One attorney’s quest for bankruptcy’s Holy Grail of discharging student loans

In this episode of Bankruptcy Law Success, I interview Michael Jaafar, a bankruptcy attorney in Detroit who believes that he’s found bankruptcy’s Holy Grail: discharging student loans in bankruptcy. Specifically, he found a way to get bankruptcy to discharge the entire balance of most private student loans that does NOT rely on meeting the difficult “undue hardship” standard.

Some of the highlights in this interview include:

  • Why you don’t have to do anything extra to discharge those private student loans besides fill out Schedule F like you usually do
  • The exact legal approach that enables you to re-open old bankruptcies, so that you can discharge most private student loans, get back all payments made since that bankruptcy, and get attorney fees and statutory damages, too
  • How you can convert your past bankruptcies into a gold mine of huge payoffs for your clients (and you, too)
  • And a whole lot more, including how satisfying it is to discharge a client’s private student loans and “change the trajectory of their life forever”

You can listen to the episode by clicking the “play” button in the audio player above, or read a full transcript below.

You can also subscribe to get an email when we release new episodes of the Bankruptcy Law Success podcast.

Bob: Hi, this is Bob Hiler of the Bankruptcy Law Success podcast, where we introduce you to successful bankruptcy lawyers, as well as powerful ideas that can transform your bankruptcy practice. Today, I’m speaking with Michael Jaafar, an attorney in Detroit who co-founded Jaafar and Mahdi group in 2008 and then Fairmax Law in November 2015. Michael, welcome to the podcast.

Michael: Thank you so much for inviting me.

Bob: So, yeah, we were actually introduced by Dave Danielson over at CINgroup. I met Dave through the podcast, he’s a fan. So, Michael, how do you know Dave?

Michael: Dave is the owner of — well, the CEO — of Best Case Bankruptcy, and that’s the software we use to process our bankruptcy filings.

Bob: But not everyone knows the CEO of their bankruptcy software company. So how did that happen?

Michael: You know, we are a heavy volume filer. But also, we came to his attention because of our unique work in discharging student loans and bankruptcy. So he reached out to us.

Bob: Awesome. I definitely want to get into the student loan side of things but I thought we’d just start by getting to know you a little bit. I saw on your website that you’ve graduated from Wayne State Law School in 2006 and you started as a… Did you start as a trial lawyer? Is that how it happened?

Michael: Yeah, I started off as indigent defense attorney defending people who couldn’t afford attorneys. I was court-appointed by some cities. And so as you can understand, I did a lot of trials. Pretty much, that’d be pretty much two to three trials a day. It was an hour preparation, that’s the nature of that work. I wasn’t unique in that sense. I was just any other public defender doing a lot of trials, a lot of motions. I’m talking about more trials than motions. More trials than even anything, just pretty much two to three trials a day helping people, defending people. And I did that for the first couple of years of my practice, of my career.

Bob: Did you enjoy that work? How did that go?

Michael: Yeah, I didn’t like it. Some people will give you the politically correct answer and say, “I like helping people a lot. I love helping people.” I didn’t like seeing people be corralled to the system, like meat. A lot of people deserve a great defense, which was impossible when a judge would tell you, “Young guy, come here. We have a trial starting in… Well, the trial started 10 minutes ago and there’s no attorney to represent this person. I need you to jump in and you’re gonna defend this person. There’s three witnesses against him and there’s your client — we forgot their name — go ahead and get started with the trial.”

I didn’t like that aspect of it. It’s a broken system; everybody agrees it’s a broken system. I did my best. I actually had a winning record at trial but despite that, it just didn’t… It’s a broken system and everybody, every participant in the system, is frustrated except for the prosecutors. They have a big heads up. You know, they had a big leg up on the competition, on the other side. Obviously, they’ve prepared for these trials, they have everything in their favor.

But everybody else is frustrated with the system. That’s why there’s a high turnover in that market. And in addition to all of that, the attorneys aren’t even paid that well. I mean, that’s the reason why only young inexperienced attorneys go there because that’s the last resort… that’s the last thing they resort to when they want to get their career started and they don’t have any other opportunities. So I did not enjoy that, no.

Bob: But it must have been sweet when you did win and you beat those prosecutors despite their resources.

Michael: Yeah. I actually won my first trial ever and that was a trial where I was retained 10 minutes after the trial began because the defense attorney — who’s actually now a judge — found out he had a conflict of interest after the trial began. So they called me — I was on the treadmill in my shorts — and they said, “There’s a trial going and we can’t find anybody to do it. We’ll wait for you but we need you to show up.”

Bob: Wow.

Michael: I put on my suit, showed up, didn’t know my client’s name, no witnesses in her favor, three witnesses against her, domestic violence case. And I actually won that.

Bob: Wow.

Michael: It was nice. It was nice.

Bob: So I can see why you kind of burned out of doing that. You started the Jafaar and Mahdi Law Group in 2008. So what was the focus of that law group? Are you still involved in that practice?

Michael: No, I sold the firm to my partner two years ago. And it was a great separation. We’re still in the same office but that firm now rents space from me and I founded my own outfit called Fairmax Law.

Bob: So Jaafar and Mahdi, what was the focus of…

Michael: Bankruptcy.

Bob: It was just bankruptcy?

Michael: Yeah, bankruptcy. You know, I’m an accountant as well so I do a lot of business transactions but I don’t advertise for them. I do them for select clientele ’cause I have a lot of experience with that prior to becoming an attorney. But I don’t advertise for that. You can’t advertise for business transactions, you just have to develop a following. And we also do a lot of traffic matters, a lot of traffic defense, traffic tickets, reckless driving, DUIs, stuff like that because obviously I had that experience from when I was a public defender.

