Since February 5, 2018  debtors filing bankruptcy in Nebraska have been allowed to sign their petitions and other court documents using digital signatures pursuant to  General Order 18-01.  So what have we learned about the use of  digital signatures in bankruptcy since then?

I recently had the pleasure of speaking to an official at the Administrative Office of the U.S. Courts who was seeking some feedback on how digital signatures were affecting the bankruptcy practice. (Nebraska is the only bankruptcy court the nation that allows debtors to sign documents digitally.)  Here are some of my observations:

  • Clients absolutely love the convenience of signing documents digitally.  They no longer have to take time off work or drive through sometimes hazardous weather to sign documents.
  • Debtors are able to review documents in a less hurried fashion.  Instead of feeling rushed to sign documents in front of an attorney without much chance to review the paperwork, debtors are now able to read the information at their leisure and they frequently point out errors and omissions.  Although some critics of using digital signatures worried that debtors would just click on “Sign Here” buttons without reading the content, my experience is that clients tend to read the paperwork more thoroughly when they don’t feel rushed and they tend to ask questions or demand corrections when the information is not accurate.
  • Debtors receive a full copy of what they sign immediately.  I think the courts would be shocked to learn how many debtors NEVER receive a copy of what they signed (even though bankruptcy rules say they must receive a copy).
  • The temptation to alter signed documents is gone.  A dirty little secret of bankruptcy attorneys is that they alter the content of bankruptcy schedules after they are signed.  Why do they do this?  Because they are fixing errors and adding missing creditors and, generally, improving the accuracy and quality of the petition.  The problem is, they don’t get updated signatures after the changes are made to signed documents.  And since they often fail to provide clients with a copy of the documents they signed, who is the wiser? Digital signatures prevent such changes because clients get a copy of what they signed immediately and it is easy to spot unauthorized changes.  Also, since digital signatures allow attorneys to get updated signatures so quickly the temptation to make unauthorized changes goes away.
  • Postage and copy expenses decrease for attorneys.  Once we started using digital signatures (we use DocuSign) we began to question why we could not send most general correspondence to clients digitally.  Why is this better than email?  Because you can have your client sign off that they received whatever you sent them. We discovered that the cost of the digital signature service is more than offset by the savings in postage.
  • We make debtors sign more documents.  For example, debtors must attend a court meeting about 30 days after their case is filed to meet the Trustee assigned to their case and to provide the trustee with identification, bank statements, etc. Frequently clients would show up in court without ID or bank statements and the Trustee would not conduct the meeting. Clients would be frustrated and say they never got our letter advising them of what to bring to court. Digital signatures changed that. When a client signs something the excuses stop.  They become more accountable.  And since it is so easy to get a client to sign off on warnings you give them and disclosures they need to know, we seem to solicit more signatures on a daily basis.  Digital signatures literally allow us to “get on the same page” with our clients.

Digital signature technology is allowing us to make debtors annotate bank statements with explanations and then we require them to sign the document.

  • Bank Statement explanations.  Part of a bankruptcy attorney’s job is to verify the income of a debtor, and we must collect 6 months of bank statements and scrutinize large deposits and expenses.  It is not uncommon to collect statements totaling a hundred pages, especially if clients have multiple bank accounts.  With digital signature services we are able to highlight large deposits and expenses in these bank statements and make a client fill in a text box to explain the source of the deposit or the purpose of the expense. So digital signature technology is allowing us to make debtors annotate bank statements with explanations and then we require them to sign the document.  Talk about accountability! These documents really come alive when debtors must write explanations and sign the document as opposed to just calling the debtor for an explanation only to have the debtor change their story when it turns out the “gift from grandma” deposit was really a paycheck from a source of income they were concealing.

What digital signatures allow us to do is to send a client home with a rough draft of their case and then when they send us the missing documents we can instantly send them an updated petition to sign electronically.

  • Digital Signatures take the pressure out of signings.  Signing a bankruptcy petition is like shooting a moving target. We have to perfectly capture a client’s financial situation on one day of their life, and that is hard since bank account balances change daily and six-month income averages that we must calculate change with every paycheck. Ask any bankruptcy attorney and they will tell you the most frustrating part of their job is getting their client to provide all the necessary documents–tax returns, paycheck stubs, bank statements, etc.  There is always a missing document, but cases must be signed and frequently these signings are made in haste to stop paycheck garnishments and home foreclosures.  So, a bankruptcy attorney is charged with the duty of perfectly stating a person’s financial condition on one day in their life while all the underlying data is constantly changing.  That’s hard to do well.  What digital signatures allow us to do is to send a client home with a rough draft of their case and then when they send us the missing documents we can instantly send them an updated petition to sign electronically. Even when a client lives a few blocks away from my office, I frequently sign the case digitally so they can review a draft of the petition at home when their two-year-old they dragged to the signing appointment goes to bed and then they can send me the missing bank account balances or paycheck stubs the next day. Digital signatures bring sanity to the process.
  • Small town clients get better service.  Nebraska is a big state and 11 of our 93 counties have no attorneys at all, let alone a bankruptcy attorney.  But they do have smart phones and internet services and we can prepare their case as well as any client who lives locally. By the time we used to mail out a paper petition to a client living 450 miles from Omaha and then get a signed copy back, the information was 10 days old.

I have a great concern to live up to my duty to protect the integrity of the bankruptcy process and the integrity of bankruptcy documents in general. And I realize that many folks out there worry that allowing debtors to sign court documents digitally may undermine the trustworthiness of those documents. However, my experience is just the opposite. Digital signatures improve attorney-client communication and increase client accountability. Clients get a full copy of what they sign immediately and that improves transparency. Attorneys are able to get updated signatures quickly when helpful changes are made to petitions. Really, I can’t think of a single negative consequence of using digital signatures in bankruptcy cases, and I suspect we are going to see bankruptcy courts nationwide begin to adopt this technology in the next two years.

Image courtesy of Flickr and sbethany09