8. Ms. Smith s Statements and Schedules prepared by Appellants Vincent Gould, D/B/A We

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1 Avoid Being Ripped Off by Incompetent Bankruptcy Petition Preparers By Mark Saiki 398 Cypress Street Broomfield, CO (303) website: 6/9/2015 I. Dismissal. 1. In my experience, in looking at the Colorado Bankruptcy dockets, in the last ten years (since 2005 when Bankruptcy Petition Preparers were inadvertently legitimized by Congress), at least forty percent of Chapter 7 Bankruptcy filings are dismissed before their First Meeting of Creditors, while over eighty percent of Chapter 13 filings are so dismissed. In addition, many of the remaining cases are later dismissed and/or have to be taken over by attorneys who had to be hired to correct some of those Bankruptcy Petition preparer mistakes. 2. My experiences are backed up by case law. Joseph Thornhill's (dba Colorado Legal Solutions)... Eleven of the 14 cases were involuntarily dismissed. Thornhill received compensation from debtors, but the debtors received little or no benefit from his services. In re: Kuch, (United States Bankruptcy Court, D. Colorado, Case No EEB. March 12, 2012). 3. Imagine how disappointing it would be: you pay between $200-$1,200 to a Bankruptcy Petition Preparer, and in return you get an incomplete stack of documents. After those papers are filed, your case gets dismissed, because your Bankruptcy Petitions were deficient. The problem is that most consumers do not understand what documents need to be filed, in order to avoid dismissal. When they look at the stack of documents, which are prepared by Bankruptcy Petition Preparers, they are unable to evaluate whether or not those forms are filled out correctly. As a result, they fail to file critical forms, and their cases get dismissed. 4. Shariann Summerrain, dba Independent Paralegal Associates, is a resident of Divide, Colorado providing bankruptcy petition preparation services in the Colorado Springs metropolitan area. [2] Her Husband Todd Brewer, dba A Law Solution Inc., dba A Bankruptcy & Divorce Center filed 243 cases in Colorado. 5. The necessary documents for Debtor George Avery's Chapter 7 bankruptcy case, with the exception of the $200 filing fee, were filed with this Court on December 28, Notably, at least three of these filings the Statement of Financial Affairs, the Statement of Intent and the Declaration Concerning Debtor's Schedules fail to conform to the Official Forms... In re Avery, 280 B.R. 523 (United States Bankruptcy Court, D. Colorado, No EEB, June 17, 2002). 1

2 The... Carrs had paid $400 to Summerrain and Brewer for bankruptcy petition preparation services. The Carr Letter further alleges that the Carrs did not receive either the documents that were to be prepared, a refund of the fee paid or return of the documents that they gave to A Bankruptcy & Divorce Center ("AB&DC") in order for that company to prepare their bankruptcy documents. In re Avery, (United States Bankruptcy Court, D. Colorado, Case Nos EEB, EEB, EEB March 20, 2012). 6. Edward D. Brown, a/k/a Derrick Edward Brown, a/k/a Derich Edward Brown, dba Legal Aid Network, Inc., worked as a Bankruptcy Petition Preparer. For his $ fee the Debtor received two completed documents, his voluntary petition and his creditors matrix. He did not receive the other documents, which are required for complete Chapter 7 filing. In re Duran, 347 B.R. 760 (United States Bankruptcy Court, D. Colorado, No SBB, July 25, 2006). 7. Gordon L. Gooch, dba American Bankruptcy website. The Debtor's letter also complains that at least some of the documents that she did receive from Mr. Gooch were not usable. In re: Hennerman, 351 B.R. 143 (United States Bankruptcy Court, D. Colorado, No SBB, September 20, 2006). The Debtor paid $275 for the preparation of her petition and other documents, including the preparation of a proposed Chapter 13 plan... The two proposed Chapter 13 plans prepared by Mr. Gooch were deficient and could not be filed with the Court. In re: Hennerman, 351 B.R. 143 (United States Bankruptcy Court, D. Colorado, No SBB. September 20, 2006). 