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ChaosTitan
06-01-2011, 04:04 AM
I have no idea if this actually happens, which is why I'm asking.

Let's say you hired a lawyer to represent you in a lawsuit, you lost said lawsuit, and you ended up with a massive bill to pay off.

Let's now say a few years have passed, and you're still paying on that debt to Lawyer 1. Let's say you want to hire a new lawyer, Lawyer 2, to represent you in a new lawsuit. Is it legally possible for Lawyer 2's firm to buy out your debt to Lawyer 1 and transfer it to Lawyer 2 (and then forgive said debt and continue working your case pro bono)?

If it helps, the story is set in Pennsylvania.

jclarkdawe
06-01-2011, 04:31 AM
I guess, but it involves some strange things happening.

Most personal injury cases are handled on a contingency basis. I invest my time and effort in your injury. If we win the case, I get a third. If we lose the case, I'm out my time and money. I might have some money invested in experts and I'm out that money. I'll learn to do a better job assessing contingency cases, wouldn't I?

If I have a case that I'm billing by the hour, I have a limit to how far I'm going to let the client go into the hole. Preferably zero (cash in advance is often the case with attorneys). I've written off bad debts from clients, but never for that big a chunk of change.

So we lose the lawsuit and the client owes me a big chunk of change. I write it off. Quickly. If I get too aggressive about trying to collect it, the client will sue for malpractice. It's not worth the effort of trying to collect. Within three years, the statute of limitations will have run and I couldn't collect it if I wanted to.

But if someone wanted to give me ten cents on the dollar for anything I've written off, let me know. I'll be glad to take it. Hell, I'd take a penny on the dollar. The stuff I've written off isn't worth a bucket of piss on a hot day.

Best of luck,

Jim Clark-Dawe

ChaosTitan
06-01-2011, 04:49 AM
That's interesting. Thanks for the answer, Jim! It's given me some things to ponder. :)

The story case isn't personal injury. It's a child custody case. The idea is that one parent went into crazy debt fighting for custody (and ultimately losing custody) of a small child. I'm trying to figure out the logistics of this in relation to the lawyer fees, etc...

Soccer Mom
06-01-2011, 04:55 AM
What if the person took out a loan to keep fighting the child custody case? It would be unconscionable for a lawyer to keep racking up charges for someone who wouldn't pay and not too likely. But say instead of debt to the lawyer they borrowed the money elsewhere. They lose custody, but still have to keep paying on the loans. Then the new lawyer buys out the loans and agrees to work pro bono.

ChaosTitan
06-01-2011, 04:57 AM
What if the person took out a loan to keep fighting the child custody case? It would be unconscionable for a lawyer to keep racking up charges for someone who wouldn't pay and not too likely. But say instead of debt to the lawyer they borrowed the money elsewhere. They lose custody, but still have to keep paying on the loans. Then the new lawyer buys out the loans and agrees to work pro bono.

Oooooh, that could work....

:e2bouncey

jclarkdawe
06-01-2011, 05:18 AM
Soccer Mom's approach is the same that I'd suggest. The client would not be expecting any payback for the case (nor would the lender). Client would have to be credit worthy, and have some ability at the time of the loan to repay the loan.

Some credit unions will finance this without collateral, credit cards can be used, but the preferred course is using the client's house as collateral. Although some attorneys will help their clients find financial institutions that will help them in this type of situation, ethics boards won't be thrilled with them if they get caught out.

The smart lawyer who knows his or her client is going to do something like this sends the client a letter recommending against it and disavowing any responsibility. And for the attorney that loses, a malpractice case can still be in their future. Nothing like having to send out a big chunk of change to keep reminding your losing client about their loss.

Best of luck,

Jim Clark-Dawe

Lehcarjt
06-01-2011, 06:02 AM
I'm a bookkeeper specializing in law firms. My biggest client is a family law office (the nice way of saying divorce lawyers) in CA. I'm finding this all pretty far fetched.

Let me write this all out so I keep is straight.

Parent goes into debt for child custody case and loses. Has to keep paying on debt though (whether to attorney #1 or bank doesn't seem to make a difference to me). We've had clients take three four year to pay. Longer than that with zero payments, we tend to just write it off (which in cash basis accounting just means stop invoicing and letting the whole thing go.).

Parent has second lawsuit and wants second lawfirm to assume the debt due to 1st law firm. Is the second case also a child custody case? Why would that lawfirm assume the previous debt (whether it is from another firm or the bank)? In a child custody (not talking support here), the goal isn't money. So the only money the law firm would get would be their hourly rate - not a % or anything like that.

