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Bankruptcy Boom Fueling Growth in Legal Practices

Jonathan Leventhal had spent some time selling bonds on Wall Street and had been a business owner for nearly a decade before deciding to launch his Woodland Hills- based bankruptcy law practice nearly a year and a half ago. Although he’d always harbored a deep interest in consumer protection, the decision to go back to law school and immerse himself in the field of bankruptcy was also a strategic business decision. “There’s a big need for attorneys to represent debtors out there who are in hard financial times,” he said. Like Leventhal, more attorneys are focusing their practice on bankruptcy as the economy takes its toll and a growing number of businesses and individuals seek help restructuring debt and working with creditors in all matters involving financially distressed transactions. In California, one of the states hardest hit by unemployment and home foreclosures, bankruptcy filings have been on the rise. In Los Angeles alone, 52,240 bankruptcies (including chapter 7, Chapter 11, chapter 12 and chapter 13) were filed from January to November of 2010 – an increase of 53.7 percent from the same period in 2009. According to the US Bankruptcy Court, Chapter 7 bankruptcy filings increased in the city by 53.4 percent during that time; while chapter 11 filings increased by 40.7 percent and chapter 13 filings by 55.2 percent. The credit crunch and the down economy have made bankruptcy one of the hottest practice areas in the legal field today. New attorneys are flocking to the field, and more established law firms – finding themselves busier now with bankruptcy work – are expanding or enhancing their bankruptcy practices. “2010 was the year we brought all our bankruptcy resources in house,” said attorney Raffy Boulgourjian, who expanded the bankruptcy division at his Glendale firm in response to the growing demand for those services. Before, the firm would outsource bankruptcy work on a case-by-case basis. “It’s been a tremendous enhancement to the firm and to my clients who we’re now helping challenge loans, modify loans, reorganize their debt, remove junior debt from their properties and stay in their homes,” he said. Boulgourjian, who specializes in real estate law, said the demand for Chapter 13 bankruptcies has been fueled by the growing number of foreclosures. Chapter 13 bankruptcy, a reorganization of debts that allows a debtor to make payments to creditors over a period of three to five years, may allow debtors to keep their home, car, and other types of secured debts. One of the biggest benefits under a Chapter 13 restructuring, he explained, is that a second loan on a home that is worth less than what is owed on the first loan, may be treated essentially like credit card debt. The booming field of bankruptcy law is also fueled by the impact of the economy on other areas of the legal profession. Looking for work Burbank attorney Lauren Ross, who has been practicing bankruptcy law for three decades and also teaches bankruptcy courses at UCLA, said a lot of legal work has dried up in recent years and law school graduates who can’t find work in other practice fields are finding there’s growth potential in the area of bankruptcy. Similarly, those experienced attorneys who lost their jobs, or whose practices were suffering in the downturn, may have turned to bankruptcy law in response to the market conditions. “I’ve definitely seen both new attorneys as well as people who’ve been practicing for some time move into the area of bankruptcy because of the increasing volume of work,” she said. In her classes, Ross said about 70 percent of her students have been practicing law for some time while 30 percent are newcomers. One of her students, Ravash Ram, opened a bankruptcy practice in late 2009 and is now operating as a sole practitioner out of an office in Sherman Oaks. “Initially I was not that interested in bankruptcy but then I started seeing how it can really help people get back on their feet, how much it actually helps, and I started seeing that as more of a role I’d like to play as an attorney compared to other practice areas,” he said. “The fact that California is in a recession and is one of the worst states to suffer economically also makes bankruptcy a good long-term area to practice in.” Complex task Ram, who received his law degree in 2006 but didn’t practice law until 2009, said practicing bankruptcy law is not as easy as many people flocking to the field might think. “On the surface it may seem like a very easy practice, but you really need to know what you’re doing; it’s much more complex than pushing papers – especially a chapter 13,” he said. As profitable as it sounds, many attorneys who were expecting it to be easy, who thought clients would be lining outside their door, can find themselves overwhelmed by the complexity of unraveling huge financial messes in bankruptcy proceedings, which they are not prepared to handle, he added. “Those that are starting out really need to rely on mentors and have a strong support network of experienced bankruptcy professionals,” he said. With the growing appeal of the bankruptcy legal practice, some attorneys are concerned about what they perceive to be an increasing number of inexperienced or ill-prepared professionals performing very complex tasks. “Bankruptcy is the hot topic right now and there’s a lot of people going into the field, and some of them should not be,” said Leventhal. “I’ve had clients walk in here asking for help after another attorney filed a case that shouldn’t have been filed and which put them in terrible straights.” Leventhal is also concerned that people without a law degree, including paralegals, may also be preparing bankruptcy documents for vulnerable clients in today’s market, and may also be putting clients at risk. Experts agree that given the cyclical nature of the economy now is the time to be looking for opportunities in the field of bankruptcy, however Ross warned that given the complexities of the field, newcomers should really be careful in the way they practice and seek out mentors and experienced bankruptcy attorneys to help them. “I think it’s a lot more complicated than most folk think it is but I can’t fault them for trying to get into the field,” she said.

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