Bob: OK.

Michael: But the main, main, main thrust of my entire career and the way I feed my family — pretty much 90% of my work — is bankruptcy and debt defense, credit repair, filing FCRA complaints, so on and so forth.

Bob: How did you get your start in bankruptcy then?

Michael: When I was in law school, the longest standing Chapter 13 trustee in the country ended up being one of my professors. And I developed an interest in bankruptcy from his class. And bankruptcy directly relates to my true passion, which is accounting. Pretty much, you need to be an accountant to really, really do a bankruptcy well.

Bob: OK.

Michael: That’s why some trustees aren’t even attorneys. Some bankruptcy trustees are not even lawyers, they’re CPAs, like me. So I had an affinity to it for all of those reasons so I said, “Let me take a shot.” And then in 2008 — I don’t know if you remember — but then, the world economy melted and there was a gigantic influx of bankruptcy filings.

Bob: Yes.

Michael: And so it was just the right timing. Bankruptcy was the issue of the time. It was on the nightly news. It was everywhere. It was all around you. Bankruptcy was everywhere. And so I figured, let me throw my hat in the race and see what I can do. At that point, you could find bankruptcies in an elevator. I mean, you can find them everywhere. You can just accidentally… you can actually file five or six bankruptcies even if you weren’t even a bankruptcy attorney. So the easiest time to start a bankruptcy practice was at that time, 2007, right? When we started getting ready to open our practice…

Bob: OK.

Michael: So that was absolutely the right time and the rest was history for me.

Bob: So one of the things that I find kind of interesting checking out your website is that you not only do bankruptcies but you do FCRA violations, FDCPA violations.

Michael: Yes.

Bob: You even do kind of credit repair and help people avoid bankruptcy. It seems like you’re taking a — and I think you have language to this extent somewhere on your site — but you take a holistic approach and you kind of use the whole animal rather than just kind of taking out the bankruptcy part.

Michael: Yes. Yes, absolutely. Absolutely.

Bob: So how did you evolve towards that strategy? Because most people, when they went through the mortgage meltdown, the Great Recession, whatever you call it, most people were so kind of busy cranking out bankruptcies that they weren’t… You know, you don’t need to use the whole animal. So how did you evolve that approach?

Michael: That’s so great… I’m so glad you asked that. Here’s exactly how. I knew at that time that bankruptcy would eventually fade away, not go away entirely but I knew that we were in just a temporary upswing in terms of filings. And I enjoyed helping people who were in debt so much that I said, “How can I do this for the rest of my life? How can I do this professionally forever, as opposed to just doing it now and going back to the disgusting legal work? Disgusting legal work such as divorces and criminal defense and public defense. How can I avoid ever having to go back there?”

There will always be people overextending themselves with debt. So why not start helping people avoid bankruptcy when they want to avoid bankruptcy? Because one of my paralegals one time told me a story that I will never ever forget.

She worked at a collection firm. And she told me… I asked her a question, I said, “How many people would you guys successfully be able to garnish?” She said, “Well, we were able to successfully garnish pretty much 80% of the people that we had judgments against. You know, wage garnishment. The rest of them, we were able to garnish at least with a bank account or a vehicle or a property seizure or a bank account seizure.”

I said, “Ok, of the people that were getting wage garnishments, how many of them would file bankruptcy? I thought she was going to tell me 100%. She told me 5% of people that had a wage garnishment would ever file bankruptcy, 95% would just allow the wage garnishment to go until we got all of the money.

Bob: Wow.

Michael: And that kind of stunned me. So when I realized and she told me that, from that day on, she changed my life. I was never the same. She told me that. I said, the fact that 95% of people are willing to be garnished and not file bankruptcy, that means that people will never… They just will not file bankruptcy, period. People will just do everything they can to avoid bankruptcy.

You know, it’s indoctrinated within us from childbirth that the word “bankruptcy” is bad. The word “bankrupt” is an epithet. An absolute epithet. They can tell you… They say things like, “Well, this person is morally bankrupt.” So what are you going to think as you grow up if you hear phrases like “morally bankrupt”? You know, somebody is devoid of character, somebody is a deadbeat, which are all bad words and they’re inapplicable.

You’re not a deadbeat. You’re not a deadbeat if you had a heart attack and your insurance denied you coverage and you have a $50,000 medical bill and you have two kids. You’re not a deadbeat. You’re absolutely not. You’re not even a bad person. You’re nothing. You’re a normal person who had bad incidents. But you now… It’s compounded… Your pain and suffering is compounded by the fact that society now has labeled you as a deadbeat because you have to go to a bankruptcy hearing to avoid a garnishment, which will prevent you from feeding your kids.

So I told myself, “I’m going to do everything I can to make a living helping people avoid collection, right?” So I came up with the way of settling debts, of helping people avoid bankruptcy by settling debts. Now, I rarely allow people to hire me for that because most people are better served in the bankruptcy context. But I have a steady, steady stream of clients that I do debt settlement for, which is, “Let’s avoid the bankruptcy and let’s settle your debts.” And that is for people who absolutely just refuse to file bankruptcy or people who should not file bankruptcy for other reasons. They maybe have some fraud, maybe they have some transfers, maybe they had too much assets. So there are some people that shouldn’t file bankruptcy.

But the main, main, main, main thing that I think will — one day when I die — will be a part of my legacy by my colleagues is the student loan stuff and the FCRA stuff. And even the FCRA stuff, suing credit bureaus, that’s not even that unique. There are a lot of attorneys that do it and I love doing it. I actually wrote a continuing education book on it, right? So I love doing it but that’s not something that’s unique to me. That’s something that I learned from other attorneys and that a lot of attorneys do. Things that I will…

I’ll probably never develop something as unique or clever or dynamic as the work we’re doing right now discharging student loans. That would be my absolute legacy. I will never do anything as unique as that. And I can constantly say, me and my guys at my office are the only attorneys in the country that are doing it. There isn’t a single other attorney that is doing it or even knows about it.