8. Ms. Smith s Statements and Schedules prepared by Appellants Vincent Gould, D/B/A We The People Forms, contained errors and omissions. Memorandum Opinion, p. 10. Ms. Smith also testified that she hired an attorney to correct and refile her petition. Gould V. Clippard, 340 B.R. 861 (United States District Court, M.D. Tennessee, Nashville Division, No. Civ. 3: , March 28, 2006). "[t]he services rendered to these debtors by the Goulds and We The People had no value to the debtors." Gould V. Clippard, 340 B.R. 861 (United States District Court, M.D. Tennessee, Nashville Division, No. Civ. 3: , March 28, 2006). 9. This really gets to the heart of the problem. These Bankruptcy Petition Preparers: have not graduated from law school, they have not passed the Colorado Bar Examination, they do not read Bankruptcy case law, and they have not studied the Local Rules. The problem remains that many know only marginally more about bankruptcy than their clients... the inadequacies of which are not readily apparent to debtors." [24] In re: Monson, Bankruptcy Nos , (United States Bankruptcy Court, D. Utah, Bankruptcy Judge William T. Thurman, November 23, 2014). 10. In summary, if you hire a Bankruptcy Preparer, at least forty-percent of such cases are dismissed, before the First Meeting of Creditors because necessary forms were not filed at all, or they were incorrectly filled out. In addition, many more of these cases are later dismissed due to 2

3 failure to comply with Bankruptcy rules, procedures and case law requirements. II. Incompetance. 11. The second set of problems, posed by Bankruptcy Petition Preparers, is that they are incompetent. They give bad legal advice, which often winds up costing consumers more money, than if they had hired an experienced Bankruptcy Attorney in the first place. 12. Due to the nationwide scandals of dishonest Bankruptcy Petition Preparers: some are disbarred attorneys, others are criminals, and many are fly-by-night operators. A fly-by-night business is designed to make money dishonestly, by taking in money, refusing to refund it, and by closing up shop, before they can be sued or prosecuted for theft or fraud. When police, district attorneys and/or lawyers sue them, they simply adopt a new business name, use their sister s name, or they set up shop in another state. 13. Due to these types of scandals, Congress chose to regulate Bankruptcy Petition Preparers. These people are supposed to be typists, who show you the Official Bankruptcy Forms, have you hand write in the answers, and they are supposed to charge you a modest fee (such as $20 an hour), to type up the forms for you. By law, they are not allowed to give legal advice, because they lack experience and training concerning Bankruptcy law and the Code. 14. Even though Congress intended to curb the abuses of Bankruptcy Petition Preparer cottage industries, by regulating them; this legislation has had the opposite effect. Many consumers mistakenly believe that Bankruptcy Petition Preparers are low-cost lawyers, and paraprofessionals, who understand Bankruptcy laws and procedures, and that Congress legitimized them in However, this is not the case at all. Bankruptcy Petition Preparers are being controlled, in an effort to reduce their most flagrant abuses, and to protect unsuspecting consumers from unappreciated risks. 15. Besides complex issues, bankruptcy petition preparers, such as Gordon L. Gooch, [dba American Bankruptcy website] are not qualified to handle the most routine bankruptcy matters. Petition preparers cannot offer the expertise needed for these issues regardless of their knowledge because these activities are prohibited as a matter of law. In re: Hennerman, 351 B.R. 143 (United States Bankruptcy Court, D. Colorado, No SBB. September 20, 2006). 16. The provision of legal services, especially in bankruptcy, which is governed by a complex statute, requires legal training and the assurance of comprehensive, competent representation that only a licensed attorney can provide. Adequate legal representation requires familiarity with bankruptcy law and its interplay with state law, as well as the ability to discern the client's objective and to determine whether and how state and bankruptcy law apply. An attorney may consult a variety of legal resources in order to analyze legal issues and their likely outcome, and may prepare bankruptcy documents utilizing computer programs or the assistance of paralegals or other clerical staff. But, all phases of analysis and document preparation, including resort to reference and document preparation resources, require the attorney's legal knowledge, skill and 3

