Public Counsel - Pro Bono Online

California Lawyer- April 1, 1999

In Defense of the Bankrupt -- A pro bono program gives debtors a fighting chance

By Geraldine Lewis

It is one of the curious quirks of our country's current prosperity that bankruptcy filings are higher than they've ever been. In fact, during the twelve-month period that ended last fall, 1.44 million filings were made nationwide-a 5 percent increase over the previous year.

As unscrupulous petition preparers have long realized, the bankrupt are quite easy to take advantage of, particularly when they're uneducated or don't understand English very well. That is why so many debtors end up paying hundreds of dollars to file their cases without getting either the counseling or the representation they need to assert their rights against creditors. In fact, the cost of representation can run from $1,000 for a simple Chapter 7 filing to up to $5,000 or more if there is any litigation.

In the Central District of California, though, where at least 10 percent of the nation's bankruptcy petitions are now filed (35 percent of them in pro per), two bankruptcy lawyers have developed a program that is giving the bankrupt a fighting chance. One is Thomas Walper of Munger, Tolles & Olson, and the other is Jeffrey Krause of Stutman, Treister & Glatt. Together, with the support of the Public Counsel Law Center and the blessings of the Los Angeles County Bar, they began raising funds in June 1997 for a pro bono project to assist pro per Chapter 7 debtors and pro per litigants with nondischargeable debts. The program officially started on December 1, 1997, in the Los Angeles and San Fernando divisions of the court and last year handled more than 130 cases. Today, more than 120 lawyers donate their time to the project.

Kenneth W. Babcock, director of litigation and advocacy at Public Counsel, proclaims the program "an extraordinary success," not just because of all the good work it does but also because of its deterrent value. Just the presence of volunteer attorneys encourages creditors to settle more quickly, he says.

Judge Vincent P. Zurzolo is another fan of the program, and he hopes to see it expanded to the three remaining divisions of the court-Santa Barbara, Santa Ana, and Riverside. He also hopes to see a public education program initiated to warn people about the petition mills.

Walper and Krause agree. And, in fact, they're already working on just such a public outreach effort that will counsel not only the declared but also the yet-to-file.

Meanwhile, petition mills are starting to feel the heat from another source as well: the U.S. Trustee's office, which has collected hundreds of thousands of dollars in fines and disgorgements since 1996. The agency has also been referring criminal cases to the U.S. Attorney's office since 1988.

But according to U.S. Trustee Maureen Tighe, her office needs increased authority to do more. "The only effective way to go after these mills is if the state of California is willing to pursue those who are working within the gray area of the law." That, she says, "is the only way to eliminate them for good."