Bob: So, yeah. Let’s talk about that. How did you come across this little mini practice area?

Michael: So Dave Danielson introduced me to a really, really smart young lawyer named Austin Smith and he connected us. And we created this synergy in my office helping people with student loans. Austin had done a lot of research and he had really pioneered and done some research. And he and I had a lot of conversations, a lot of meetings. And I credit him for tuning me into it. And we had many, many, many, many long several hour sessions of discussing how to build a practice, how to monetize it, how to go after the cases.

Austin and I, and Dave [Ienna], after many, many, many hours of conversations, we decided to have a little quick conference together face-to-face where we drove to Chicago and then he flew in to Chicago. And we spent an entire day at a Starbucks in downtown Chicago huddled around a small table. Nobody left that table. We never… You know, maybe one or two bathroom breaks. Nobody ate a single bite of food. We had initially said we’ll go out to dinner. We never… we forgot about dinner plans.

We just sat down and we didn’t eat, just sat there all day, huddled around a small table at Starbucks and we basically carved up a system to go after these cases and the rest was history. We’ve been going after these cases, we’ve been going after attorneys, we’ve been going after anybody who could listen. And we’ve been filing cases and we have yet to lose a single one.

Bob: OK. So let’s take a moment here to explain to the audience what your cases are, what’s the specific kinds of student loans that you found to be dischargeable?

Michael: OK. This only applies to private student loans, which is billions of dollars of private student loans are out there in the United States. So this is definitely a gigantic, gigantic subset of student loans. This does not apply to federal student loans. It only applies to private student loans.

And the fact pattern is a little bit complex — not complex for us but it’s a little bit complex probably for the podcast. It gets into a lot of technicalities but the short of it is, if anybody who has a private student loan, they most likely received that private student loan after 2003 when the Bankruptcy Code was amended to make them non-dischargeable. However, the way the bankruptcy law was structured to make them non-dischargeable, it actually did not make them non-dischargeable. It only made a small subset of private student loans non-dischargeable.

But creditors made mistakes in their underwriting and they went too far — as they usually do — and they were basically handing out student loans. But they’re handing out a lot of loans under the guise of a student loan but they didn’t follow the underwriting criteria set by the statute to make sure that they were a non-dischargeable student loan. So they were giving people money that they should not have given them. And because of that, it’s not considered non-dischargeable because of that. Even though it’s scheduled as a student loan and even though the statements say “student loan,” they’re actually a regular loan. OK?

But the curious thing is, creditors that gave them look at them as a student loan and they treat them like student loans. Meaning, I don’t care if you filed bankruptcy, I need my money. If you’re not going to give me my money, I’m going to sue you. I’m going to get a judgment, I’m going to garnish, right?

So if you’re a bankruptcy attorney, the way you have to look at it is, what would you do and how much value can you provide for your clients and for your practice if I told you billions of dollars of regular credit card debt out there by Citibank and Chase and Wells Fargo… And they are going after your clients even though your client got a bankruptcy discharge and notified them and collecting on them in garnishment? You would basically be in heaven at that point. You would have a lot of extra work to do and a lot of value you can provide to your clients ’cause that’s basically what’s happening.

And these creditors are going after these “student loans” as though they are student loans. as though as they were not dischargeable, when in fact they were discharged. So what we do is we file a motion to reopen the bankruptcy in some districts — other districts don’t require that — and then we file a motion for contempt. We ask for the remainder of the debt to be completely wiped out and all the money that has been collected post-filing to be returned plus attorney fees.

Bob: Wow. And what about some of these other things, like does this violate FDCPA or anything, any of the other kind of statutes out there?

Michael: Yeah, everything is a possibility, everything. FCRA, I mean, they report delinquencies to the credit bureau. So that’s the first thing. They also send collection letters for discharged debts, which is also illegal. They call you, which is a violation of the TCPA, Telephone Consumer Protection Act. They harass you, they sue you, they also violate your bankruptcy discharge. They do a lot of…

Obviously, I mean they’re collecting on you on a debt that was discharged. I mean, the amount of things that we are able to allege against them is seemingly limitless.

Bob: So if there’s someone has like — I don’t know — let’s say $20,000 in a private student loan that should have been discharged in a bankruptcy, if that case did not settle, like what’s the kind of max alternative to a settlement that you could get through a court process?

Michael: I mean, the max, obviously that you can get on — pretty much on a case like this — I mean, it’s just to get back the money that was illegally compelled to be paid plus attorney fees plus statutory damages. I mean, there’s statutory damages under the FDCPA and then under the FCRA, I mean it’s just attorney fees, attorney fees and statutory damages.

So we’re not talking about a million dollars per case. We’re talking… I mean… So we’re bound very tightly by these confidential settlement agreements. But what I can tell you is if you look at a typical case going forward in the future, I mean it would basically be pretty much what I just laid out, which is recouping of the money that was paid, plus attorney fees, plus some statutory damages.

You’re not talking millions of dollars but you’re talking about enough money to make the difference in somebody’s life, right? Your client… So if you have a client who gets a phone call from you and you say, “Hey, I did your bankruptcy a couple of years ago. I just met these attorneys out of Detroit that might be able to help you get rid of all these student loans. And hey, I know you’ve been paying on them but you owe about $80,000. Why don’t you give them a call?” And let’s just say that person called us. I got to talk about this as though it’s a case going forward. I can’t talk about cases that we have or that we settled.