4 experience. In re Gomez, 259 B.R. 379 (United States Bankruptcy Court, D. Colorado, No MSK, February 20, 2001). 17. Since the enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, the number of pro se individuals filing bankruptcy in the Eastern District of Michigan has skyrocketed. Because many of these individuals are unable to afford a lawyer, they frequently seek assistance from individuals to help them prepare their bankruptcy papers. Unfortunately, there are many unscrupulous individuals who offer services as bankruptcy petition preparers... The proliferation of bankruptcy petition preparers... has resulted in numerous individual debtors in this district having their bankruptcy cases dismissed, having their discharges denied, and having sanctions imposed against them. In re: Roscoe Copeland, (United States Bankruptcy Court, E.D. Michigan, Southern Division, Case No , Jointly Administered, Adversary Proceeding No PJS July 24, 2014). 18. This conundrum causes untold problems. Common sense tells most people that it would be foolish to file your own Bankruptcy Petition, because there are over thirteen hundred Bankruptcy Code sections, which are back up by Bankruptcy Fraud provisions, which carry criminal fines of $500,000 and up to five years in prison. 19. However, being short on money, they turn to Bankruptcy Petition Preparers, most of whom know only marginally more than these lay people. In other words, if ordinary persons on the street already knew how to fill out the Means Test, then they would not have to hire third parties to file it for them. And when they get the stack of pages, they are in no position, to judge for themselves, whether or not the forms had been filled out correctly in the first place. Do you yourself know how to fill out the Means Test Schedules? As a result, their cases get dismissed. They have to start over again, after they have wasted several hundred dollars of their hard earned paychecks. 20. In summary, Bankruptcy Petition Preparers are regulated by Congress to curb common abuses and scandals. Our Legislature attempted to protect unsuspecting consumers. However, most consumers mistakenly believe that Bankruptcy Petition Preparers was low-cost alternatives to experienced Bankruptcy Attorneys. The reality is that the two groups are not producing a standardized product. Bankruptcy Petition Preparers are supposed to type Bankruptcy Schedules based upon your own unenlightened understanding of the Federal Bankruptcy Code, while an experienced Bankruptcy Attorney is ethically required to study the Code and case law, in an effort to benefit you. You need advice on which debts you will have to pay, and which debts are dischargeable. You need advice on what types of earnings and property you need to turn over to the Trustee, and which types of exempt property, which you will be allowed to keep. Competent Bankruptcy planning will allow most people to minimize non-exempt assets and maximize Colorado s statutory exemptions. III. Costly Mistakes. 21. In addition, these Bankruptcy Petition Preparers often supply erroneous advice, with devastating consequences. 4

5 22. Virgle Odekirk, [dba The Bankruptcy Guy], is not an attorney. After working in the construction business, he switched careers and became a bankruptcy petition preparer approximately five years ago. He first worked for six months under the tutelage of Gene Till, a bankruptcy petition preparer in Provo, Utah, then moved to St. George, Utah. Stanley Talbot, was told by his Bankruptcy Petition Preparer, they he could cash and spend his tax refund, provided he kept receipts. He appeared at his First Meeting of Creditors, and his Trustee informed they the tax refunds were property of the estate, and he had to turn them over, or else he would lose his discharge. As a result, Mr. Talbot had to hire a real Bankruptcy attorney, paying him $4,681 to convert to Chapter 13, and he had to repay the thousands of dollars in tax refunds. In re: Monson, Bankruptcy Nos , (United States Bankruptcy Court, D. Utah, Bankruptcy Judge William T. Thurman, November 23, 2014). 