October 2022 Peek at Pro Bono - Guidance for Bankruptcy Litigants

by Micheal A. Jones

In 2010, the Justice Department created the Office for Access to Justice as an initiative to increase and improve legal resources for indigent litigants within the federal court system. Legal representation is fundamental within our society to ensuring that there is fair, equal, and meaningful access to perhaps the best legal system in the world. However, in the United States, millions of financially struggling and low-income people are effectively forced to navigate the legal system entirely on their own because of financial barriers to hiring competent legal representation. As a result, people who are struggling financially are effectively deprived of a means of having their issues redressed within the courts. This should not be.

The Bankruptcy Courts are the most likely place to see pro se parties trying to handle their own cases. While in many instances they can do that, there are certainly cases that have nuances far beyond what you would expect a person to be able to handle without legal training. From my perspective as a bankruptcy attorney, most people need at least some help or guidance. While there are a variety of nonprofit legal assistance organizations that attempt to fill this need, they are generally underfunded and lacking volunteers.

The reality is that bankruptcy is a very specialized and complex area of law. We have our own title in the United States Code (Title 11), our own Federal Rules of Bankruptcy Procedure, our own appellate court system (Bankruptcy Appellate Panels), and our own federal judges. Even most lawyers only have a vague idea of what bankruptcy can do, and we are trained in the law! Imagine trying to figure it out with no training at all.

The irony of the bankruptcy system is that it often requires money to deal with a money problem. When you’re doing debtor representation, the nature of the case involves there not being enough money to go around. Unless you can get a fee waiver, the filing fee, required credit counseling, and credit reports will cost around $500—and that’s probably all the money a debtor can scrape together. This leaves no money to hire an attorney, hence the high number of pro se parties trying to manage on their own.

Most people think that debtors file bankruptcy cases because they are generally fiscally irresponsible, but that’s not true. Many cases are filed because of an unexpected medical calamity, a business failure, a family law situation, or job loss. These are people who have already suffered greatly in their lives and now they are trying to get help through the bankruptcy system. The bankruptcy code even says that “the filing of a petition is an order for relief,” and “relief” is exactly what they need.

I’ve helped people in all of the categories mentioned above. In my military life, I’m a JAG Officer with the U.S. Army, so many of my pro bono cases involve military personnel and their families. A typical case may include a veteran who has lost his job, gets a few months behind on his mortgage, starts being sued by credit card lenders, and is afraid that his car is going to be repossessed. That’s a scary place to be and by the time most people get to me, they’ve stopped opening their mail because it’s always just bad news. The pro bono attorney who is helping them might be their only glimmer of hope in an otherwise really awful situation where everything is crashing in around them. The amount of gratitude from a pro bono bankruptcy client is off the charts. The following examples are real cases, although the names are changed to protect their privacy.

For example, consider the case of Jim. Jim owned and operated a fitness gym and martial arts school. When COVID-19 shut down gyms, the business he had invested with his life savings essentially vanished overnight. Creditors started suing him. Every day brought endless collection calls and demand letters. The COVID-19 pandemic sure wasn’t his fault, but it financially destroyed him. Bankruptcy provided a measure of relief that enabled him to financially get a new start.

Helping disabled veterans through pro bono assistance is very common. A service-connected disability left Donald with social security income, VA disability, and GI Bill funding to try and gain new job skills to work in the civilian world. It was important that he be able to focus on his education and not have to deal with debt collectors hounding him for medical bills and other pre-injury debts. He was able to discharge more than $50,000 of debt that he never would have been able to address otherwise.

Likewise, Robert needed pro bono help to restart his financial life after a service-connected disability left him as a disabled veteran incapable of working. While he could make a new budget that was within his disability income, he needed to address a mountain of debt from before his life-altering injury. We were able to wipe away the past, get him back to $0, and let him go forward from there.

Most pro bono bankruptcy cases move along smoothly with no bumps or hiccups, but some do involve complex areas of law, such as student loan discharges. According to a study by the American Bankruptcy Law Journal, only 0.1% of student loan borrowers even attempt to discharge their student loan debt in a bankruptcy case. Why? Because these cases are difficult to prove, and many times require something in the nature of a permanent disability that will never change.

We were able to help a 100% disabled marine and his wife to wipe out a substantial amount of student loan debt that they would surely have never been able to repay. The wife had to remain home to care for her completely disabled husband and would never be able to use the benefit of her education to return to work. Even under the tough standards of student loan discharges, we were able to work out a deal with the lender that reduced their payments to $0 per month for a few years, followed by a discharge at the end.

When you successfully discharge a student loan for a disabled veteran or a new mother who’s now a quadriplegic because of complications in childbirth, there’s a special level of personal satisfaction in knowing that you have used your unique skill set to really help a person in need.

When a pro bono bankruptcy case is done with a fee waiver, those cases are especially fast and trouble-free. To get a fee waiver, a bankruptcy judge has to look at it first and issue a ruling that the debtor truly has almost nothing and is very low-income. In other words, the court certifies right at the beginning of the case that there will be no assets available to pay anyone, so everyone already knows what to expect. Even creditors appreciate it—they can go ahead and write off their accounts and stop spending money trying to collect an account that’s truly uncollectable.

If you’re looking for an especially rewarding area of law to do some pro bono work, bankruptcy is a great choice. When lawyers step up and volunteer to help debtors in bankruptcy cases, they are appreciated by everyone in the system. The judges, creditors, trustees, and debtors are all typically very thankful when an attorney steps in to help the case move along to its conclusion. In fact, the attorney doing the pro bono case will usually find it very satisfying because, unlike many areas of law, nearly everyone is glad to have you working the case. A bankruptcy case that proceeds well is often of benefit to all of the interested parties.

Michael A. Jones founded Michael Jones & Associates, PC, where he practices bankruptcy and federal litigation; he also serves as a Judge Advocate in the United States Army. He can be reached at mike@mjonesoc.com.

Peek at Pro Bono is an occasional column that offers insight into meaningful pro bono work being done by an Orange County lawyer.