Bob: No, no, I understand. I understand.

Michael: So imagine six months later after we do what we have to do and we have not charge this client a penny, we call the client and we tell them, “We’re going to get back the money you paid plus we’re going to get attorney fees plus all of the $80,000 that you still owe is completely wiped out.”

I mean, what’s that going to do for you? It’s going to do a lot. It’s going to do a lot. So that’s what we’re talking about. We’re talking about the type of thing that would change somebody’s — the trajectory of their life forever.

Bob: Yeah.

Michael: You know, that’s a whole entire retirement account. That’s all entire retirement account for a person. I mean, you instantly basically gave them a forgiveness of $85,000 of debt with interest, which would have taken them 30 years to pay. And they wouldn’t have paid $85,000. They would have paid probably $170,000 over 30 years. So you’re helping people out a lot.

Bob: So Michael, help me size this. I mean, like what percentage of private student loan debt issued after (say) 2003 is subject to being discharged in a bankruptcy?

Michael: That’s a tough statistic. First of all, that’s pretty much the only time that … private student loans were issued. It was after 2003. Pretty much all private student loans were issued around after that. But in terms of the amount that would be discharged, that’s a tough statistic. I don’t know. So what I tell people is “a lot.” I like to think of it as more than 50%. But I can’t give you like an actual statistic because it’s case by case. But it might be as high as 80%.

Bob: Wow.

Michael: It might be as high as 90%. Let’s just put it like this, it’s a lot. It’s not 5%. It’s not something small, it’s not like we have to fish for these cases in the Bering Sea. We’re fishing for these cases out of a barrel. These are like shooting fish in a barrel. I mean, it’s really easy to find these too. We just have to have somebody pick up the phone and call us. When we talk to 10 people, we usually like eight of the cases.

Bob: Wow. So you and Austin and the third attorney…

Michael: David.

Bob: David. Like how did… OK, so like I understand that these cases exist because they’re not meeting the statutory requirements as defined by the 2003 law to qualify as student loans. Now that you found the needle in the haystack, you can kind of do it many times. But how did you find the first needle? I mean, how did you figure out that… Most bankruptcy lawyers will never even look at the terms of a student loan.

Michael: Lots of research. Lots of research. Just lots of research.

Bob: Like how did you even think to do that?

Michael: It was a lot of research. I give the credit to Austin. He was the progenitor of this research and it was burning the midnight oil for about three years straight as a hobby. And then it’s like one of those things when the truth begins to unfold, you keep peeling layers. You keep peeling back layers until you finally get to the core. And once you get to the core… I mean, if you start peeling layers and every time you peel back a layer, you see another layer and you know how to pull that layer back, you just keep peeling and peeling. So it’s kind of one of those things like a snowball effect, it’s a self-motivating type of thing.

Bob: So two things occur to me. First, this technique… And do you have a name for this technique?

Michael: We never gave it a name. I think we say — between us, in our team — we call it a Cost of Attendance case. We just gave it that name because one of the major requirements is the loan was given in excess of the cost of attendance. That’s like the first test. That’s why I say pretty much almost every student loan was given to you more than what the cost of attendance was at that school. So we just call them Cost of Attendance cases. That’s just how we call them internally.

Bob: It’d be great to give that a sexy name.

Michael: Yeah.

Bob: Because it really does seem like… I mean, there’s a real Erin Brockovich moment here as you tell me, as you describe this to me.

Michael: It really is. It really is. No, it really is.

Bob: So the first thing is that if somebody is a bankruptcy lawyer and they’re filing on behalf of a client, like they really need to be discharging these cost of attendance private student loan debts.

Michael: You see, this is the frustrating part. This is why it’s so frustrating that we haven’t been able to convince attorneys to pick up our calls. Some have but en masse, they’re not doing it. Here’s the frustrating thing: they don’t have to do anything. When they schedule it, normally just put it on schedule F. It’s automatically discharged without them having to do anything. It’s just discharged. They literally, they just have to keep doing what they’re doing, they just have to… They’re just telling their client, “Well, just so you know, even though we’re scheduling this, we’re doing it because we’re required to schedule it, it’s still not discharged. You still have to pay this back.” That’s the frustrating thing.

And kind of a lot of like what I call “mental laziness.” There’s a lot of people in this world that are just mentally lazy. Once they get into a routine, they don’t want to break it. So if you’re a bankruptcy lawyer and you’re mentally lazy and your colleagues and peers and even judges told you, “Well, it’s a student loan so obviously it’s not dischargeable,” that’s it. So if another attorney from another state tells you, “Hey, I’m discharging them. Call me so I can work with you on your cases and split the fees.” Like, “Yeah, I’ll get to it. I got a scheduling conference at 10. I’ll call you later.” And then he just goes away.

A lot of people, it just doesn’t dawn on them. “Hey, let me take this seriously. This is actually a big deal. Let me call this person now or let me make sure I call them on my way home to make sure that it’s not a scam. Make sure it’s real.” They just don’t. They just don’t do it, they just let it go.

Bob: OK. We’re not getting too much in the details though, what are the steps that a bankruptcy attorney — let’s call it a naive bankruptcy attorney who wants to become non-naive about this cost of attendance private student loan issue — what do they need to do in order to discharge these private student loans, at the time of the bankruptcy?

Michael: Nothing. They need to do everything the way they’re doing now, just don’t tell their client there’s a discharge. Now, to know for a fact that that’s going to be discharged…

Bob: Yeah, they need to analyze the paperwork on the student loan.

Michael: Yeah, they need to analyze which… That I can guarantee you they’re not going to do. And that, I don’t blame them because they’re not going to spend three years of research to learn it. They’re not going to do that.

