Mann Bracken in receivership

Debt-collection law firm to be liquidated as it seeks files, funds from spinoff, Axiant

February 27, 2010|By By Jamie Smith Hopkins | The Baltimore Sun

Debt-collection law firm Mann Bracken, which threw the courts and the collections industry into disarray after abruptly shutting its doors last month, has been placed into receivership and will have its assets liquidated.

Receivership, an unusual step in Maryland, is an alternative to filing for bankruptcy protection. The firm's attorney, James M. Hoffman, said a receiver was appointed Thursday by the Montgomery County Circuit Court at Mann Bracken's request.

"Mann Bracken believed that the Circuit Court receivership was the best way to benefit clients, creditors and third parties," said Cheryl E. Rose, the receiver. "In this particular case, it will be a liquidation."

Rockville-based Mann Bracken, one of the nation's largest law firms specializing in debt collection, alerted Maryland courts in January that it could not continue handling the cases it had filed against consumers on behalf of credit-card companies, debt purchasers and other creditors. District Court Chief Judge Ben C. Clyburn ordered that the cases - estimated in the tens of thousands - be dismissed.

"The courts are still dismissing the cases," said Angelita Plemmer, a spokeswoman for the Maryland judiciary, who added that it remained unclear how many there were.

Mann Bracken said it couldn't pursue the cases because it had been cut off from its files by the collapse of a spinoff company. Collections firm Axiant filed for bankruptcy protection in November and is being liquidated. Mann Bracken depended on Axiant not only for its files, but also its office leases, computer systems, telephones and support staff. In a statement last month, Mann Bracken said it was insolvent and had "no alternative but to wind down its business operations."

But the firm does have assets separate from Axiant that will need to be dealt with, Rose said. The court order also directs her to participate in Axiant's bankruptcy proceedings to collect money owed to Mann Bracken, if any, as well as to recover the firm's files and send them back to the clients trying to pursue debtors.

Thomas Rafferty, co-chair of the creditors' rights department at local law firm Ober Kaler, said receiverships account for a small percentage of the insolvent-business cases in Maryland, mainly because bankruptcy is a more familiar process in the corporate world.

"It's a good step for the principals to have taken to minimize any suspicions that they did something wrong, as contrasted with having made some bad business judgments and becoming financially overextended," Rafferty added.

Mann Bracken clients need resolution because they can't collect without their files. Consumer lawyers say many cases could be past the statute of limitations to refile them in court once everything is sorted out.

Mann Bracken's shutdown is also a problem for consumers across the country who had worked out payment plans with the firm and aren't sure how to put the debt behind them. Regulators in Maryland and elsewhere have fielded calls from confused residents wondering whom to pay.

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