|Oregon State Bar Bulletin DECEMBER 2008|
Salem attorney Richard D. Lee, who has been practicing law since 1956 and often handles bankruptcy, creditors’ rights and landlord-tenant cases, never has seen so many referrals as in the last few months.
Lee, who participates on the Oregon State Bar’s Lawyer Referral Service panel, witnesses daily the effects the nation’s and state’s economic turmoil is having on the disadvantaged.
The morning he was speaking, Lee had received a call from a young woman whose husband had lost her job. The family of three was living on $700 to $800 a month, and was $16,000 in debt.
Yet Lee told the caller he wasn’t sure if he could help her.
He points out that bankruptcy legislation Congress passed in
2005 made filing "difficult for those who need it, and almost beyond
their ability to do it," costing $300 just to file, and extending the
process by to two to three weeks.
At the same time, he says, lawyers who handle such cases have had to double their fees because of the added complexity of cases, and many lawyers won’t take such cases anymore.
The economic downturn is starting to take its toll, affecting access to justice across the state. Unfortunately, but predictably, as the need for services for the affected population continues to go up, the amount of money available to supply those needs is going down.
Unemployment Payments Soar
Portland attorney Ann K. Chapman, who has specialized in bankruptcy for 23 years, concurs with Lee. She says the number of lawyers who are experienced in handling difficult bankruptcy cases has shrunk, at a time when more are needed than ever before.
"Fewer know how to do it, and do it well," she says. Many attorneys who handled some bankruptcy cases as part of their regular practice have stopped taking those cases, adds Chapman.
"Our firm (Vanden, Bos & Chapman), over the last 60 days, hired two new lawyers," and now has a total of five, plus several legal assistants, she says.
The OSB’s Debtor-Creditor Section, which she formerly chaired, sponsors monthly, free bankruptcy clinics in the metropolitan area for low-income debtors. There is a long waiting list for people who want to see these pro bono attorneys.
Legal aid attorneys around the state have a little more difficulty discerning change, because, "We are always pretty overwhelmed with calls," points out Leslea S. Smith, regional director of the Hillsboro office for Legal Aid Services of Oregon. Her office serves Washington, Columbia, Clatsop, Tillamook and Yamhill counties with only six lawyers, who generally handle 2,000 cases a year, many of them involving giving advice in family court.
"Part of what we’re seeing (among clients) is an increase in the fear level: ‘How am I ever going to get out of this soon?’" says Smith. So far, she has not observed the "newly poor" from layoffs, as she did in late 2001 and early 2002, but Smith expects that is coming, "It’s early in Oregon," but 300 people are being laid off in St. Helens, and more job losses probably will follow in her district.
Indeed, between November 2007 and this past November, state unemployment payments increased about 76 percent, the Associated Press reported. In October, Douglas County registered a 10.4 percent jobless rate, and the average unemployment rate for the state was 7.3 percent.
On the Oregon Coast, "Housing has been incredibly tight for a while," observes Linda J. Gast, regional director of Legal Aid Services of Oregon’s Lincoln County office in Newport.
"A lot of the middle class cannot find housing (they can afford). They’re taking housing that normally poor people would use. Landlords, when they check on future tenants, can pick and choose credit scores. Poor people are going to be more vulnerable. Clients are asking how they can improve (their credit scores). People are concerned about that."
Some residents are "doubling-up," she adds, taking in friends who’ve lost jobs. But that action "can get the Good Samaritan in danger of eviction," because many landlords impose a 14-day guest rule that can lead to eviction if not complied with.
The other thing Gast is seeing is really aggressive debt collecting. Many of her calls are from the elderly who become confused when debt changes hands four or fives times, and calls and notices are not from the original creditor, she says. "I’ve really seen more aggressive collection also with medical bills." Seniors’ bank accounts can be garnished if they deposit money they did not receive from Social Security, such as a gift. "To have the bank account garnished is pretty scary."
Gast’s office is receiving more inquiries, too, about bankruptcy. Very few legal aid offices handle bankruptcy, though, including hers.
"Marked Increase" in Need
the Last Six Months
George D. Wolff, administrator of the OSB’s Lawyer Referral & Information Services, says lawyer referrals for foreclosure cases have increased 178 percent since last year.
In addition, Modest Means program applications have risen significantly this year: Clients requesting help with landlord-tenant matters rose 253 percent this year over last; criminal law referrals are way up; and some lawyers who accept family law referrals have told Wolff to hold off on sending any further referrals for now, because they are deluged.
One of the more common sources for landlord-tenant pleas for help comes from renters who are "stuck in the middle, living in a house bought on spec that is going into foreclosure, with the landlord nowhere to be found," explains Wolff. The tenants are told they are being evicted, yet they don’t know where to send rents.
Wolff says the economic downturn undoubtedly has affected the steep jump in family law referrals. "When times get tough, there are ancillary effects such as that families fall apart. The strain of that upon families is something that hits critical mass, and then they call us."