Bob: Yeah.

Michael: They’re not going to do that, right? So what we’re trying to tell people is hey listen, just call us. I mean, it’s not going to cost you a penny. It’s not gonna cost your client a penny. It’s not gonna cost anybody a dollar so call us, let us work with you on it. And actually Best Case just put something called the Student Loan Analyzer tool in Best Case software. And they can actually use that.

And what we’ve been telling the attorneys is: “We’ll show you how to use it for free. We don’t need you to pay us any money. We will show you how to use it free of charge and in return — we don’t want anything in return — but in return, we know you’re going to remember that we are the authority on it. And so when you have cases, clients calling you telling you, “Now, they’re coming after me,” well we will take on the case and we stand to gain.

Bob: So let’s pay Dave Danielson back a little bit for introducing us…

Michael: OK.

Bob: …and talk about what the Student Loan Analyzer does. Does it actually analyze a private student loan and tell you whether or not it violates this cost of attendance rule that you’ve come up with?

Michael: Yeah. I mean, he’ll tell you “yes.” And then I could tell you the answer as well. The answer is “yes,” it will tell you whether or not that loan is dischargeable.

Bob: Wow. I mean, I would argue based off of what you’ve told me and obviously I’m not a subject matter expert here but based on what you told me, it’s legal malpractice not to do this check if you’re going to file someone’s bankruptcy and they have student loans.

Michael: Well, it is. Yeah, absolutely. It is legal malpractice, yup. Especially now since there’s more and more and more instances of somebody else telling you, “Hey, these bills probably are discharged. Call us so we can explain why.” If you just say, “I don’t want to call you. I don’t have time.” And I’m going to go about my business like usual, then I think at a minimum, at best, it’s legal malfeasance.

Bob: So it sounds like you’ve been contacting lawyers. Ironically, the longer the student loan borrower has been suffering since the discharge, the more damages there are and the deeper the pockets are from the student loan company in terms of paying it back.

Michael: Absolutely.

Bob: It’s just weird the way the world works sometimes, like the longer they’ve been suffering, the bigger the pot of gold…

Michael: Yes. Yes. Yes.

Bob: It’s sad that it’s that way. OK, so you call up a bankruptcy attorney and you say, “Hey, work with me on these old cases and I’ll split the fees with you, or referral fee or however it works.” So you’ve been doing that. I understand that you’re frustrated that not every lawyer in the world has gone back to you but it sounds like it’s going pretty well and that these cases are pretty easy to win. So tell me how that’s going.

Michael: Yes. I mean, the cases are going great. Like I said, we have not yet lost a case, and we’re very happy about that. The cases that we have not yet settled, we don’t see any way of losing them. And we’ve got the upper hand on all of them. And they’ve always inevitably get to talking about settlement.

There’s one case that we just won a decision on and they — rather than talking settlement — filed a notice to appeal the judge’s decision and you know, we’re confident in that case as well. So we’re going to continue chugging along and we’re never going to give up.

We just want to keep getting more and more of these cases. And right now, we’re pretty much getting maybe one case every month. But we want to try to take it up to maybe getting 20 to 30 cases a month so we can focus solely on that.

Bob: And why not? Yeah, that would make sense. So you’re reaching out to these other bankruptcy attorneys. You know, tell me if I’m asking too pointed a question but have you thought about just reaching out to the people who have filed bankruptcy? I mean, can you look back in the court record and find that Bob Hiler filed for bankruptcy on X date, and then contact Bob Hiler?

Michael: We tried but it’s too difficult and it is too expensive, and people don’t trust, right? So we tried but here’s the thing, I mean, you’ve got one case at a time not knowing whether or not that person even had a student loan to begin with, right? Because not everybody has student loans so we’re going one case at a time and even then, people’s phone numbers are not listed so we can’t call them.

So we got to send them a letter. We don’t know if they have the same address and even if they do, they don’t know you, right? So it’s very tedious, it’s very difficult, and it’s not worth the time, right? Because with the statistics, the way the statistics are, if you’re going to get one out a 100 people who actually even had a student loan, that’s going to take you hours to look at 100 people and you got to spend a lot of money because PACER charges you to search.

And then one out of 100 people, now you spent hours to get one person so you’re going to have to spend dozens of hours to get maybe 20 people. And of those 20 people, what if none of them ever respond to your letter? So they either don’t know who you are or it sounds too good to be true or they changed their address. So it turned out to be not worth it.

So what we came up with was what I thought was the best system, which is call bankruptcy lawyers, because bankruptcy lawyers with one click of a button — we know, they don’t know how, but we know… We worked with Dave Danielsen to have something in Best Case. Obviously, the credit goes to Best Case for this, to do with one click of a button, you can search every single prior case that’s scheduled a private student loan. And then at that point, that attorney has everybody’s phone number. They have everybody’s address and they have everybody’s trust. So we can mail merge one letter.

We’re doing this with attorneys right now. So we’re actually doing it, right? Well, with one press of a button, we showed them how to do a mail merge template to prepare a letter to everyone of them en masse and just send it out saying, “Hey, this is your bankruptcy attorney, whatever, Johnson And Murphy. We filed your bankruptcy and we noticed that you scheduled a private student loan. Actually, that might have been discharged in the bankruptcy. Call us so we can make sure that they’re not collecting on it, yada yada yada. This is not going to cost you a penny.”

By doing that, now the person can pick up the phone and call back and say, “Hey, I’ve got your letter. Yeah, let’s talk about this.” And that was way more… And that’s actually free. That doesn’t cost. That doesn’t take hours. It takes 30 minutes total for your whole entire database. And it doesn’t cost money. Well, you have to have postage but obviously it kind of pays for itself.

