Law Firm Debt
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In an instance when a law firm suffers and basically goes out of business due to dealing with so much debt, employers of the partners of those firms will often end up suffering from some of those problems as well.

A partner for Herrick, Feinstein, Paul A. Rubin, told the Wall Street Journal, “The departing partners and the new law firms that they joined are a prime target.” He has plenty of experience with these situations because he works with bankruptcy cases all of the time.


The truth is, the new employers can suffer because a bankruptcy trustee is allowed to sue the partner for money that they make while working at their new law firm. When trustees want their money, they will often sue the partner as well as their new firm, which can very unfair to the new law firm especially because they have nothing to do with the old law firm in which the partner first came from.

Law firms are beginning to notice how big of a problem this is becoming. It seems to happen often where a law firm is sued by trustees because an employee they have hired owes debt from a previous firm.

Rubin told WSJ, “As we’ve seen the spectacular growth of law firms, we’ve also unfortunately seen the demise of some longstanding well-regarded firms.” “When it happens,” he says, “the question becomes: What can [be done] to maximize value for creditors, and what is the liability of the new law firms that take on these lawyers?”

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Howrey LLP is yet another firm that gave way. The law firm went out of business in March 2011 and owes over a $100 million dollars in debt. This law firm was once very prominent and the fact that the firm owes so much money is quite shocking to many people.

The trustee can receive money by taking office equipment from the law firm that shuts down and selling it for a profit in a way to get the money back that is owed. However, in many cases, the new firms that have hired former partners of firms that shut down and own debt will have to pay something too.

Howrey was once a reputable law firm that provided services for over 50 years. At one point, Howrey employed over 700 different attorneys. Shortly before the demise of the law firm, many of its partners departed and headed over to other law firms. These law firms benefited while Howrey suffered in the long run.

Law firms that are currently dealing with lawsuits from trustees due to the employees that they have hired and their own personal debts from previous employment are making attempts to prevent this from happening in the future. These lawsuits can put law firms in serious debt problems.


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