Legal Practice Management Software for Consumer Bankruptcy Firms

No one would debate that a law firm needs to use word processing programs. Consumer bankruptcy law firms would find it extremely difficult, if not impossible, to file petitions without document assembly programs. And, some type of time, billing and accounting software is mandatory for almost all law firms. Yet, legal practice management software (LPMS), which has been one of the most discussed, debated and reviewed legal software genres for the past decade, has just recently reached the threshold of being adopted by half of all firms. This low penetration rate is surprising in that LPMS arguably has more day-to-day impact and, after being used for a time, also provides functionality that no law firm would want to be without.

Interestingly, in the consumer bankruptcy environment the penetration is even less. We’ve worked closely with consumer bankruptcy firms since 2006. In our years of experience working with these firms, we believe there are at least three reasons for this:

• Many consumer bankruptcy firms use Act, Goldmine, or other contact management software (CMS) as pseudo-Case Management systems. Based on the number of firms we have encountered using these applications, we have to conclude that they were highly recommended to the general audience of consumer bankruptcy attorneys at some point in the past at conferences, or through Internet communities or listserves. While these programs provide basic functionality, they lack many core legal practice management components. For example, they don’t have a Case/Matter record type.
• Every consumer bankruptcy law firm has a petition preparation software package like Best Case, Top Form, EZ Filing, etc. And, every such package has some rudimentary case management features – they list cases, allow the addition of notes, and may have basic case status fields. Yet, the case management feature set reflects what you would expect from a software application that excels at its primary function – preparing a petition – and isn’t dedicated to what you need to run your entire practice – a practice management system.
• We have also noticed a trend at the NACBA conferences for the technology “opinion leaders” to discourage the use of legal practice management software. Instead they encourage the use of cobbled together systems using free and open source software. While we respect these individuals’ opinions, their advice strikes us as unsound, lacking in common business sense, and is “penny wise, pound foolish.” We are all for the concept of open source and Web 2.0 software – we use many such programs daily in the operation of our business. However, the concept of trying to link a bunch of free software into a comprehensive practice management system doesn’t make economic sense unless you are a hobbyist and enjoy that type of thing.

We have talked to hundreds of consumer bankruptcy firms who use one of the approaches listed above. Almost all agreed that while these solutions were limited by missing features, they did help them get their work done. This makes sense to us, because some system is better than no system at all. But, then two events occurred that changed the consumer bankruptcy practice landscape and are driving firms to seek out better options:

• BAPCPA, which was passed in 2005. This Act placed a tremendous burden on consumer bankruptcy attorneys. Its enactment had the effect of reducing the total number of bankruptcy filings (even if temporarily), while placing significant additional burdens on attorneys to collect the documents and information needed to prepare and file a petition. With fewer cases (post-surge), and more work needed on each case, BAPCPA has forced attorneys to look at ways to become more efficient.
• The changing economic conditions – The surge in filings due to the 2008 Great Recession provided a unique opportunity for consumer bankruptcy firms to grow their practices. Firms experiencing this growth sought software that let them (1) simply get the large number of new cases under control, and (2) grow their practices in an efficient manner, keeping expenses down, and profitability up. In the post-Recession economy, filings plummeted to levels not seen in decades. With dramatically fewer filings, and a need to control expenses, downsizing of staff required that firms be able to handle the BAPCPA burden even more efficiently.

We believe these post-BAPCPA conditions and economy mandate that consumer bankruptcy attorneys discover what their colleagues in other practice areas learned a long time ago – that Legal Practice Management Software isn’t an option; it is as necessary as staff salaries, advertising and marketing, office space, and all the other expenses that lawyers consider part of the cost of doing business. This paper describes what LPMS is, and how it can be applied in the consumer bankruptcy practice to help firms manage their case loads, and let them grow efficiently and profitably, while minimizing costs and expenses.

What is Legal Practice Management Software?

Legal practice management software accumulates and aggregates all the relevant information about a case so that it can be easily accessed and used by lawyers and their staff. While there is no set rule, basic LPMS have four primary components: calendaring, task management, people management, and case management.