23. This same Bankruptcy Petition Preparer also cost another customer the rental property, which she was trying to save. Alysse Monson hired an incompetent Bankruptcy Petition Preparer, who advised her that she could keep her rental property. She filed for Bankruptcy, the Trustee told her that her rental property was non-exempt and she would have to turn it over to him. This lady hired her first attorney, in an unsuccessful attempt to have her case dismissed. She then had to hire a second Bankruptcy attorney to convert to Chapter 13. She had to pay $4,681 in attorney fees. In addition, she had to pay tens of thousands of dollars, representing her equity in the rental property. In re: Monson, Bankruptcy Nos , (United States Bankruptcy Court, D. Utah, Bankruptcy Judge William T. Thurman, November 23, 2014). 24. The Debtor testified that Gordon L. Gooch [dba and American Bankruptcy] opined that her tax debts would be dischargeable in her case. This advice is within the ambit of prohibited "legal advice." A bankruptcy petition preparer may not give advice about, "whether the debtor's debts will be discharged in a case under this title [title 11, United States Code]." A bankruptcy petition preparer is specifically prohibited from giving clients advice "concerning... (II) the dischargeability 151*151 of tax claims." [16] In re: Hennerman, 351 B.R. 143 (United States Bankruptcy Court, D. Colorado, No SBB. September 20, 2006). 25. In hindsight, it would have been cheaper to hire an experienced Bankruptcy Attorney, instead of looking for the cheapest possible service provider. Each of these Bankruptcy Preparers made mistakes, which cost their customers more money than it would have cost them to have the job done right the first time. One family would have been advised that tax refunds were non-exempt, and to save them, so that they could have turned the refunds over to the Trustee. Or I myself would have advised them to cash and spend the tax refunds, and then file for Bankruptcy. For Ms. Monson, she might have sold the house, bought exempt Individual Retirement Accounts and protected her nest egg. The last debtor might have been informed that the mere passage of time makes some forms to taxes dischargeable (meaning that they do not need to be repaid). 26. On the other hand, I often save my clients more money, than it costs to hire me. Carl G 5

6 (Arvada, CO, 7/28/09), kept $1,752 in federal and $562 in state tax refunds, and it only cost him $700 to hire me. By comparison a significant percentage of persons, who hire attorneys, learn that their tax refunds are non-exempt, at the First Meeting of Creditors. Tracey L (Denver, CO, 3/11/10) was paying $572 per paycheck to garnishments, and it only cost her $1,200 to hire me. And YM (Longmont, CO, 7/22/10, sold his guns for $1,400, and it only cost him $800 to hire me. 27. If you hire me, most of my Client keep all of their property and discharge almost all of their debts. However, if you hire a Bankruptcy Petition Preparer you may make costly mistakes, with your hard earned dollars. I generally do a title search for my Clients. This revealed court suits, garnishments, judgment liens, and tens of thousands of dollars in debts, which would not otherwise have been listed. I found a $40,279 second mortgage, which my Client was unaware of, and we stripped it off. Another example is amending the list of creditors. Most Bankruptcy Petition Preparers do not know how to do this, because Bankruptcy Software does not walk them through this. By contrast, I have prepared hundreds of amendments. 28. In summary, incompetent Bankruptcy Petition Preparers often give bad legal advice. Their clients lose their tax refunds, have to sell the nest eggs, and then they are forced to pay thousands of dollars to experienced Bankruptcy Attorneys, in an effort to undo these costly mistakes. 29. In conclusion, the incompetence of Bankruptcy Petition Preparers causes around fortypercent of their cases to be dismissed shortly after filing. Next, they prey upon unsuspecting consumers, who trust that they know what they are doing, when in point of fact, they do not. Finally, Bankruptcy Petition Preparers make costly mistakes, and consumers often wind up paying more by hiring these bargain basement non-professional typists. The bottom line is: if you knew how the Federal Bankruptcy Code works, you would not have to hire a Bankruptcy Petition Preparer. Most of their customers assume that theirs are simple cases, but they do not understand no two cases, and no two clients, are identical. Favorable results are relative, and maximum discharge of debts, and minimizing non-exempt assets requires careful Bankruptcy planning, and sage advice from an experienced Bankruptcy Attorney. 6