In re Brokenbrough
| Decision Date | 06 June 1996 |
| Docket Number | Bankruptcy No. 95-32579. |
| Parties | In re Eula M. BROKENBROUGH, Debtor. |
| Court | United States Bankruptcy Courts. Sixth Circuit. U.S. Bankruptcy Court — Southern District of Ohio |
Wayne P. Novick, Centerville, Ohio, for Debtor.
Stanley A. Hirtle and Gwendolyn D. Cosey, Legal Aid Society of Dayton, Dayton, Ohio.
George W. Ledford, Chapter 13 Trustee, Englewood, Ohio.
Donald F. Harker, III, Chapter 7 Trustee, Dayton, Ohio.
DECISION AND ORDER ON U.S. TRUSTEE'S MOTION UNDER 11 U.S.C. § 110 (DOC. # 22)
This matter is before the court upon the motion of the U.S. Trustee for a finding of various violations of 11 U.S.C. § 110 by Eugene White and Lancaster Bankruptcy Center (aka Legal Aid Services) as well as the imposition of penalties under the provisions of that section of the Bankruptcy Code. The court has jurisdiction pursuant to 28 U.S.C. § 1334 and the standing order of reference entered in this district. This matter is a core proceeding under 28 U.S.C. § 157(b)(2)(A) and (O).
This matter came on for hearing on March 29, 1996, and the following findings of facts are made:
1. On August 1, 1995, Eula M. Brokenbrough ("debtor") filed a Voluntary Petition under chapter 7 of the U.S. Bankruptcy Code.
2. The Voluntary Petition, Schedules, Statement of Financial Affairs and other relevant bankruptcy papers filed with this court on August 1, 1995, were prepared by Eugene White and Lancaster Bankruptcy Center/LAS (Debtor's Testimony and Hearing Exh. 5).
3. The Certification and Signature of Non-Attorney Bankruptcy Petition Preparer form contains the following information: Lancaster Bankruptcy Center, Eugene White, Social Security account number XXX-XX-XXXX, Tax ID number XX-XXXXXXX, located at 641 West Avenue, J, suite 153, Lancaster, CA 93534, with a signature of one Eugene White, dated 7-27-95 (Hearing Exh. 5).
4. LAS held itself out in the Dayton, Ohio, area as being in the business of preparing legal paperwork in various legal matters, including bankruptcy. The Dayton Area Yellow Pages contains an advertisement for "Legal Aid Services" with a phone number of 1-800-222-2428 (Hearing Exh. 8).
5. Dayton area phone calls for LAS placed at the 1-800-222-2428 number were answered in California. It was the practice of LAS to hire a local agent to rent temporary office space in the Dayton area and meet with Dayton area customers.
6. LAS also placed listings in the Dayton area Business White Pages and the Dayton area Yellow Pages under the name "Legal Aid Servs" sic with a local number of 222-2428 (hearing Exhs. 7 & 8).
7. Lancaster/LAS are based in Lancaster, California, and received mail at 2331-D2 E. Ave. S, Ste. 264, Palmdale CA 93550, and at 641 West J, # 153, Lancaster CA 93534.
8. Eugene White, is an employee, agent and/or principal of Lancaster/LAS (Hearing Exh. 5).
9. Mr. White and LAS are not attorneys licensed to practice law within the State of Ohio, nor are they admitted to practice before any United States District Court in Ohio (Hearing Exh. 5).
10. Prior to the filing of the instant case, LAS, its principals, and any one acting in concert with them were enjoined from preparing bankruptcy petitions and/or acting as bankruptcy petition preparers anywhere in the United States of America for violations of section 110 of the Bankruptcy Code. See Ross v. Smith (In re Gavin), 184 B.R. 670 (E.D.Pa.1995) and 181 B.R. 814 (Bankr. E.D.Pa.1995); In re Hernandez, unreported, Case No. 95-51477-RBK (W.D.Texas, San Antonio Division, June 14, 1995); and In re Lackey, unreported, Case No. 95-10453FM (W.D.Texas, Austin Division, May 19, 1995).
11. On or about April 1995, debtor's daughter telephoned LAS for information as to whether bankruptcy would resolve the debtor's financial problems. Due to the similarity in names, the debtor and her daughter believed they were contacting the Legal Aid Society of Dayton. Legal Aid Society receives funds from the Legal Services Corporation pursuant to federal law as well as from other funding sources to provide legal services to the indigent in Montgomery County, Ohio.
12. An unidentified employee of LAS, in the Lancaster California office, scheduled an appointment for the debtor to meet Ms. Gohagan, an agent of LAS, at an office temporarily rented at 4027 Colonel Glenn Highway, near Dayton, Ohio. The debtor was told to bring her financial records and a list of creditors to the meeting and that the bankruptcy would cost her $ 150.
