Court Imposes $2,000 Fine Upon Bankruptcy Petition Preparer

26 Feb Court Imposes $2,000 Fine Upon Bankruptcy Petition Preparer

A New Mexico bankruptcy court recently imposed a fine of $2,000.00 upon a bankruptcy petition preparer (BPP), as a sanction for offering legal advice to the debtors inwhose caseshe had prepared the bankruptcy documents. The court held that the BPP’s conduct in offering legal advice violated bankruptcy code section 110.

This case, In re Rojero, 2008 WL 5191689 (Bky.D.N.M. Dec. 10, 2008), involved bankruptcy petition preparer Tammy Adams, who did business under the name Winds of Change Document Preparation Services. She was neither an attorney licensed by the state of New Mexico, nor did she work under the supervision of such an attorney. The BPP prepared all the required lists and schedules, including Form B22A, for use by the debtors in filing a joint chapter 7 bankruptcy case. The debtors paid the BPP $642.00 for this service. The debtors testified that they assumed the BPP was a licensed attorney.

The BPP met with the debtors in her home to gather the information for use in the bankruptcy documents, using their friend as a translator due to the debtors’ limited English proficiency. The BPP provided the debtors with the exemption statutes, a worksheet, and printed materials about bankruptcy. The BPP’s bankruptcy document software was pre-set to use the New Mexico exemptions, and the BPP customarily used those exemptions unless the debtor requested the federal exemptions. The debtors in this case indicated no preference as to which exemptions should be used.

The bankruptcy court noted that section 110 of the bankruptcy code forbids BPP’s from offering legal advice, defined as advising the debtor:

  • Whether to file bankruptcy;
  • Which chapter to file;
  • Whether the debtor will able to keep his or her home;
  • How to characterize the debtor’s assets or debts; or
  • About bankruptcy procedures and rights. 11 U.S.C. section 110(e)(2)(B).

The court found that here, the BPP had violated section 110 by selecting the chapter under which the debtors were to file, choosing the New Mexico exemptions (which also amounted to the unauthorized practice of law), informing the debtors they would be able to keep their home, and suggesting how the debtors should value their property in the bankruptcy documents.

The court ordered that the BPP refund all but $170.00 of the $642.00 fee to the debtors; that the BPP pay a fine of $2,000.00 to the debtors; and that the BPP be fined $25.00 for each of the four instances which constituted giving legal advice to the debtors.

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Craig W. Andresen is a consumer bankruptcy lawyer in Bloomington, Minnesota, with 22 years’ experience in consumer and small business bankruptcy cases. He is the Minnesota chair of the National Association of Consumer Bankruptcy Attorneys, and is a member of the Minnesota State Bar Association’s Bankruptcy Section. Mr. Andresen lectures often on the topic of consumer bankruptcy at local and national legal seminars.
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