Calendaring / Docketing

Consumer bankruptcy firms need to be able to track a variety of dates and deadlines –initial conferences, signing appointments, 341 Meetings, claims bar dates, hearings, and more. Firm members obviously have to know where they need to be at any given time, and any firm with more than a few lawyers and/or staff needs to be able to view the calendars for everyone in the firm. Good practice management software makes it easy to see the calendar of individual firm members or the calendars of many or all firm members at the same time. Additionally, docketing systems are used to track deadlines and critical dates that are better processed and handled on a Docket List instead of a graphical calendar.

Task Management

All firms find themselves with certain tasks that need to be completed in a timely manner, and often in a certain order – accumulating all the documents that they need to complete a petition and accompanying schedules; fending off a Motion for Relief or to Dismiss; making sure that their client satisfies their debtor education requirement; or responding to Trustee or creditor objections to a Chapter 13 plan. Practice management software provides tools that enable firms to orderly track who is responsible for what tasks, when they are due, what tasks have been completed, and which tasks remain to be completed. Good LPMS include delegation systems that allow tasks to be delegated to others, making it easy to track their progress and to hold responsible the person to whom the task was assigned.

People Management

Every case revolves around people – debtors, creditors, trustees, counsel, opposing counsel, judges, and clerks. The “old school” way of doing this – the Rolodex – has been around for a long time, so tracking people is nothing new. But, good practice management software maintains a single, shared, list of all the people with whom the firm is in contact, with tools that enable them to easily search and locate the contact information that is needed. A tremendous amount of information can be stored – multiple phone numbers, multiple addresses, important dates, family information – and easily accessed.

Case Management

Chapter 7 and 13 cases are comprised of a wide variety of information that needs to be tracked – phone calls, e-mail, faxes, memos, notes, documents, contacts, financial data, events and tasks. Good practice management software provides tools to enter and then access this type of information from a shared, central location. Being able to work with every aspect of a case without having to search for the paper file in the file room is a central and key function of a practice management system.

All good practice management software have these primary components, but also have a number of other modules to help firms service their clients more efficiently.

Tickler System

Law firms implement all types of manual ways to make sure that a deadline isn’t missed, or a file doesn’t get ignored. Good practice management software enables the firm to make sure that users are constantly reminded of upcoming events. Cases or contacts that are not “electronically touched” in a certain period – say 90 or 180 days – are highlighted and brought to the attention of the firm.

Rules-Based Processing

Much of what happens in a consumer bankruptcy practice is very repetitive. Good practice management software with rules-based processing takes advantage of such patterns and repetition by automatically setting up events, tasks, phone calls, creation of documents, etc., based on the initial conference, the filing of the petition, or the 341 Meeting. For example, Claims Bar Dates can be automatically set from the date of the filing of the petition and the date of the 341 Meeting, while the receipt of the Trustee and Judge Assignment can result in the creation of Event records for the 341 Meeting and Confirmation Hearing, as well as a letter to the client notifying them of the dates and what they mean to them.

Document Management

Consumer bankruptcy firms figured out long ago that one of the biggest time saving legal technologies is document automation – the use of software that quickly compiles and updates the petition and schedules. But, how does one track all the documents that are needed to support the petition and schedules? And how can these documents, as well as all the letters, motions, notices, and other documents that are received on a daily basis, be easily located and accessed in the office and remotely?

Good practice management software has integrated document management components that let you easily capture the documents (faxes, letters, ECF, etc.), store them in a consistent way, and then makes it simple for anyone who is authorized to view them to locate them.

Time & Billing

All firms have to have some way to track their time and billing. While most consumer bankruptcy firms don’t do a lot of hourly billing, when you are able to petition the court for supplemental fees, it is important to be able to accurately do so. Practice management software tracks events and tasks, many of which form the basis of the time entries. Because much of the information needed by the time and billing program is already entered in the practice management system, time and expense slips can be easily generated using this information. The billing information is then available in an integrated billing system, or easily transferred into a time and billing program, allowing for the easy creation of billing slips, making it more likely that time isn’t missed.
A special need for consumer bankruptcy firms is to track when all the fees for a Chapter 7, or enough of the fees for a Chapter 13, have been received in order to begin to draft the petition. Without a billing system in place that easily provides this information the firm risks failing to file a petition even if the requisite fees have been paid.