Legal Aid Services of Oregon’s Thomas J. Matsuda, the executive director, says he has heard from his agency’s field offices of "a very marked increase (in the need for services) in the last six months or so, especially for seniors saying collection agencies are coming after them real hard."
"People on fixed incomes are hit on heating oil, food, gas. Costs are going up, so if they have any consumer debt, it becomes increasingly hard for them to pay," Matsuda says. "People are having to make impossible choices, such as food for their kids versus medicine." With job losses, there is more stress on many people to cover the basics, he says.
Studies show that fewer than 20 percent of the legal needs of low- to moderate-income Oregonians are being served each year. A recent Legal Services Corp. survey, "Documenting the Justice Gap in America," using data from Oregon and other states, shows that this unmet need has continued to grow in each of the last five years.
In 2007, the Oregon Food Bank saw its first significant increase in demand for food boxes in several years. In an average month in 2008, 200,000 people ate meals from an Oregon Food Bank emergency food box, compared to an average of 192,000 a month last year.
The U.S. Department of Agriculture reported in November that the current hunger rate in Oregon is 5.5 percent, among the highest in the nation — comparable to Mississippi, Maine, South Carolina and Georgia.
"That translates into approximately 78,000 Oregon households that, at some point during the year, skipped meals, shrunk portions and worried about making it to the end of the month," says Mark Edwards, an Oregon State University sociologist and an expert in hunger issues.
However, the 5.5 percent rate does not take into account the more serious economic downturn in 2008. "I anticipate that the percentage of those experiencing hunger will go up even more next year, given what our economy has experienced in 2008," Edwards says.
More than 22,000 Oregon families received cash payments from the state in October, according to the Oregon Department of Human Services. Statewide, the number of families receiving help increased 16.1 percent from October 2007 to October 2008.
"In all areas of the state, we’ve seen a big jump in the poverty population," says Sandra Hansberger, executive director of the Lawyers’ Campaign for Equal Justice, the nonprofit fund-raising arm of legal aid in Oregon.
For example, in rapidly growing cities such as Hillsboro, Oregon City and Bend, the poverty population eligible for services has grown by more than 50 percent since 2000.
The poverty population reaches 18 percent in Multnomah County, she says, and for the state as a whole, is as much as 19 percent, affecting about 600,000 people statewide.
"We’re talking about people at or below the poverty level," which for a family of four is a gross income of $26,500, or for someone single, $13,000, Hansberger says. Eighty percent of the clients helped by legal aid are women, and most have children to support.
Fully 40 percent of cases legal aid handles are for family law, and most of these involve domestic violence, she says
Legal Aid Funds Impacted
Despite all of these increasing needs, mechanisms for funding legal aid have felt the squeeze.
The largest source of funding for legal aid in Oregon is from court filing fees, at 31 percent of legal aid’s budget, according to Judith Baker, executive director of the Oregon Law Foundation and legal services program manager for the OSB.
The second-biggest source of revenue for Oregon’s legal aid programs is money derived through the federal Legal Services Corp., which comprises about 25 percent of Oregon’s legal aid budget. Congress slashed that funding nationally in 1996 by 30 percent, and federal support for legal aid never has returned to the level it was before then, Baker says.
IOLTA — Interest on Lawyer Trust Accounts — is the third-largest source of funds for legal aid in the state at about 12 percent. An additional 11 percent of state legal aid funding is received from about 80 government grants and contracts.
In Oregon, 70 percent of IOLTA funds — which are distributed by the Oregon Law Foundation — go to legal aid agencies, mainly to Oregon Law Center, Legal Aid Services of Oregon, Lane County Legal Aid and Advocacy Center in Eugene and Jackson County Center for Non-Profit Legal Services in Medford. The money available for legal aid will diminish because of the drop in interest rates on IOLTA funds.
Interest rates fell on IOLTA accounts, from highs around 4 percent a year or so ago to 1 percent or lower now. Total IOLTA revenue for the foundation was a record high of $3.6 million at the end of 2007, but that may fall to as low as to $2.2 million by the end of this year, Baker says. "We are predicting IOLTA revenue for 2009 at $1.2 million, which is one-third of what we received in 2007."
"The foundation is very worried about the impact of falling IOLTA interest rates and the impact on our revenue and our ability to continue to fund legal aid at a meaningful level," she adds. "The economy does not look like it will get any better in 2009."
What’s more, Oregon legal aid programs need to increase income by $425,000 annually just to cover the cost of inflation. Legal aid received a one-time general fund appropriation of $700,000 in the last legislative session, "for the first time ever," says Matsuda. "We would like that to continue, but it will be difficult with state funding going down. With tax revenues going down at the federal level, that’s probably going to have an effect on legal aid services. We’re waiting to see if that happens."
ABOUT THE AUTHOR
Cliff Collins is a Portland-area freelance writer and a frequent contributor to the Bulletin.
© 2008 Cliff Collins