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Some corporate bankruptcy attorneys get paid over $1,100 per hour to help their clients negotiate the bankruptcy restructuring process. Creditors, however, often get much less than what they are owed after all is said and done. While one might balk at lawyers getting $18.50 per minute while creditors get 35 cents on every dollar they are owed, bankruptcy can be a useful tool for businesses and individuals looking to right their financial ship.
Bloomberg reports that top dollar bankruptcy attorneys now command in excess of $1,100 per hour for their services. UCLA bankruptcy law professor Lynn LoPucki estimates that billing rates for such bankruptcy attorneys are climbing at four times the rate of inflation. This, at a time when bankruptcy creditors are collecting less and less, dropping toward 35%, of the money owed them by bankrupt companies.
The need for bankruptcy lawyers is obvious. USA Today reported that individual bankruptcy filings increased by 1/3 in 2008. Top dollar attorney price tags for enormous corporate bankruptcies should not prevent individuals from informing themselves as to the possible benefits of using an attorney to file for bankruptcy.
Alternatives to bankruptcy must be explored. If applicable, filing for bankruptcy can offer possible benefits including delay or avoidance of foreclosure and wiping out some credit card debt and other unsecured debt. Bankruptcy will not likely help with child support, alimony, most tax debts, student loans, or secured debts.
There is also a possibility that this year we will see significant change to key bankruptcy provisions. Many wanted the economic stimulus package currently before Congress to include new rules allowing judges to force modification of mortgages "under water" because the mortgages are for more than the value of the home. The Washington Independent reports that these new rules were taken out of the stimulus plan to make it more likely to pass with Republican support. Bankruptcy reform to let judges "cramdown" some under-water mortgages to the current value of the home is being pushed in separate legislation.