Why Does a Firm Need a Practice Management System?

Having defined what comprises good legal practice management software, why does a consumer bankruptcy law firm need it? As with any decision a law firm makes when investing its limited resources, the firm should compare the total cost associated with the system against the economic return that the system brings the firm. If the return is greater than the cost, then it makes sense to invest in the system. With this in mind, what returns can a law firm expect from the use of LPMS?

General Returns

With just over half of all law firms in the United States utilizing some type of true practice management system (meaning a system other than Outlook or cobbled together applications acting as LPMS), there must be a reason why law firms make this type of investment. The common advantages and returns of any type of LPMS are:

Malpractice & Risk Avoidance

Firms can use LPMS to reduce their exposure to risk and malpractice in several ways. First, tickler systems ensure that deadlines are not missed and that files do not get stuck in a filing cabinet and disappear – a fear of many lawyers. Second, a conflict checking system makes it less likely that a conflict is missed and a firm ends up representing a client that they should not be representing. Finally, rules-based processes make sure that the staff doesn’t miss an important step in a case that could result in malpractice. These checks and balances clearly satisfy the requirements of most if not all malpractice insurance contracts. A firm saves by lessening the chance of a malpractice judgment – a hit to the firm’s pocketbook and reputation – and saves money by reducing malpractice insurance premiums.

Time Savings

Law firms that can perform work in less time can take on more work, or enjoy more leisure time. Practice management software, by making all information centrally located, reduces wasted time that every law firm experiences searching for hard to find files or documents. When a client calls, information is instantly available to the attorney and office staff – that leaves more time to practice law with and for the client, and less time searching for information. Having all the relevant information in the practice management system also reduces the need to maintain duplicate data. If a change is made to a client’s address, for example, it is also changed in the time and billing program and in subsequently created letters. As important, when the address is changed for use by lawyer A, it is also changed for use by lawyer B. This not only eliminates having to enter data more than once, but makes it more likely that the data is accurate everywhere it is needed.

Increased Efficiency

When a law firm knows where its data is, the firm’s lawyers and staff can be more efficient. A problem that every lawyer experiences is making sure they know what to do next in a case. Rules-based scheduling makes sure that the process is pre-defined, maintaining firm standards, and that the entire firm moves efficiently from one task to the next. “What’s the status of the Jones case?” With a practice management system, everyone knows, and with minimal effort. With group scheduling there is no “scheduling tag” that results in the sending of numerous e-mails or memos in an attempt to get several lawyers together – simply pull up everyone’s calendar and see when they can get together. If a staff member or attorney leaves the firm, another staff member or attorney can immediately pick up where the departing employee left off. And, with information centrally located, lawyers can better collaborate on projects and know what others in the firm are working on. These are just a few examples of the many ways that LPMS can help make a firm more efficient, and therefore more profitable.

Better Work Product

Because legal practice management software saves time and increases efficiency, there is more time to practice law and reflect on clients’ cases, and it is more likely that better work product will be produced, with higher success rates. This, in turn, can generate a better reputation and more work for the firm. Simply put – better work product, more profits.
As first designed, LPMS gave law firms a place to put information about each file. Today, almost every activity that takes place in a law firm can be recorded and tracked in legal practice management software, creating better work product and resulting in a law firm that is more effective, efficient, and profitable.

Consumer Bankruptcy–Specific Investment Returns

Having helped many hundreds of law firms of all kinds – personal injury, insurance defense, immigration, real estate, trusts and estates, elder law, corporate, and many others – implement and manage legal practice management software, I believe that the value of LPMS to consumer bankruptcy law firms is greater than it is in most all other types of firms for the following reasons:

• BAPCPA – it would be difficult to find an Act that so thoroughly changed the landscape of a legal practice area. Among other things:
  • There are many more tasks required to get the petition filed.
  • In particular, the accumulation of information and documentation has become a truly onerous task.
  • The shift from Chapter 7s to Chapter 13s will increase the case maintenance and management needs for a much longer period of time.
• Margins in this type of practice are tight due to competition, the control exercised by Trustees, and the nature of your clients (who obviously are having financial problems) … any efficiency edge you can get increases firm profits.
• The nature of the work is very repetitive and capable of being automated.
• Pre-petition needs, especially for volume filers, requires a great deal of staff collaboration and scheduling – one of the strengths of LPMS.
• Post-petition work is very rules-based and subject to being streamlined by the tools available in LPMS.
• Because of the wide adoption of ECF, the use of scanning and paperless office technologies that are encapsulated within LPMS are extremely useful.
• Time is truly money – your fees are for the most part set by local competition and the Trustees. This means that if you can do what you need to do for your client in less time, you maximize profit. Moreover, if you can reduce the chance that a client’s case ends with an adverse outcome, you protect your time and make more money.