What we told attorneys is, “It’s going to pay for itself because you should be in touch with your prior clients. They might have forgotten who you are and they might have been referring their friends and family to another bankruptcy lawyer. This is a good way of touching base with them. But in addition to all that, you’re going to make a lot of money and you’re clients are going to be happy. And you’re going to have a loyal client.”

Like, the people that we have helped discharge their student loans, they will never ever ever have another attorney for the rest of their lives and they will make sure their family members and their friends know about us and about the attorneys that recommended them to us. Because we’re attorneys in other states. It’s not like… If I were going to compete with them for business, obviously ’cause we don’t do bankruptcies in Tennessee. So it’s a win-win-win.

Bob: And how much can… I’m thinking of one of my clients. I think he’s filed 6,000 bankruptcies. He’s been in business for a long time. How do the numbers work out in terms of like if I told you that this guy existed, how would you size that opportunity from a cost of attendance private student loan point of view?

Michael: That’s a great question. I just want to make sure I understand your question. When you mean size an opportunity in terms of what? Like how many cases he might have?

Bob: Yeah, how many cases might he have. So he’s got 6,000. Let’s call it 5,000 to make the math a little easier. So you got 5,000 cases. How many of those would be eligible?

Michael: So the last attorney that we scoured his database, I think he had… Actually, he had the same amount. He either had — I forget it — it was 5,000 cases or it was somewhere around that. And he had 538 possible cases.

Bob: So maybe 10%. And then, of those…

Michael: Of those, we’re still going through them. We’ve already found a few good cases going through the Best Case software, and we are now, just now, reaching out to his clients and we are just now having his assistant… We did the mail merge template for him. We are just now having his assistant prepare to print the letters, send them to the printer and then mail them out and coaching his staff on: “Hey, we know that this is not in your muscle memory but a lot of people — when you send these out — are going to call back and say, ‘I got your letter.’ You cannot tell them, ‘I don’t know what you’re talking about, because student loans are not dischargeable, we’ve told you this before.'” Because again, the muscle memory works against you.

Bob: What about creating a special telephone number that people can call back that goes directly to your office and then maybe even having that call recorded so that the first attorney can listen to the recordings if they want so they know you’re not cheating them out of referral fees?

Michael: That would be impossible anyway because they would get notice of the bankruptcy of this being filed ’cause it would have to be filed in their bankruptcy.

Bob: Oh, OK.

Michael: And they would know about it.

Bob: Well, that’s a good point.

Michael: They’d get it so that would be… Yeah, so besides the fact that we have integrity, they don’t know who we are so we’re strangers so they don’t have to assume we have integrity. Even if we are completely evil lying human beings intentionally looking to cheat them, even if we were those people, it’s impossible to do so ’cause they would get the first alert that we, our firm, has filed an appearance in their bankruptcy. So they would get… Literally, their computer would open up and say, “Fairmax Law filed an appearance on this client.” And they’d get notice before us so it’s impossible.

In terms of having a dedicated line, we’ve thought about it. We haven’t done this with many attorneys, we’ve done it with a few, and what we’ve found is, they might not be happy that another firm wants somebody to call back at a different number. We’ve thought about it, but some attorneys have a deep relationship with their clients and we just thought it would just be easier for the attorneys to have the client call them and that we coach their staff.

Bob: So what’s the next step from the client’s perspective? They call back the office and they say, “Hey, I think you sent a letter about this issue. I’m calling back.” And then what does that person say? They say…

Michael: “Excellent.” They say, “All right, we’re going to have the attorney contact you. I am going to give them your number and the attorney’s going to contact you, ask you some questions. You gotta stand by your phone. You’re going to get a call and if you don’t answer, they’re gonna leave you a voicemail. And then we just call, call, call, call.

Once they’ve picked up the phone, we have five or six questions we ask them just to see if the client actually does superficially qualify for this. Some clients might say, “I actually have federal loans. I don’t know why I said it was Sallie Mae, or why I said it was Chase Bank. Actually, it’s not, it’s a federal loan. I’m already on a plan…” So we ask them a few questions, and at the end of that, when we find out that, “Hey, this looks like a good case,” then we ask them for several documents that are easy for them to get.

Once we get those documents, we sit down, we review the case for an hour and then we approve it. And that’s all there is to it. Once we approve it, the rest is all on us. We prepare pleadings, we file them, we litigate and then we try to resolve these to a resolution within six months.

Bob: So of those 538 cases, maybe it’s another 10% where maybe you file 50 or so cases. Is that fair?

Michael: Well, we’ve noticed, we found 80% of the cases are actual cases of people who actually call us back. People call us back. I mean, I honestly can’t remember the last client, maybe it was one or two in the past year that called us back and we didn’t take them. And even then, it wasn’t because they didn’t have a case because they actually had a great case, but they were already represented in a class action lawsuit which is a whole another story. But I don’t remember a client calling us back having private student loans and us telling them “no, it’s not a good case.”

Now, there are some people who call back and they have only $3,000 in private student loans. Any attorney realizes… It’s kind like if you’re a personal injury attorney and somebody comes into your office and say, “I was in an accident. I wasn’t injured. Nothing hurts but my car was damaged and I need to get my deductible back.” No lawyer is going to take that case on a contingency. You know what I mean. It’s $500, we’re not going to do it.

So people who have a private student loan that’s under $5,000, we usually don’t bother with it because they’re usually not being harassed either. Because if they’re being harassed, then that’s a big case even if it’s just a $5 debt. But we’ve never noticed that creditors harass people who owe less than $10,000. If they did, then we would take the case just on that front.

