In re Bernales
| Decision Date | 19 June 2006 |
| Docket Number | No. SV 05-50082 MT.,SV 05-50082 MT. |
| Citation | 345 B.R. 206 |
| Parties | In re Ceasar Gaite BERNALES, Debtor. |
| Court | U.S. Bankruptcy Court — Central District of California |
Ceasar Gaite Bernales, North Hollywood, CA, pro se.
Diane Weil, Los Angeles, CA, Chapter 7 Trustee.
Jennifer Braun, Office of U.S. Trustee, Woodland Hills, CA, U.S. Trustee.
AMENDED MEMORANDUM OF DECISION AND ORDER
TABLE OF CONTENTS
I. Introduction ....................................................................... ----
II. Preliminary Matters ................................................................ ----
III. Factual Background ................................................................. ----
IV. Discussion ......................................................................... ----
A. Prohibition on Offering Legal Advice ........................................... ----
1. What Constitutes Legal Advice .............................................. ----
2. Whether New BAPCPA Provisions Allow Limited Practice of Law ................ ----
3. CCSA and Mr. Bohl Improperly Gave Legal Advice ............................. ----
a. Filing Fee Advice ...................................................... ----
b. "Facesheet Filing" ..................................................... ----
c. Motion for Extension of Time ........................................... ----
d. Legal Interpretation of the Deadline ................................... ----
e. Advice Regarding the Debtor's Duties ................................... ----
f. Means Test Advice ...................................................... ----
g. Inclusion of All Creditors ............................................. ----
h. Questionnaire .......................................................... ----
i. Selection of Exemptions ................................................ ----
j. Website ................................................................ ----
B. Other Violations of § 110 Involving Lack of Required Disclosures .......... ----
1. 11 U.S.C. § 110(b)(2)(B) .............................................. ----
2. 11 U.S.C. § 110(h)(2) .................................................. ----
C. Sanctions ...................................................................... ----
1. Fines or Damages to be Paid to the Debtor and U.S. Trustee ................. ----
2. Injunction ................................................................. ----
V. Conclusion ......................................................................... ----
This case presents the issue of the lawful parameters of activities by bankruptcy petition preparers following enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 ("the new Act" or "BAPCPA"). Immediately before the effective date and following enactment of BAPCPA, the bankruptcy courts have seen increased numbers of unrepresented debtors file bankruptcy.1
This case involves Consumer Credit Services of America, Inc. ("CCSA"), a Florida-based bankruptcy petition preparer corporation which operates principally through its website: http://www.ccsofamerica.com/.2 Advertising nationally through multiple media outlets, CCSA attempts to draw in the business of potential bankruptcy debtors across the country. CCSA and its employee and officer, Greg Bohl, have repeatedly engaged in the unauthorized practice of law and violated the Bankruptcy Code provisions regulating bankruptcy petition preparers. They have given legal advice, attempted to explain court procedures, suggested filing strategies, used unlawful questionnaires, and selected exemptions. To make matters more dangerous, CCSA and Mr. Bohl have done so without any real apprehension that what they are doing is the unauthorized practice of law. To the contrary, they appear to be quite proud of their "innovative" business model and strenuously argue that they are one of the "legitimate" bankruptcy petition preparers in the marketplace.
The findings contained herein are based on the two hearings held in this matter and all documents filed in the court record. CCSA has not appeared at any of the several order to show cause hearings, despite having been noticed of them. Under LBR 2090-1(g)(1), "[a] corporation, partnership or unincorporated association may not file a petition or otherwise appear without counsel in any case or proceeding" except in circumstances not relevant here. Under this rule, Mr. Bohl's telephonic appearance does not qualify as an appearance on behalf of CCSA as Mr. Bohl is admittedly no lawyer.3 Thus, CCSA filed no objections and made no appearance.
Additionally, Mr. Bohl chose not to appear in person, despite ample warnings that he could not testify telephonically. By not appearing in person, Mr. Bohl was advised that he waived the right to testify, put forward evidence, or cross-examine any witnesses who testified at the hearings. He was, however, allowed to argue telephonically and invited to file any documentary evidence he wished, which he did.