In addition to these general points, there are some specific points that lead to an even greater return on your investment:

Handling More Work with the Same or Fewer Staff

As an initial point, the larger the firm, the more likely that good legal practice management software will enable it to do the same amount of work with fewer employees, or more work with the same number of employees. Either of these outcomes results in easily quantifiable and substantial savings. Assuming an average support staff costs $30,000 per year, for every such employee you don’t have to hire you save $30,000 per year, every year.

Codifying the Firm’s Protocols Reduces Staff Development and Turnover Costs

Codifying business processes and protocols within legal practice management software reduces the cost of staff development and turnover. A common problem for law firms of all types is not having established business processes, resulting in each employee having their own way of doing things. This causes ongoing inefficiency, increases the difficulty in training new employees, and dramatically raises the cost of staff turnover. Because LPMS establishes how your firm operates – codifying your firm’s business processes and protocols – your firm will be more efficient, it will be less likely that you will have employees using their own systems, you will be able to get new employees up and running more quickly and less expensively, and your firm can better handle employee turnover.

Checklist Systems

One of the, if not the major, impacts of BAPCPA has been to drive up the amount of information and number of documents that you have to collect from your clients. This has required more and additional steps be taken to make sure that you have, for example, accumulated all the pay advices that you need in order to properly draft the petition. Failure to obtain a single pay advice can result in having your client’s petition dismissed or having to take the time to redraft the petition and schedules.

Good case management software should provide a variety of checklists to make sure that all your tasks are getting done. For example, checklists can track the documents and information you need to prepare the petition; track the steps that are needed to draft and file the petition; and track what needs to be done after the filing of the petition to head off foreclosure or garnishment, or to extend or reinstate the stay.

These types of checklists provide a number of advantages and returns to the firm:

• Senior staff and attorneys create and customize the checklists so that work can be done by less experienced staff with less concern that a mistake will be made or a step missed.
• Checklists make it easier for teams to check in with each other to make sure that the work is getting completed in a timely and proper fashion.
• Checklists provide a valuable audit trail that helps to make sure that the work is getting done, and also provides a way to go back to see why a mistake might have been made, improving future performance.

Critical Date Systems

While consumer bankruptcy firms have always had to track critical dates, in these days of ever increasing foreclosures, a critical date system is an absolute requirement. Good LPMS for consumer bankruptcy firms enables the firm to respond to true emergency filing needs by providing “bare bones” filing support, and by providing tools to make sure that petitions get filed before collection activities like foreclosure, repossession, garnishment of wages, or levy on bank accounts.

Where the deadline for these actions may be several months or more in the future, it may not be an immediate emergency but it still poses a challenge to the firm as they have to make sure that the date isn’t forgotten and missed. A critical date system that provides this protection from malpractice exposure is invaluable.

Follow-up System

Larger filers have to deal with the issue of potential clients who set an initial appointment but fail to show (no-shows), and those who show but for a variety of reasons don’t retain the firm during the initial appointment even though they are a qualified prospect (no-hires). Because a substantial investment has been made in getting the prospective client to set the initial appointment, it is important to have a “follow-up” system in place to methodically contact the prospect to get them to come to another initial appointment, or to come back for a retaining appointment.

Good LPMS for consumer bankruptcy firms should have a system that enables the firm to increase the number of prospects that eventually become clients. If, for example, such a system helps a firm get just one no-show to “show,” or one no-hire to come back for a retaining appointment each month, the firm can increase their annual revenue by $12,000 – $40,000.

