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Thriving Law Practices in a Weak Economy PDF Print E-mail
Written by Norton Gappy   
The U.S. economy has been and is expected to continue experiencing weakness in many areas, such as housing, manufacturing, financial services, and the U.S. dollar.  Tighter credit, slipping commercial sales, and rising commodity prices are hitting individuals and small businesses right where is hurts, in their wallets.
   

   

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. 

According to the American Bankruptcy Institute, the Annual Business and Non-business Filings by State (2007) are as follows: 
2007
State Code Total Filings Business Filings Non-Business Filings Percent Consumer
AK 697 70 627 89.96 %
AL 23,856 306 23,550 98.72 %
AR 11,852 397 11,455 96.65 %
AZ 10,920 479 10,441 95.61 %
CA 72,615 3,505 69,110 95.17 %
CO 15,499 645 14,854 95.84 %
CT 5,890 264 5,626 95.52 %
DC 712 26 676 94.94 %
DE 2,002 306 1,696 84.72 %
FL 41,462 2,029 39,433 95.11 %
GA 50,092 1,456 48,636 97.09%
GU 133 3 130 97.74 %
HI 1,386 56 1,330 95.96 %
IA 7,036 243 6,793 96.55 %
ID 3,838 116 3,722 96.98 %
IL 41,456 1,140 40,416 97.49 %
IN 31,122 608 30,514 98.05 %
KS 8,072 223 7,849 97.24 %
KY 17,157 311 16,846 98.19 %
LA 14,227 510 13,767 96.43 %
MA 13,705 393 13,372 97.57 %
MD 13,733 380 13,353 97.23 %
ME 2,304 152 2,152 93.40 %
MI 46,190 1,194 44,996 97.42 %
MN 11,902 520 11,382 95.63 %
MO 21,257 384 20,873 98.19 %
MS 11,217 262 10,955 97.66 %
MT 1,879 55 1,824 97.07 %
NC 19,710 597 19,113 96.97 %
ND 1,206 59 1,147 95.11 %
NE 5.364 208 5,156 96.12%
NH 2,983 327 2,656 89.04 %
NJ 19,948 864 19,084 95.67 %
NM 3,403 142 3,261 95.83 %
NMI 17 2 15 88.24 %
NV 10,593 321 10,632 97.07 %
NY 40,519 1,375 39,144 96.61 %
OH 50,723 1,352 49,371 97.33 %
OK 9,127 353 8,774 96.13%
OR 9,386 265 9,121 97.18 %
PA 29,962 1,017 28,945 96.61 %
PR 7,786 276 7,510 96.46 %
RI 2,817 105 2,712 96.27 %
SC 7,291 144 7,147 98.02 %
SD 1,366 90 1,276 93.41 %
TN 39,593 537 39,056 98.64 %
TX 42,931 2,480 40,451 94.22 %
UT 6,464 183 6,281 97.17 %
VA 19,478 594 18,884 96.95 %
VI 23 8 15 65.22 %
VT 895 65 830 92.74 %
WA 15,568 477 15,091 96.94 %
WI 17,849 685 17,164 97.40 %
WV 4,492 150 4,342 96.66 %
WY 795 36 759 95.47 %

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