mart, NextCard, HMO Lifeguard Insurance, PG&E, Conseco and United Airlines who filed the largest bankruptcy in U.S. history.

But Enron executives went a step further and fraudulently took advantage of the bankruptcy law.  Many of the top-level CEO’s purchased million-dollar homes in Florida so they could enjoy the benefits of the “unlimited” exemption allowance provided in the Florida bankruptcy state statutes.  In other words, they purchased a home in Florida, filed bankruptcy and were allowed to keep their home (regardless of the equity) simply because Florida allows an “unlimited” amount of equity to be exempted on any homestead so that it is not subject to be sold for the benefit of creditors.

The New Bankruptcy Reform Law

Because filing bankruptcy has increased so dramatically, and now that millions of people are being affected by these filings, the topic of bankruptcy has risen to new popularity.  Many of you have undoubtedly heard “bits and pieces” on the news regarding the proposed new bankruptcy laws.  I first learned about the possible changes back in 2000.  The bankruptcy attorney I was working for at the time held a special staff meeting to discuss the changes, which he felt would be signed into law in January of 2001. 

Nevertheless, these changes did not go into effect.  Although the new bankruptcy reform law was approved by the House and Congress, and was scheduled to take effect in March 2001 – both sides still had to iron-out a few discrepancies before the President signed the bill.  These discrepancies were supposed to be discussed and finalized in a general conference meeting scheduled for September 12, 2001.  However, as you know, the terrorist attacks on September 11 put a halt to that immediately.

By putting the bankruptcy reform law on the “back burner” this caused some people like Judiciary Chairman Patrick Leahy, to look at this as an opportunity to open up the legislation to a wide variety of other provisions ranging from identity theft to abortion clinic violence.  In fact, the subject of abortion clinic violence grew into such a large debate that it eventually killed the bill in July 2002 by the House of Representatives.  The debate was over whether people who were fined for protesting at abortion clinics could discharge their fines by filing bankruptcy. Although the provision was finally approved by the House with a minor change in language, it was still too late for action before the Senate and House adjourned for their August 2002 recess.

When the House reconvened and the bankruptcy bill came up for a vote on November 14, 2002, eighty-seven (87) Republicans balked over the provision that would have prevented anti-abortion protesters from gaining bankruptcy protection for fines incurred as a result of their protests. The critical vote, which came on a resolution over whether to consider the bill, went down to defeat by 243 to 172. The bill failed because of an unlikely coalition between the pro-life Republicans and 155 Democrats who believed the measure would be harmful to consumers. (Source: Hoover’s Online and ABI World.)

Now it is back to the drawing board for the bankruptcy reform law.  Coupled with the fact that President Bush believes there are more important things to worry about such as homeland security and terrorism insurance, tax relief, prescription drugs, energy legislation and approval of stalled judicial nominees, it appears that the current bankruptcy laws will remain in effect for some time without change.

The Need for Bankruptcy Paralegals is Increasing

With bankruptcy filings increasing by record-breaking proportions and at present it does not appear there will be an end to this rise any time soon -- many attorneys are adding a debtor bankruptcy practice to their law firms.  These attorneys in turn need paralegals skilled in the area of debtor bankruptcy law to assist them.  Unfortunately, since bankruptcy has not been a popular topic in the past, paralegals are not normally trained specifically in this area of law.  While bankruptcy is briefly covered in paralegal programs, more emphasis is placed on litigation, civil law and corporate matters.

Because of the lack of education offered to paralegals in the area of debtor bankruptcy law, many attorneys have taken the “inside” approach to personally training their paralegals in bankruptcy.  But simply learning from an attorney about bankruptcy law is not the education a bankruptcy paralegal needs for their day-to-day duties.  Additionally, many attorneys may have not practiced in this area before so it would be impossible for them to properly train their paralegals in the day-to-day skills they need.  The result for the paralegal often becomes a frustrating experience because they are forced to learn from their mistakes while on the job.  This causes additional work for the Bankruptcy Court who must catch these mistakes and the paralegal and attorney then have to fix the mistakes after being alerted to them.  However, if the paralegal had only been trained properly in the first place, these mistakes could have been avoided.

