Are You Just Banging Your Head Against The Wall?

Today I attended a seminar put on by the Houston Association of Debtor Attorneys (HADA).  What I learned illustrates a point I have been trying to make for a long time.  It is not only how much you charge, or how hard you work, but whether or not you are actually getting paid for your services.  If you are working hard and you are not getting paid, you are are banging your head against a wall.

The issue concernes Chapter 13 bankruptcy practice.  There is a bad tendency among lawyers, and especially among solo consumer bankruptcy counsel in particular, to market bankruptcies for little or no money down.  Amazingly, there is a tendency for these attorneys to fight the imposition of wage withholding or pay orders, which requires the Chapter 13 payments, on which the attorneys rely to get paid, to be taken out of the debtor's payroll by the employer and sent directly to the Chapter 13 Trustee.  What we learned is that it is a fools game.

First, in my opinion, it is a fools game because these attorneys have allowed pricing and fees, and how they are paid, to become the differentiator they use to market their services, thereby attracting clients which are less likely to pay the trustee (read, pay the attorney for his or her services).

Second, and more importantly, these attorneys are not getting paid. They must be starving in fact.  Of those clients who do not have wage withhold orders, the attorneys are only collecting their entire approved fee in 18% of the cases they file.

Just as shocking, in Chapter 13 cases in which there is a wage withholding or pay order in place, the attorneys are only getting paid their full approved fee in 82% of these cases.  I say only, because this means in even the best Chapter 13 cases attorneys are losing a good portion of the fees in 18% of these cases as well.  This speaks to the fact that these attorneys simply cannot afford to take cases for no or little money down.  They cannot use pricing and fees as a market differentiator if they hope to make a reasonable living from this vital work.

And, the problem is not simply limited to consumer bankruptcy cases. Too many lawyers, and especially too many solo attorneys, are putting too much of their fees at risk.

Will you initially lose clients if you quit using price and fees as a market differentiator?  You bet.  But, what is the cost?  In the consumer bankruptcy example, why are you not willing to give up those cases which only afford you a chance to make money in 18% of them?