Change The Bankruptcy System To Help End Cycle Of Poverty

By Robert Gordon
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Law360 (November 1, 2020, 8:02 PM EST) --
Robert Gordon
Robert Gordon
I was a bankruptcy judge in Baltimore for 14 years. During that time, I presided over thousands of consumer cases, some complex and some relatively simple. But the vast majority had the same common denominator: a debtor's collapse under the weight of a personal financial crisis because they lacked the money to set things right.

For an individual on a low fixed income, or in the throes of poverty, what may look like a minor financial glitch to others —  a large doctor's bill, an unexpected car repair, the failure of a major appliance — can be a major derailment, launching the train of relative security off the tracks to careen down insolvency's embankment.

That singular common denominator fills the mind of a compassionate bankruptcy judge with reminders of just how sad life can be. This is especially so when the prized bankruptcy discharge, and the fresh start it creates, often only provides a temporary breather from the endless cycle of poverty. Yet, bankruptcy relief can be the vital hedge between a citizen's complete devastation — loss of assets, loss of home and loss of dignity — and the ability to save each from ruin.

There is a very thin line between relative security and abject poverty for so many Americans. Believe me, I know. This is why the fresh start should be more available, not less so, and especially to those in the lowest economic class.

The pandemic will drive an unprecedented number of individuals into bankruptcy. Yet one of the system's baked-in barriers  — the unaffordability of attorneys — will deprive many citizens of the benefits they should be able to easily receive. And that fact is particularly cruel when one considers that bankruptcy is one of the few subject areas specifically mentioned in the original text of the U.S. Constitution that is intended to provide direct benefits to the average citizen. Abraham Lincoln once had to file bankruptcy and if Honest Abe had to do it, there should be no shame in it and it should be accessible to anyone who is otherwise qualified.

When an individual can afford a competent lawyer to navigate a bankruptcy filing that is usually the best option. But when the cost of a lawyer (usually $1,000 or more for a Chapter 7 bankruptcy filing) makes that option impossible, there is no just reason why the less well-off individual should not be able to benefit from the fresh start. In fact, the individual who plainly is more in need of bankruptcy, should be even more entitled to its legal benefits.

Free, or pro bono, legal service is the traditional solution to the problem of the debtor who cannot afford a lawyer. But in Maryland, experience proves that option only scratches the surface and does not solve the problem. From June 2018 to June 2019, approximately 3,500 cases were filed in Maryland by debtors without lawyers. Not all were impoverished, but I do know from personal experience that most were very low income or worse and only a tiny fraction were served by free counsel.

I also know that the court's response to the problem — the Debtor Assistance Project, which was created about 12 years ago and relies upon unpaid, lawyer-citizen volunteers providing 20 to 30 minutes of free advice — was met with derision by many attorneys who believed it cut into their market share.

At its peak, in the immediate wake of the Great Recession, the program served no more than 800 debtors annually and thereafter usually no more than 300. That fact alone makes it clear that the 3,000 or so debtors in Maryland who annually file without attorneys do so for reasons that have nothing to do with the presence of the DAP and, moreover, that the DAP alone does not solve the problem.

To address this problem, our bankruptcy courts must accept their full responsibility to uphold equal rights by making relief more accessible to low-income individuals who cannot afford lawyers and who must file bankruptcy on their own. The first step to creating a more accessible bankruptcy system is to conduct user testing and then employ the test results to redesign the consumer bankruptcy forms with the assumption that individuals will not be able to afford representation.

The bankruptcy forms should also be immediately translatable into a selected language and drafted in as plain a brand of that language as is possible and at no more than a 10th grade reading level. Systems create the outcome they are designed to produce, and the complexity of today's forms means that debtors don't have a fair opportunity to access the bankruptcy laws that are intended to protect them.  

On a similar note, bankruptcy courts must bring their forms and filing process online for individuals who cannot afford lawyers, especially in the age of the pandemic. A small handful of courts like the U.S. Bankruptcy Court for the Central District of California have already adopted Electronic Self-Representation, or eSR, a guided, step-by-step process that empowers individuals to fill out their forms on their own. Coupled with form simplification, eSR has the potential to deliver justice to debtors currently too broke to file bankruptcy, while also making life easier for judges and trustees who will receive more legible and better understandable paperwork from self-represented individuals.

The right to file bankruptcy is not included in the Bill of Rights. But the venal absurdity of making full access to debt relief dependent upon whether a citizen on the razor's edge of poverty can pay money they plainly don't have is glaring. In effect, it is not unlike the poll tax implemented for years after the Civil War to suppress the right to vote.

We have long relied on legal aid and pro bono resources to address this problem, but we must look to our courts for systemic change. Given that we'll never be able to provide a free lawyer to everyone who needs one, particularly during the tidal wave of bankruptcies expected due to COVID-19, we must create a system that empowers individuals to access the rights they're guaranteed when they cannot afford legal fees.  



Robert Gordon is a principal at Lerch Early & Brewer Chtd. and a former judge at the U.S. Bankruptcy Court for the District of Maryland.

"Perspectives" is a regular feature written by guest authors on access to justice issues. To pitch article ideas, email expertanalysis@law360.com.


The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

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