Education for the Paralegal

So what should you do if you find yourself in a position where the attorney you are working for decides to expand into the area of debtor bankruptcy?  Or, what if you are a paralegal interested in the area of bankruptcy and you are seeking to change careers?

The best education is to work with a bankruptcy attorney who solely specializes in the field as his or her only practice.  However, if you want to continue working for your present attorney, where do you turn to gain the hands-on training you need to become a qualified bankruptcy paralegal?  You can start your education with some excellent books published by Nolo Press specifically for educating paralegals.  These books include, “How to File for Chapter 7 Bankruptcy,” “Nolo Form Kit – Personal Bankruptcy,” and “Chapter 13 Bankruptcy – Repay Your Debts.”  To order simply call Nolo Press at 1-800-992-6656.

An excellent online training course (approved by the National Federation of Paralegal Associations (NFPA) is also available on the internet through The Center for Legal Studies at http://www.legalstudies.com/bankruptcy.html.  This seven-week course is designed to introduce paralegal students to the complexities of bankruptcy law. The course also provides paralegals working for attorneys who specialize in other areas of law with the knowledge they may need to assist their attorney with clients who receive notice of a bankruptcy.

Additionally there is a bankruptcy petition training CD available for paralegals at http://www.lawyerassistant.com/cds/index.html and an excellent bulletin board to network with other bankruptcy paralegals at http://www.creditinfocenter.com/discus/.  Just click on “discussions” and choose the subject of “bankruptcy” from the list.

However, these few references are all I could find on the internet for specific, basic education available to bankruptcy paralegals at the time this article is written.  While there are 100s of paralegal programs that incorporate the subject of bankruptcy into their curriculum, the knowledge you learn is limited and still does not provide you with the “hands on” training needed to become a bankruptcy paralegal.

This is an unfortunate matter that I believe needs addressed now.  That is why I developed a website that provides basic bankruptcy paralegal training to paralegals with experience in other areas of law.  (Go to http://www.lawyerassistant.com/training/ for this free online training.)

But the fact remains -- since many paralegals are pushing for new paralegal regulation, why shouldn’t they also have the opportunity to be skilled in specific areas of the law?  Nurses who wish to train in specialized areas normally have no trouble in locating specific classes to further their knowledge in various areas of the medical field – but paralegals do not have the same opportunity and are limited to the education they receive in general paralegal courses or through “on the job” training by other paralegals and/or attorneys.

Suggestion for Experienced Bankruptcy Paralegals

Other than going to your local Bankruptcy Court and requesting a copy of the local bankruptcy rules, which most inexperienced paralegals would have a hard time understanding – I encourage all experienced bankruptcy paralegals to look for ways to further the education of paralegals that have no bankruptcy experience.  In addition, you should contact companies who sponsor seminars and encourage them to offer more debtor bankruptcy classes geared toward the paralegal.  It might also help to contact your local bar association and encourage them to offer a bankruptcy paralegal class with training by a debtor attorney and experienced debtor paralegal.

I am sure that as more paralegals speak out and demand specific bankruptcy training, more programs will be developed and more seminars will be offered.  It is important that we act quickly though.  With the staggering increase every day of new bankruptcy filings by consumers and businesses, paralegals specializing in the field of debtor bankruptcy law will become more in demand.  Therefore, I urge all paralegals who are interested in furthering their education and knowledge in bankruptcy law to push for more educational materials to be more readily available.  While learning more about the law itself is important, paralegals desperately need information that aides them in doing their job better.  We need to learn day-to-day skills that we can put into practice immediately such as client interview skills, the type of information to gather from the client for their petition, how to answer basic questions from clients, how to properly prepare a bankruptcy petition and other tips and techniques to help their attorneys create and maintain a smooth workflow.  My suggestion is to leave the law and its interpretation up to your attorney and concentrate more on learning the bankruptcy paralegal skills necessary to do a better job.  We just need more source material to achieve that goal.