Last year the U.S. economy hit hedge funds and big banks.  This year we are seeing small businesses and individuals battered by the sub-prime mortgage markets and financial investment weakness.  

When the U.S. economy struggles, many legal practices also struggle as their clients are taking longer to pay legal service fees.  This in turn causes accounts receivables to increase and bleeds cash flow.  In response, law firms react by requiring associates to increase billable hours and impose new client origination quotas on law firm partners. 

While some law firms are experiencing a shrinking client base and a receivables bubble, certain niche law practices are flourishing in this economy.  One such area of law is bankruptcy. 

Personal Bankruptcy
According to American Bankruptcy Institute (ABI), U.S. consumer bankruptcy filings increased 47.7 percent nationwide in April from the same period a year ago.  ABI obtained this information from the National Bankruptcy Research Center (NBKRC). The overall April consumer filing total of 92,291 also represented a 7.1 percent increase from the 86,165 filings in March. Chapter 13 filings constituted 31.14 percent of all consumer cases in April, a slight decrease from March.

Business Bankruptcy
The number of business bankruptcies filed in April 2008 increased 49% from the same time over the last year.  That equates to an average of 235 daily filings (over 5000 filings for the month of April 2008) last month compared to 158 in April 2007.  This data was compiled by Jupiter eSources, an Okalahoma City company that operates Automated Access to Court Electronic Records (AACR).

It’s not clear which market sector accounts for the spiked increase in bankruptcy filings, but it is presumed that most of the companies closing their doors are builders and those tied to the housing markets.   Most bankruptcy law practices usually provide additional ancillary services such as:  facilitating residential mortgage foreclosures, filing bankruptcy actions due to fire losses, drug forfeiture actions, tax sales, condemnation proceedings, land contract forfeitures, and actions to quiet title.  Bankruptcy law clients usually include:  mortgage bankers, local banks, credit unions, mortgage services, regional property owners, investor groups, and individual entrepreneurs.

There is also a direct relationship to increased divorce filings & criminal prosecutions when the economy struggles. 

Legalnut's Bankrupcty Law Forums