If the second case isn't child custody, I have a hard time seeing why a law firm would step in or even care (not counting the client's ability to pay their own fees) about old debts.

In terms of actually transferring the debt, that is easy. Law firm #1 writes a check (not from their trust account, but their operating account) and pays off the debt. Then they invoice the debt in total to the client. This would be no big deal.

If they are not going to bill it to the client and the case is all pro bono, then I do wonder if the payoffing of the debt wouldn't fall under the category of 'gift' and need to be handled as such taxwise (although that is getting far afield of my experience).

I am really curious on why you have the 2nd law firm wanting to pay the debt though.

jclarkdawe
06-01-2011, 06:48 AM
I think there is probably an ethical issue on the part of lawyer 2. There are some issues regarding soliciting clients.

Now attorneys will sometimes seek out a client, either because the case is good publicity, or the issue interests the attorney, or the attorney feels sorry for the client. That's fine, and doing it pro bono for a client without funds is ethically permissible.

However, buying your way into a case is not. And that's what this seems like. Let's say the outstanding debt is ten thousand dollars. The attorney would need to take the money from his business account. It would have to go down as either a business expense (advertising) or a non-charitable gift (I can hear Lehcarjt's groans over the internet -- I can just imagine the reaction of my accountant).

I'd hate to have to explain either one to the professional conduct committee.

So even if I can move beyond why the hell attorney #2 would do this, I then hit the ethical problems.

Best of luck,

Jim Clark-Dawe

Lehcarjt
06-01-2011, 07:25 AM
The attorney would need to take the money from his business account. It would have to go down as either a business expense (advertising) or a non-charitable gift (I can hear Lehcarjt's groans over the internet -- I can just imagine the reaction of my accountant).

After I wrote out my response I spent too much time trying to figure out how I would handle this if one of my clients came to me with this scenario. I didn't think of marketing (although that is a good one), but decided on either Gift or Professional Contracting. Actually, I could probably just stick it in Client Costs (reimbursed COGS) - which would be unethical, but chances of being caught are low. (I'm not recommending dishonesty, but I've seen a lot of it.)

frimble3
06-01-2011, 12:20 PM
What would it do to OP's story is the debt isn't to a lawyer? What if, after losing the custody case, the parent went a little nuts and turned to weird stuff? Paying dodgy investigators, pointless information purporting to bolster the case, shady lawyers offering dubious help 'for a price', 'experts' offering to testify that the custodial parent is a bad, bad person, people claiming to be able to 'rescue' the child? Then, second lawyer takes pity, chases off the conmen, and steps in to straighten things out?
I get the impression the idea is to paint the 2nd lawyer as a knight in shining armour, so if it's done without 'buying a way in', but by sending pro bono cease-and-desist letters to these others, would that be more ethical?

jclarkdawe
06-01-2011, 04:39 PM
Originally Posted by jclarkdawe http://www.absolutewrite.com/forums/images/buttons/viewpost.gif (http://www.absolutewrite.com/forums/showthread.php?p=6200370#post6200370)
The attorney would need to take the money from his business account. It would have to go down as either a business expense (advertising) or a non-charitable gift (I can hear Lehcarjt's groans over the internet -- I can just imagine the reaction of my accountant).
After I wrote out my response I spent too much time trying to figure out how I would handle this if one of my clients came to me with this scenario. I didn't think of marketing (although that is a good one), but decided on either Gift or Professional Contracting. Actually, I could probably just stick it in Client Costs (reimbursed COGS) - which would be unethical, but chances of being caught are low. (I'm not recommending dishonesty, but I've seen a lot of it.)

Problem is that the IRS is known to talk with Professional Conduct Committees. Attorneys tend to have higher than average rates of audits. Chances of getting caught, as you say, are low, but you're virtually guaranteed a reprimand from the PCC and the IRS is likely to say it's not an allowed deduction, subject to interest and penalties.

As you say, stuff like this is done. I can think of a couple of big name attorneys who have been caught doing stuff like this. And several more that I'm sure are doing this and haven't been caught. But it's not recommended practices.

Best of luck,

Jim Clark-Dawe

PinkAmy
06-01-2011, 06:33 PM
I'm from PA and though my situation wasn't the same as what you described, there are some similarities.
I paid firm #1 what I call the $5 a-month-for-the-rest-of-my-life . Lawyer from firm # went into pvt practice and when I told him about my financial plan he told me (with a wink and a nod) that if I stopped paying firm #1 wouldn't go after me for the money because it wouldn't be financially worth it. I wasn't a defendant in a lawsuit and the bill was massive to me, but wasn't massive in the grand scheme of things. I had the same lawyer, just in different settings.

