Collection Law Firm Mann Bracken to Liquidate in Receivership

Debt collection law firm Mann Bracken has been placed into receivership by a court in Montgomery County, Maryland at the firm’s request. The company is opting for receivership in lieu of bankruptcy protection after shutting down its offices earlier in the year.

The accounts receivable management law firm will be liquidated, according to the Baltimore Sun. Cheryl E. Rose, the receiver appointed by the court, told the paper, “Mann Bracken believed that the Circuit Court receivership was the best way to benefit clients, creditors and third parties. In this particular case, it will be a liquidation.”

Mann Bracken, based in Rockville, Md., was once the largest collection law firm in the country. But when ARM legal services provider Axiant, a firm that had close ties to Mann Bracken, filed for bankruptcy late last year, the firm began to unravel, eventually being forced to wind down its operations.

Axiant was formed in 2007 by private equity firm Accretive Technology Partners through the consolidation of the non-legal operations of three large debt collection law firms in the United States – Mann Bracken, Eskanos & Adler, and Wolpoff & Abramson. The goal was to establish a national debt collection law firm, and at its peak Axiant’s geographic coverage included a majority of the U.S. population and the firm counted more than 1,000 employees.

But the economic downturn hit the firm very hard in its post-roll up transitional phase. Adding to financial woes was the highly publicized relationship that Axiant – through Accretive – had with the National Arbitration Forum (NAF), the nation’s largest consumer debt arbitration body. When it was discovered that Accretive’s founding partner had invested in NAF before the collection law firm roll up, NAF’s independent status was called into question, and the organization was forced to stop taking consumer debt collection cases.

This directly hit Axiant’s bottom line, since it used NAF as a platform for recoveries.

Axiant was forced to sell its operation late last year to ARM giant NCO Group. To facilitate the deal, Axiant filed for bankruptcy protection. But NCO backed out of the deal only a couple of weeks after it was announced (“NCO Group Backs Out of Deal to Acquire Legal Collector Axiant,” Dec. 9, 2009). At the time, Axiant CEO Kevin Keleghan told insideARM that the company stilled planned to sell, citing interest from other buyers.

“The plan remains the same, but the potential buyer changes,” said Keleghan.

But another buyer never materialized. Since Axiant was a large source of Mann Bracken’s business, its revenues suffered a huge hit. The company began to wind down shortly thereafter.

In January, the Maryland Commissioner of Financial Regulation forced Mann Bracken to suspend operations when the state caught wind of office closings (“State Issues Suspension Order to Debt Collector Mann Bracken,” Jan. 15). A judge soon ordered all outstanding debt collection cases filed by Mann Bracken to be dismissed.

The episode has raised questions for consumers that had been targets of Mann Bracken. Many debtors had worked out payment arrangements with the firm. But those arrangements are now the source of confusion for all involved, and the matter is not likely to improve when Mann Bracken liquidates.