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‘Bankruptcy/Divorce Consultancies’ Not Equal to Professional Legal Services Think Twice before Engaging to Avoid Potential Risks

  • 2021.05.17

‘Into each life some rain must fall.’ It is not uncommon for individuals to be hit by financial difficulties during this economic downturn, and the worst-case scenario would be ending up in bankruptcy. In the case of marriage, the most undesirable outcome would be divorce. According to statistics from the Official Receiver’s Office, the number of bankruptcy cases reached 4,294 in the first half of 2020, an approximately 20% increase against the same period in 2019. Furthermore, a total of 21,157 divorce cases were recorded in 2019. Given that bankruptcy and divorce are both tough decisions in life, the parties involved may feel perplexed and wish to seek legal advice or professional support. When searching for bankruptcy-related/divorce-related services online, the Council found that a lot of so-called ‘bankruptcy consultancies’ or ‘divorce consultancies’ popped up in search engine results. These ‘consultancies’ boasted of low fees and extensive experience, and even claimed to offer ‘professional services’ to clients. However, the Council found that these ‘consultancies’ were in fact not qualified law firms and might mislead consumers. 

In March 2021, the Council enquired about the fees and services of 12 ‘bankruptcy and/or divorce consultancies’ through mystery surveys, to understand the required steps and potential risks involved in the submission of the bankruptcy and divorce applications, and also analysed the information stated on their websites. The Council found that these ‘consultancies’ employed various promotional tactics on their websites to attract customers. All of them positioned themselves as ‘consultancies’ and presented either implicitly or explicitly that they could offer legal advice. One included the word ‘legal’ in its web address, while some displayed images that resembled gavels, legal publications and/or statues of Themis prominently on their websites. A number of them mentioned ‘professional services’ in their slogans or even proclaimed they have ‘experts’ in family law to provide services. These might easily mislead laypeople into thinking that these ‘consultancies’ were professional law firms.

Cross-referenced with the Law Society’s ‘Law List’, it was confirmed that none of these 12 ‘consultancies’ were registered law firms. Moreover, upon enquiry, the 7 ‘bankruptcy consultancies’ surveyed were either not in charge by practising solicitors or did not respond. Among them, 2 claimed that the responsible persons were accountants; 2 claimed that they had been insolvency officers, of which 1 had purportedly worked in a law firm for over 17 years; 1 claimed to be a paralegal and 2 did not respond. Of the 5 ‘divorce consultancies’, 2 of them emphasised that their person in charge were not solicitors; 1 claimed to be a paralegal and another a ‘family matters specialist’; the remainder stated that the application would be handled by a staff member specialising in divorce matters.

All ‘consultancies’ emphasised their competitive edges in terms of price, response speed and convenience. They also highlighted the services of law firms as relatively time-consuming and expensive, at the same time stressing that the bankruptcy procedures and required documents were complex and hard to be handled by prospective clients on their own. However, the Council found that the services provided by ‘bankruptcy consultancies’ and ‘divorce consultancies’ were essentially filling in forms on behalf of clients. Unlike the services provided by law firms, these ‘consultancies’ were unable to administer oaths or represent clients at court hearings. If a debtor engaged a ‘bankruptcy consultancy’ to file bankruptcy petitions on their behalf, such debtor would still have to attend the court hearing personally. None of the ‘consultancy’ staff would accompany and assist their clients in the court hearing at all.

The Council reminds consumers to think twice before engaging any of these ‘bankruptcy/divorce consultancies’ for their services. Although these ‘consultancies’ appear to charge a low price and are seemingly more affordable, it is reminded that these ‘consultancies’ are not law firms and therefore are unable to provide professional legal advice. Without proper legal advice, client’s rights and privileges might be at risk, with violating the law being the worst possible outcome.

The so-called ‘all-inclusive’ services of ‘bankruptcy consultancies’ included providing guidance to respond to interjections in court and at the creditors’ meeting. They also claimed that they could help their clients meet the most favourable position in retaining their income to cover living expenses. The Council reminds consumers that making false representations, false instruments and/or perjury are criminal offences, and therefore urges those potential clients not to defy the laws. Some ‘consultancies’ claimed that they could stop creditors from collecting debts immediately but failed to provide a clear and constructive solution. They only offered to notify the concerned creditors such as banks and finance companies about the initial filing of bankruptcy petition.

When a marriage has broken down irretrievably leading to divorce, complications are likely to be involved, such as the arrangement of children, alimony and/or division of assets. Should clients choose to blindly follow the instructions from non-professional advisers, which may include inaccurate or incomprehensive advice, it could affect their chance at receiving the best legal protection, or could even lead to further complications in the procedure arising from unprofessional handlings. As mystery shoppers, the Council made enquiries to 5 ‘divorce consultancies’ about the way forward to move the spouse out of the matrimonial home provided by the client’s parents. 4 out of the 5 ‘consultancies’ advised the client that he could order his spouse to leave the flat anytime. However, this advice might lack sound legal basis, as such proceedings should require instructions from the court.

The charges imposed by ‘divorce consultancies’ also lack transparency. For couples consented on divorce with 1 year separation, the charges ranged between $2,000 and $4,500, but excluded the court fees. For couples consented on divorce but have separated for less than 1 year, 1 of the ‘consultancies’ charged $10,000 without an explanation for such difference. For couples who have underaged children, 3 ‘consultancies’ asked for extra filing fees ranging between $1,000 and $1,500 per child. 2 ‘consultancies’ stated that they would charge clients an extra $2,000 to fill in the form for maintenance even if the arrangement for alimony was already in agreeable terms between parties. Should there be any disputes on child issues and/or financial arrangement between parties, all ‘divorce consultancies’ assured that they could help appoint lawyers to handle the matter, with fees subject to further negotiation. 

The Council reminds those who intend to file bankruptcy or divorce petitions to consider carefully before taking any action. For example, debtors should consider the consequences of bankruptcy and also their own financial status in order to carefully assess if bankruptcy is the best available option. If one eventually decides to apply for bankruptcy or divorce and intends to seek support for the submission, they should enquire about the professional qualifications of such service providers. Consumer rights are much better protected by professional services such as those provided by lawyers. The public can visit the Law Society of Hong Kong’s website and search for law firms specialising in bankruptcy and family law. For less complicated cases, citizens can consider carrying out the procedures on their own to minimise the cost. Both the Official Receiver’s Office and the Hong Kong Judiciary offer detailed explanations on their websites as well as samples for reference. Besides, the Law Society of Hong Kong provides free legal advice to the public and interested parties may consult duty lawyers through the ‘Tel-Law Scheme’.

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