II. Factual Background
Sometime in mid-November 2005, Ceasar Gaite Bernales contacted CCSA to assist him in filing for bankruptcy. He found CCSA, which is operated out of Florida, online through its website. Bernales's assigned "case coordinator" was Greg S. Bohl, a non-attorney.4 On November 22, 2005, CCSA e-mailed Bernales "emergency bankruptcy documents," including a Voluntary Petition, a Statement of Social Security Number, a Verification for Creditor Matrix, an Application to Pay Filing Fee in Installments, and an Order Approving Payment of Filing Fee in Installments.
On November 23, 2005, Bernales filed the Petition and the Verification for Creditor Matrix. Bernales's request to pay the filing fee in installments was denied. Bernales promptly amended his petition and paid his filing fee in full.
That very same day, the clerk's office issued a Notice of Case Deficiency under 11 U.S.C. § 521(a)(1) and Bankruptcy Rule 1007 and a Case Commencement Deficiency Notice. These notices advised the Debtor to file the remaining required documents within fifteen days or face possible dismissal.
After receiving these notices, Bernales and CCSA contacted each other back and forth by e-mail. CCSA advised the Debtor it would provide the missing documents "a day or 2 prior to the deadline." By December 8, 2005, the filing deadline, Bernales still had not received the remaining documents. Instead of receiving the documents or a response, he received an e-mail dated December 9, 2005, explaining that his case coordinator, Greg Bohl, was out on medical leave. This e-mail requested Bernales to fill out a Questionnaire and return it by fax to enable CCSA to prepare the remaining bankruptcy documents. Bernales faxed over a completed copy of the Questionnaire.
After Bernales faxed over the Questionnaire, he asked CCSA by email whether he "need[ed] to contact the court to get an extension on the 15 day deadline." CCSA replied with a question: " After receiving this suggestion, the Debtor lodged with the Court an Order Pursuant to Extending Time to File the Required Documents, which would extend the filing deadline to December 16, 2005.
CCSA finally e-mailed some of the remaining documents to the Debtor on the afternoon of December 13, 2005. Bernales finally filed these documents on December 15, 2005. The Court signed Debtor's proposed order to extend the filing deadline on December 19, 2005, thus extending the deadline to December 16, 2005.
Notwithstanding the fact that Bernales filed additional documents on December 15, 2005, Bernales still failed to timely file a significant number of required documents, including (1) Debtor's Credit Counseling Certificate, (2) Debtor's Debt Repayment Plan (if any), (3) the current version of the Declaration Concerning Debtor's Schedules (Official Form B6), (4) all of Debtor's payment advices or other evidences of payment for the entire 60-day prepetition period, (5) a Statement of Related Cases (Official Form F 1015-2.1), (6) a Notice of Available Chapters (Official Form B201), (7) a Statement Regarding Assistance of Non-Attorney with Respect to the Filing of Bankruptcy Case (LBR 1002-1), (8) a Declaration and Signature of Non-Attorney Bankruptcy Petition Preparer (Official Form B1 9A), (9) a Notice to Debtor by Non-Attorney Bankruptcy Petition Preparer (Official Form B19B), and (10) a Disclosure of Compensation of Bankruptcy Petition Preparer.5 On January 31, 2006, another order to show cause was issued re: dismissal for Debtor's failure to file these required documents. Having failed to cure this defect by the time of the hearing on the order to show cause, and having failed to appear at that hearing, Debtor's case was dismissed on February 16, 2006.
This case first came to the court's attention when the Debtor filed a proposed order to extend the filing deadline. Based on the unusual nature of that document and after a subsequent review of Debtor's file, the court issued an order to show cause re: "Disgorgement of Fees by Bankruptcy Petition Preparer Consumer Credit Services of America, Inc. and Greg S. Bohl" on December 20, 2005. This order requested that CCSA and Mr. Bohl "explain how the petition was prepared and who gave the Debtor instructions to move...
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