The legal credit crunch

Chambers called an emergency chambers meeting yesterday.

HeadofChambers explained why in his opening. “It has come to my attention that a number of solicitors’ firms have been selling off their future earnings to loan sharks.”

“What’s the problem with that?” asked OldSmoothie. “It’s common business practice to factor the debts you’re owed at a discount so why not do the same thing with legal costs?”

“The problem is that I hear they are factoring all of their costs, even for the cases in which they’re unlikely ever to be recovered. Some of them are even selling off phantom cases I hear.”

“I’ve also heard that a few are selling at a huge discount as well, sometimes for as little as 30% of the supposed value,” said BusyBody.

“That’s because some firms are completely desperate at the moment,” said TheVamp. “Their businesses are collapsing and they’re taking from Peter to pay Paul.”

“Sounds like some sort of a legal Ponzi scheme, if you ask me,” said UpTights.”
“Illegal, more like,” said BusyBody, “and as soon as those buying the bad debts realise what’s going on the whole house of cards will come tumbling down.”

“It’s like some kind of a terrible game of pass the parcel and when the music stops, whoever is left holding the toxic debts goes under.”

“And we all know who are some of solicitors’ biggest creditors.”

“Me for a start,” said UpTights. “My aged debt has gone up from £200,000 a few years ago to nearer £700,000 at the moment.”

“Which should already have raised just a fewed just a few alarm bells,” said OldSmoothie.

“And it amounts to a significant amount of credit if you add in the rest of chambers,” said TheCreep almost standing on his tip-toes as he said it.

“Oh, CreepyWeepy,” said TheVamp patting him on the head. “I hardly think the size of your own, er, aged debt is going to make any sort of a splash in this particular sea.”

“So how do we know which ones are up to their ears in it?” asked TheBusker.

“That’s just the problem,” said HeadofChambers. “We have absolutely no idea which firms are healthy and which ones are mired in mountains of their own, er, debt. Even identifying that they’re factoring doesn’t in itself indicate that they’re in trouble and we can hardly go around doing a detailed due diligence exercise on every one of our instructing solicitors.”

“Which puts us in about the same position as a major creditor of a bank in 2008,” said UpTights.

“Well, it’s certainly far too late to batten down the hatches or take any other precautionary measures. We’re already in too deep as it is. So when the storm hits we’ll just have to hold on tight and hope that it doesn’t take the whole of chambers with it. But mark my words: some members of chambers could be in serious trouble within the next year or two.”

“It’s a shame we can’t do what the government does in these situations,” said TheVamp, “and simply print more money.”

“Now there’s an idea,” said OldSmoothie. “Perhaps it’s time to start taking lessons from SlipperySlope in the art of creative billing.”

BabyBarista is a fictional account of a junior barrister written by Tim Kevan whose new novel is Law and Peace. For more information visit and to read past posts visit Cartoons by Alex Williams, author of 101 Ways to Leave the Law.

June 10, 2014 · Tim Kevan · Comments Closed
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