13. The debtor met with Ms. Gohagan on April 25, 1995, at the Colonel Glenn Highway location and provided Ms. Gohagan with information and documents concerning her assets, debts and finances. The debtor inquired and was advised at this meeting that she would be represented by legal counsel during the bankruptcy proceeding, and that the bankruptcy proceeding would not result in the loss of her home. The debtor had no knowledge regarding which of the various chapters of the Bankruptcy Code provides the relief she sought, nor did she have an understanding of the statutory exemptions available to her, how to classify claims, or knowledge of legal terminology.
14. The debtor emphasized that she did not wish to lose her home, and Ms. Gohagan reassured her that she would not lose her home.
15. The debtor paid $ 150 cash to Ms. Gohagan and signed an agreement for the preparation of a chapter 7 bankruptcy petition by LAS (Hearing Exh. 4).
16. On or about August 1, 1995, more than three months after the meeting, the debtor received copies of a chapter 7 Bankruptcy Petition, Schedules, Statement of Financial Affairs, and other papers prepared by Eugene White and Lancaster Bankruptcy Center/LAS.
17. The debtor never met or spoke to Eugene White.
18. Shortly after her receipt of the bankruptcy papers from LAS, the debtor called the LAS office in California and inquired about meeting her attorney and how to file the bankruptcy documents. An employee, who failed to identify herself when asked to do so by the debtor, assured the debtor she would be represented by counsel and instructed the debtor to take the bankruptcy documents to the bankruptcy court. LAS never provided the debtor with an attorney.
19. The debtor did not realize that she had made a mistake in thinking that LAS was Legal Aid Society of Dayton, Inc., until her chapter 7 first meeting of creditors was held in October, 1995, pursuant to 11 U.S.C. § 341.
20. The only papers signed by Eugene White, as the bankruptcy petition preparer, with his name and address printed thereon were the "Certification and Signature of Non-Attorney Bankruptcy Petition Preparer" document, which contains the signature "Eugene White" and is dated July 27, 1995 (Hearing Exh. 5), and the "Declaration of Bankruptcy Petition Preparer" document (Hearing Exh. 5). The petition, the numerous schedules, the Statement of Financial Affairs, and other bankruptcy papers prepared by Mr. White and LAS — and later filed with this court by the debtor — were not signed by Mr. White and/or LAS.
21. Eugene White's Social Security account number appearing on the Certification form, the Declaration form, the Disclosure of Compensation form, and on page 2 of the Petition, i.e., XXX-XX-XXXX, is not a valid and correct number for Eugene White. His correct social security account number is XXX-XX-XXXX, which does not appear on any of the bankruptcy papers (Hearing Exh. 1, 2, 5, and testimony of Jerald M. Messer, Special Agent, Office of Inspector General, Social Security Administration).
22. The bankruptcy papers prepared by Eugene White and LAS contain a number of significant errors:
a. LAS filed a chapter 7 petition on the debtor's behalf thereby subjecting the debtor to the potential sale of her home;
b. no exemptions were claimed by the debtor;
c. Schedule F contains no address for the debtor's largest unsecured creditor, Associated National Bank of Delaware;
d. In the Debtor's Statement of Intention concerning her consumer debts secured by property of the estate, LAS states that the debtor will avoid the mortgage on her real estate.
23. Due to such errors by Eugene White and LAS in preparing the debtor's bankruptcy papers, the debtor retained a bankruptcy attorney and moved this court to convert the chapter 7 case to a case under chapter 13 of the Bankruptcy Code. The order of conversion was entered on December 4, 1995.
24. In retaining counsel for her case, the debtor incurred attorney fees of $ 500.
In 1994, in response to the increasing number of "bankruptcy petition preparers," Congress enacted § 110 of the Bankruptcy Code which sets standards for bankruptcy petition preparers and provides penalties for the failure to meet such standards. Congress intended that it still be permissible for a bankruptcy petition preparer to provide typing services but believed that far too many bankruptcy petition preparers "also attempted to provide legal advice and legal services to debtors." H.R.Rep. No. 834, 103rd Cong., 2d Sess. 40-41 (1994).
These preparers often lack the necessary legal training and ethics regulation to provide such services in an adequate and appropriate manner. These services may take unfair advantage of persons who are ignorant of their rights both inside and outside the bankruptcy system. Id.
Section 110(a) of the Bankruptcy Code defines a "bankruptcy petition preparer" as "a person, other than an attorney or an employee of an attorney, who prepares for compensation a document for filing." 11 U.S.C. § 110(a)(1). In turn, a "document for filing" is defined as "a petition or any other document prepared for filing by a debtor in a United States bankruptcy court or a United States district court in connection with a case under this title." 11 U.S.C. § 110(a)(2).
Evidence at the hearing in this case demonstrates that the debtor paid $ 150 to LAS's agent, Mrs. Gehagan, for preparation of the bankruptcy papers filed with this court. In addition, it was also shown...
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