Bob: I guess where I’m going with this is that my audience is bankruptcy lawyers so if someone has 5,000 cases what kind of payday can they look to if they pick up the phone and give you a call? In addition to helping their clients discharge all these private student loans, how much money…

Michael: I can give you one example without naming a name. A person making $50,000 a year who owed $150,000 in total private student loans to two different creditors. So there were two different cases. On one case, we forced them to pay us $15,000 and wipe out the remaining balance. On another case, we could have went all the way and gotten them to pay us but they made an offer she couldn’t refuse, which is, “We’ll just wipe out all of your debt and we pay you nothing. And in return, you’re responsible to pay your attorneys.” And she opted to take that route. So basically, she ended up paying… Between the money she paid us and the money that we received — she basically ended up paying us… The total out-of-pocket for her… Because she received money on the first case. Yes, she received the check but she didn’t pay us anything on the first case. And the other case, she had no money but she had to pay us but she wiped out all of her student loans on both cases.

In over $150,000 of student loan, it cost her a total of $5,000. And when we balance both cases together and she had all of her debts wiped out, right? And that’s just because she opted to take a quick settlement, right? That’s an example. That’s an actual example. So that’s the way these cases go.

There’s another case where the client got all their student loans wiped out and that they didn’t have to pay anything. We got paid our attorney fees. And now we’re still in the early stages of this. What we’re noticing was when we went to mediation with one of the defendants, the defendant pulled up eight cases and said, “Hey, why don’t we just try to resolve all these cases on this docket that we have?”

So we’re just starting to see that effect coming down the pipeline now as we start to get more cases. In the beginning, we had to basically convince these creditors, “Hey, we got you dead to rights. Let’s settle.” They were like, “Whoa, fat chance. Not only are we not going to settle, we will see you in court and we will stand over your carcass as you write us a check for this frivolous lawsuit you just filed.” We had to deal with that up until recently.

Now, with some of these big big big defendants, they now know that these cases are not frivolous and if anything, that these cases, we are going to win. We can start settling these cases sooner. If you talk to me in a year, it will be completely different. In a year from now, the settlements will get better. They’ll become faster. They’ll become more efficient. We will become more efficient. And hopefully, hopefully we continue to get cases. We see now an uptake in the number of cases we’re getting.

Bob: Awesome. You’re describing a problem that affects eight out of ten private student loans that you look at, and involves billions of dollars. I made a joke about Erin Brockovich earlier but — I mean, I’m not a lawyer — but is there an opportunity for some kind of class action lawsuit? I don’t want you to tip your hand if that’s something you’re working on.

Michael: No, I don’t mind tipping my hand. The good thing about it is… No, it’s not good for a class action. We thought about it; it’s not. Because the fact patterns are too varied from client to client. They’re just way too different. There’s just no way.

Bob: That’s a good point. So you’re reaching out to all these bankruptcy lawyers. I wanted to ask, Best Case is out there but there’s also BankruptcyPRO and now Jubilee. Is there a way on using those softwares — I know Best Case has this Student Loan Analyzer — but is there anything comparable with…

Michael: We take clients from any software. We don’t care. But in terms of using Student Loan Analyzer, that’s unique to Best Case.

Bob: Yeah, got it.

Michael: That’s unique to Best Case. They’re the pioneers. I mean, they’re the pioneers pretty much on everything but in that, I mean, they’re not just the pioneers, there’re just the only people who have it.

Bob: This is perhaps a small issue but we’re talking about discharging these private student loan debts. Typically, if that’s not outside of the bankruptcy process, you’re going to owe income taxes on the amount of dismissed debt. But here, this is part of the bankruptcy process so there’s no income tax issue involved, is that correct?

Michael: Yeah, no. These are discharged. The exception — like I said, I used to be a CPA — the exception to Title 28 is Title 11, right? So the exception to the bank… to having to pay taxes on discharged debt is if it was discharged in a bankruptcy. So if these are discharged in bankruptcy, absolutely not. You do not have to pay taxes on them. End of story.

Bob: That’s great.

Michael: So you just reminded me of another major major benefit here. Get rid of your student loan and don’t pay any tax consequences. Yeah. I mean, with the case, we just settled for one of our clients. We settled two last week. We were happily able to remind those clients, “Hey, dude, you’re not going to have to pay taxes on this. This is done.”

Bob: Awesome. Michael, if someone out there is listening to this podcast right now and wants to pick up the phone and give you a call or send you an e-mail, what’s the best way to get in touch with you to start referring cases?

Michael: Well, I’d be honored. They should call my direct line because it would be obviously something very very important to me. You know, I have a large staff but these cases are so important and so near and dear. And I hold them so close to the chest that I actually give people… I would give them my direct line.

Bob: OK.

Michael: And my direct line is (313) 801-8809. That’s not my office line. That’s my direct line. And the reason I give my direct line on these is because they’re very very very important to me.

Bob: OK.

Michael: And that would be… I would give them my e-mail but my line is the best way because I always return every voicemail before the day is over. I’m very very communicative with my phone. I’m very very communicative with the email as well but my phone, I mean, that’s a direct way of getting to me. And I encourage everybody to leave a voicemail if I don’t answer. But my e-mail is mike AT That’s very simple. They can e-mail if they like. And that would be great, that would be awesome.

Bob: Great. And if anyone’s listening, I’ll spell out the website in the transcript to this podcast so just scroll down if you’re listening to the audio player.

Michael: Hey, Bob. That’s very nice of you to call and take time out of your day to do this. How can I help you? I mean, this has been very very very nice for you to do.

Bob: Well, I mean, I told you before the podcast started that every lawyer is doing at least one thing that’s pretty amazing and most of them don’t seem to realize that what they’re doing is amazing and unique. And so the point of this podcast is really to spread these best practices to all of our listeners. And so one of the cool things in interviewing you, Michael, is that you actually are aware that what you’re doing is unique because it’s so different than what everyone’s doing. So that’s very cool. It’s still a great best practice to share. And that’s how you pay me back by sharing your best practices and being open and honest about it and I appreciate that.