Dismissals/Post Dismissal

Chapter 13 cases are often dismissed prior to discharge. It is safe to say that in many districts over 50% of Chapter 13 cases end in dismissal instead of discharge. Depending on the jurisdiction, a dismissal can result in direct loss of Chapter 13 fees for which substantial work has already been done, or the loss of potential supplemental fees in the future. LPMS that makes it easier to fend off the dismissal to begin with, or makes it easier to get the client back in to re-file, reinstate, convert, or take other action that continues the case, can directly impact revenue and profits. As in the previous example, if a firm can use such a system to fend off just one dismissal per month, the firm can increase their annual revenue by $12,000 – $40,000.

LPMS also moves files through the pre-filing stage quicker. The sooner you can get a Chapter 13 filed and confirmed, the sooner you begin to receive your fees through the plan. This is also a cash flow issue – the longer you take to get a Chapter 13 case confirmed, the longer it is before you being to get the trustee plan payments.

Call Center

More for volume filers than smaller firms, a Call Center can easily result in picking up several additional cases per month. For example, when a prospect calls into the firm, phone scripts ensure that the right information is collected and given to the prospect, and that an initial appointment can be quickly made. Because these appointments are properly set, the prospects are more likely to show.

As the Internet becomes a larger source of client leads, it is important that the firm get in touch with the prospective client as quickly as possible. The longer they wait the less likely they are to land the new client. Also, because these types of leads require outgoing calls, where you are likely to experience disconnected numbers, answering machines, and ignored calls, you have to have a way to track your attempts to contact the prospect. A Call Center should provide a methodical, persistent way to maximize the likelihood that you will be able to get in touch with the prospective client to set an appointment.

Finally, a Call Center should provide the ability to make appointment confirmation calls. Making a confirming phone call the day before the appointment has been shown to increase the likelihood that the prospective client will keep the appointment that has been set.

As with the other systems discussed above, if a Call Center enables a firm to add just one more client each month, the firm can increase their annual revenue by $12,000 – $40,000.

Business Metrics

Using LPMS to track the activity in your firm provides you with business metrics that can be used to track the performance of your firm in a number of areas. Some examples are:

• You can ascertain where your business is coming from by tracking how your prospects and clients find your firm. You can drill down further into this data to see if your closing rate on prospects is better for certain advertising sources than others.
• You can compare the rates of “no-shows” when a confirmation call was made the day before the appointment to see if such a call helps in your area.
• You can compare the Show and Retain rates of your staff who are involved in the setting of appointments, or interviewing prospects, to see if some staff are doing a better job than others. This will let you make adjustments and provide additional training to raise the quality of your staff’s work.

There are many of these types of comparisons and analyses that can be made across the spectrum of your firm, providing you information that you otherwise would never know about.

Online Portal / Web-based Access

With the Internet, remote access to information has become a capability that most lawyers rely on every day. The information in your LPMS should not only be accessible by your firm, but also by your clients, creditors, and Trustees. By giving fully secured access to selected information to your clients, you are more responsive to their need to know the status of their case. Creditors can use this secured access to verify representation. In both instances, you are providing access to information without your staff’s involvement, reducing the number of phone calls and emails you have to handle. This savings in time can result in better efficiency and more profits.

Summary of the Economic Opportunity

Having implemented LPMS into hundreds of law firms over the past 20 years, and having spent a decade researching the needs of consumer bankruptcy law firms, interacting with multiple firms, both large and small, and familiarizing myself with the their various internal practices, there is no doubt in my mind that every consumer bankruptcy firm can reap appreciable economic benefits by automating their efforts with the right LPMS.

During the time I spent developing, installing, training and monitoring the LPMS with which I am familiar (Time Matters), across multiple clients, I have personally witnessed the improvements and rewards such a system can bring. Differences in the results I observed were typically driven by:

• thoroughness of the LPMS implementation and training
• the size of the firm
• how time saved is reinvested, and
• the ability to grow their client base

Some of the returns were immediate, while others took up to a year to materialize. Regardless of the timing, even the lowest returns justified the cost of the LPMS.

Recognizing that law firms’ needs and practice patterns vary, I offer that, moving forward, every consumer bankruptcy firm will eventually recognize the need for, and value of, installing LPMS to improve the quality of their services, improve internal efficiency, reduce internal mistakes and associated risk, and thus realize higher profit margins.