ChaosTitan
06-02-2011, 01:46 AM
Thank you, everyone, for your replies!



I am really curious on why you have the 2nd law firm wanting to pay the debt though.

It isn't really about the law firm. The idea is that the MC's love interest is trying to figure out a way to remove the burden of this huge monetary debt from the MC without outright paying the bill (he's too proud to accept the love interest paying it for him). Since I know nothing about how lawyers bill for their time/work, I wanted to posit the scenario here. :)

It isn't necessary to the story that the second law firm pay off the debt; mostly I was curious if it was a reasonable scenario or not.



What would it do to OP's story is the debt isn't to a lawyer?

This is the direction I'm leaning, after Soccer Mom's suggestion last night. That the debt was accumulated through other kinds of loans.



I get the impression the idea is to paint the 2nd lawyer as a knight in shining armour, so if it's done without 'buying a way in', but by sending pro bono cease-and-desist letters to these others, would that be more ethical?

The lawyers in the story are really just plot points (sorry, my lawyer friends!). The focus of the story is a romantic relationship, and one of the big issues is the debt the MC has accumulated trying to fight for custody of his daughter. The pro bono work of Lawyer 2 is to review the original custody case and see if there's a way to get his child back.

It seems like it may not be plausible/ethical for a lawyer to assume/pay off a third-party debt, so I may have to rethink this a bit.

Thanks again!

suki
06-02-2011, 01:57 AM
Thank you, everyone, for your replies!



It isn't really about the law firm. The idea is that the MC's love interest is trying to figure out a way to remove the burden of this huge monetary debt from the MC without outright paying the bill (he's too proud to accept the love interest paying it for him). Since I know nothing about how lawyers bill for their time/work, I wanted to posit the scenario here. :)

It isn't necessary to the story that the second law firm pay off the debt; mostly I was curious if it was a reasonable scenario or not.




This is the direction I'm leaning, after Soccer Mom's suggestion last night. That the debt was accumulated through other kinds of loans.



The lawyers in the story are really just plot points (sorry, my lawyer friends!). The focus of the story is a romantic relationship, and one of the big issues is the debt the MC has accumulated trying to fight for custody of his daughter. The pro bono work of Lawyer 2 is to review the original custody case and see if there's a way to get his child back.

It seems like it may not be plausible/ethical for a lawyer to assume/pay off a third-party debt, so I may have to rethink this a bit.

Thanks again!

I'd think the lawyer could just write off the debt. And it doesn't need to be because it was paid.

Could the love interest reach out to the lawyer and explain the situation and because of love interest's heartfelt plea/successful advocacy write off the debt?

Then love interest has caused the burden to be relieved but you avoid the ethics issues...

~suki

jclarkdawe
06-02-2011, 02:07 AM
It's so easy when you tell us what you want to do.

MC borrows big chunk of change on plastic for his custody fight. MC either has problems or doesn't, whichever floats your boat. MC starts dating lawyer and lawyer realizes MC is being sunk by plastic. Lawyer says "I love fighting plastic scum suckers. Let me see what I can do."

Lawyer writes a couple of letters and "sends" them to the credit card companies, alleging violation of consumer protection laws. If lawyer is really good, he/she/it gets a buddy to respond or fakes the responses. Otherwise, phone calls work.

Smart lawyer says scum will settle for ten cents on a dollar, or whatever the MC can afford. Dumber lawyer says that scum is scared crapless and will drop the debt. Lawyer sends check for the balance out of his/her/its personal funds as a gift.

Perfectly legal, gets what you want done, and provides some fun.

Best of luck,

Jim Clark-Dawe

ChaosTitan
06-02-2011, 02:20 AM
It's so easy when you tell us what you want to do.

MC borrows big chunk of change on plastic for his custody fight. MC either has problems or doesn't, whichever floats your boat. MC starts dating lawyer and lawyer realizes MC is being sunk by plastic. Lawyer says "I love fighting plastic scum suckers. Let me see what I can do."

Lawyer writes a couple of letters and "sends" them to the credit card companies, alleging violation of consumer protection laws. If lawyer is really good, he/she/it gets a buddy to respond or fakes the responses. Otherwise, phone calls work.

Smart lawyer says scum will settle for ten cents on a dollar, or whatever the MC can afford. Dumber lawyer says that scum is scared crapless and will drop the debt. Lawyer sends check for the balance out of his/her/its personal funds as a gift.

Perfectly legal, gets what you want done, and provides some fun.

Best of luck,

Jim Clark-Dawe

This is kind of brilliant. :D

The love interest is a cop, not a lawyer, but knows a lawyer. So this scenario might work.

Thanks!

:D