We can talk offline after the podcast, but the other way that you or anyone out there can help is by introducing me to other bankruptcy lawyers out there or people who are somehow involved in this practice area to set up more interviews because I learn something in every interview.

Michael: OK. We’ll talk after the podcast is done. Thank you. Let me ask you this question. So I know of a lot of attorneys that… they love marketing by sending out mail to people who have judgements… lawsuits entered against them or judgments entered against them or foreclosures. I tried. It was too difficult. I didn’t get a good response rate. What did you… How do lawyers do that? How did they… What’s the secret? Well, I know you’ve heard about a lot of nice ideas around the country. Give me a couple of like this nice most unique marketing tactic you’ve heard of.

Bob: Well, the first thing that I would say on the direct mail front is you’ve got to have a good letter. If you’re mailing people just a bad poorly written letter that’s not persuasive and you use words like “discharge” and things that people don’t really understand, you’re not going to get a good response rate. So that’s the first thing. You really need to work with a professional copywriter to get a really good letter before you start mailing things out.

The second tip is — well, this is actually should be the first step — you always want to work with… at least review the rules of your state bar to make sure that you’re not violating any advertising rules. Oftentimes, you have to identify on the envelope that this is a legal advertisement, things like that. So make sure that you check with your state bar.

The third issue is that a lot of people mail too irregularly and they don’t mail quickly enough. So if someone on January 1st is getting a foreclosure notice and in your state, you have three weeks until the foreclosure, if you are mailing twice a month or once a month, you’re not going to be the first letter that people receive. So if you mail at least once a week or twice a week or daily — if you’re pulling the foreclosure notices online — then you’re going to have a lot better response rate than if you’re mailing once a month. Does that make sense, Michael?

Michael: Yeah, it makes a lot of sense.

Bob: How often were you mailing when you tried it?

Michael: I was doing it same day. I was doing it every single day.

Bob: The other thing is that if you’re trying to make the numbers work for your mailing, you can look at adding filters. So maybe don’t mail every home, maybe… If you’re going for Chapter 13s and you’re looking at foreclosure notices, maybe only mail people that have a positive equity balance. And those are things that you can get from your data provider. Or if it’s a credit card — it’s a wage garnishment for a credit card or something — look at the balance. If it’s a $2,000 balance, then maybe they’re not going to file bankruptcy. But if it’s a $50,000 balance, they will. So those are the sorts of filters that you can use. But those are some tips.

Michael: Got it. OK. All right. So what would you say is the best unique idea that you heard recently that an attorney is doing in these bankruptcy cases?

Bob: The thing that I’m obsessed with right now is the sales funnel for the average bankruptcy customer because what I found is that the average bankruptcy lawyer needs far too many leads to get one bankruptcy retainer. And my goal is to get it so that every bankruptcy lawyer just needs maybe four or five leads in order to get one retainer as opposed to right now, it’s like eight or 10 or 12 or something like that. You know, they’re just losing too many people at every step in the process.

Michael: But you’re saying what… Are you saying that the statistic now for attorneys around the country is what? One out of 20 are coming in? Or…

Bob: One out of eight or one out of 10 or one out of 12 is something that I’ve seen by people that aren’t really trying to optimize it. So what I’m suggesting is that if you’re at one out of 12 clients and you really focus on improving your close rate, then you can triple the size of your practice without spending any money on advertising because you’re closing one out of four. That’s really really good.

Michael: OK. All right, pal. It was great talking to you. It’s been amazing to talk to you. I’m really happy we did this and I appreciate everything you’ve done. And yeah, in terms of if you have clients or attorneys… Are you an attorney, by the way?

Bob: No.

Michael: Oh, OK. Got it. Because I’m not allowed to do the referral fees with you if you’re not an attorney. If you’re an attorney, maybe we could do something.

Bob: No, that’s OK. Well, I get paid with AdWords consulting and my goal is to make the leads more valuable to my clients and to the bankruptcy attorney bar, in general, by helping people improve their sales funnel in these sorts of things. So that’s my goal with this, I guess. I’m really excited about it.

Michael: Oh, if I could plug myself in that regards then… If you have clients that trust you and you want to give them just new latest way of doing it, I mean, if you wouldn’t mind, you tell them, “There’s this attorney…” I mean, they could look me up online. You know, there’s just a lot of information on me online. And I will talk to them anytime they want for free and show them how I can get them possibly what could amount to hundreds of thousands of dollars in attorney fees for them pretty much doing very very very little work. And if anything, go after their prior clientele.

Bob: Awesome. There is one question that I have for you, which is is there some kind of white paper that you have or something, where someone who doesn’t have access to Best Case and their Student Loan Analyzer can use to manually look at private student loans and to see whether there’s a cost of attendance issue?

Michael: Yeah, I actually have something better than that. I have a PowerPoint presentation.

Bob: Okay, great.

Michael: We presented, by the way at NACBA in Orlando this year. We presented on this issue.

Bob: Okay.

Michael: And we took questions from the audience and so this is something that’s serious. Yes, we presented it at NACBA. We have a PowerPoint. I can send it to you. If you shoot me an email, I’ll respond with the PowerPoint and with some… And there’s an article in The Wall Street Journal and in MarketWatch. So this is a serious thing. Yeah, I can absolutely send you that stuff.

Bob: Awesome. Great.

Michael: Thank you so much.

Bob: Yeah, thank you so much.

Michael: Thank you. Bye bye.

Bob: Bye bye.