A lawyer is one of the fastest-growing professions in the United States, with an annual growth rate of more than 50% from 2010 to 2018.
But with more and more Americans opting for the private sector, it is now illegal to practice law.
And with California law, it’s not just lawyers who face bankruptcy protection: The California Bar Association says that of the more than 7,500 lawyers in the state, only 3,000 are in bankruptcy protection.
As the state struggles to cope with the financial crisis, it has created new laws to protect the legal profession, including new safeguards against bankruptcy.
The US bankruptcy code has been amended to provide an exception for legal services to “prevent, mitigate or lessen the effects of a default” and is now more protective of a lawyer’s reputation than it is of his or her assets.
“The law has been in place for a long time, but it was never as clear as it is today,” says Barbara Jepsen, a bankruptcy attorney at the law firm DLA Piper.
“It’s very difficult for us to have a clear understanding of what constitutes a debt to a client, what constitutes an emergency and what constitutes the most prudent course of action to protect that client.”
The changes come as a result of the financial meltdown, which has brought with it heightened scrutiny of lawyers’ financial standing and the risks they face in bankruptcy.
In January, the US Supreme Court ruled in the case of Burt v US that a lawyer could not be forced to stop working after a bankruptcy filing.
But many states, including California, have now enacted legislation that makes it legal for lawyers to discharge debts if their debts are no longer manageable.
California Attorney General Xavier Becerra has been working to amend the state’s bankruptcy law to allow for the discharge of debts after a lawyer has been “indefinitely” discharged from practice.
For the past six years, Becerras office has been reviewing laws around the country that deal with debt collection, and he is keen to pass these changes to California.
It’s a process that took six years to complete, but Becerres office says it is finally moving forward with the changes.
There are two main bills currently pending in the California legislature.
One, SB 933, would make it easier for lawyers in California to discharge their debts, including debts owed to themselves, family members and others.
The other bill, SB 1093, would extend the bankruptcy protection that a court has granted to certain attorneys and other professionals.
Becerres bill, which was co-sponsored by the California Bar, is designed to protect a lawyer against having to sell assets or face bankruptcy.
It also would allow attorneys to be discharged from the bankruptcy of someone else if they owe more than $10,000 to a third party.
State law currently allows for an individual to be bankrupted by their employer for any reason, even if they have not yet exhausted all means to pay that person back.
Burt v United States Supreme Court, a case decided in 2014 that ruled a California court’s bankruptcy judgment was invalid, also dealt with the issue of whether a lawyer owed more than the amount of the debt.
When a lawyer had a $10 million debt, Becherres office said, they had no option but to discharge it because they could not collect on the debt for the time being.
At the same time, Becercas office said the bankruptcy law was meant to protect attorneys from creditors, and the courts had to give an individual due process to prove the debt was more than that of which the attorney was responsible.
In addition to allowing attorneys to discharge the debt, SB 1125 also makes it harder for a lawyer to be placed on a waiting list for a discharge of debt.
The law, which Becerreres office has introduced in the House and Senate, would allow a lawyer on a list to ask the court to suspend or discharge the bankruptcy and would require the court then consider any options, including the court’s decision to impose a court order.
While it’s difficult to say exactly how many lawyers are in the process of being discharged from bankruptcy, Becerras office says that it has a good idea of how many are.
To date, the California bar has had a total of 15,500 attorneys in bankruptcy, according to a survey of lawyers conducted by the National Law Journal.
That number has doubled since the late 2000s, when the number was only 10,500.
With more and better information coming out about bankruptcy, the number of attorneys in financial distress is likely to continue to rise, says Becerris office.
If you or someone you know needs help, call 1-800-945-9000 or visit a local crisis centre.
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