In re Irons

• Decision Date: 19 December 2007
• Docket Number: No. 07-37182.,07-37182.
• Citation: 379 B.R. 680
• Parties: In re Anthony R. IRONS, Debtor(s).
• Court: U.S. Bankruptcy Court — Southern District of Texas

379 B.R. 680

In re Anthony R. IRONS, Debtor(s).

No. 07-37182.

United States Bankruptcy Court, S.D. Texas, Houston Division.

December 19, 2007.

COPYRIGHT MATERIAL OMITTED

Roger Harmon Broach, Attorney at Law, Houston, TX, for Debtor.

ORDER DENYING MOTION TO VACATE DISMISSAL AND SETTING § 526 HEARING WITH RESPECT TO ROGER BROACH

This case" was automatically dismissed pursuant to 11 U.S.C. § 521 of the Bankruptcy Code after the debtor failed to file certain documents within the time required by the statute. Mr. Irons seeks to have the dismissal vacated, alleging that the failure to file the required documents was his counsel's fault.

Mr. Irons cites no authority that allows the Court discretion to vacate a statutory dismissal. However, even if the Court has such authority, the Court declines to do so. The deficiencies in Mr. Irons' compliance with the requirements of the Bankruptcy Code are substantial. The Court cannot overlook the prejudice to other parties in interest and to the administration of justice, if the dismissal of this case were to be vacated.

The vast majority of chapter 13 debtors' counsel do outstanding legal work. Those counsel undertake difficult cases. They represent individuals in chapter 13 cases with diligence, competence, and compassion. There is often substantial risk that their work will not be fully compensated. A Debtor's counsel's burden is increased by the fact that often the professional relationship is limited to a single engagement. Counsel must prepare complex and exhaustive pleadings quickly, without the luxury of pre-filing familiarity with the client and his affairs. Exigent circumstances often preclude an extended review of the information provided by the client. In such circumstances, honest and occasional errors can be expected. The Court will not criticize counsel for such errors.

However, the Court is concerned that counsel may have practiced law at a level of competence and diligence that is far below the professional standard followed by members of the chapter 13 bar in Houston, Texas. If the deficiencies in this case are indeed counsel's fault, as Debtor alleges, then counsel's conduct may exceed the limits of excusable negligence. When such egregious behavior is alleged, the Court has a statutory obligation to act.

Background

Mr. Irons filed this case on October 22, 2007. The requisite documents were required to be filed within 15 days. FED. R. BANKR.P. 1007(e). If the documents were not filed within 45 days (i.e., December 6, 2007), the statute provides for automatic dismissal of the case. 11 U.S.C. § 521(i).

On October 23, 2007, this Court issued an order setting forth Mr. Irons' deficiencies, notifying him of the statutory deadline for filing the documents with the Court, and the statutory consequences of failure to meet that deadline. The October 23, 2007 order advised Mr. Irons that his case would be automatically dismissed if he failed to comply. His § 521 filing deficiencies included the failure to file his schedules A-J, statement of financial affairs, Form 822, and payment advices.

Mr. Irons missed the 15 day deadline, without seeking any extension. He then waited to file his schedules and his statement of financial affairs until November 24, 2007. No pay advices were filed until December 5, 2007. Mr. Irons completely failed to timely file a Form B22, and this case was automatically dismissed by statute, with the dismissal effective December 6, 2007. On December 7, 2007, the Court issued an order confirming the statutory dismissal. On December 12, 2007, Mr Irons filed what he purports to be his Form B22.

Mr. Irons' counsel is Mr. Roger Broach Filed Documents Are Grossly Deficient

Mr. Irons' pleadings are chock-full of inconsistencies and inaccuracies. Mr. Irons seeks equitable relief based on his allegation that he has now filed the required documents. Because the filed documents are so far off the mark, the Court declines the request for equitable relief.

The Court starts with the Form B22 that Mr. Irons untimely filed. The Court has reviewed the late-filed form and notes the following:

• All of the amounts are listed at $0.00.

• The document is not signed.

The late-filed B22 is wholly devoid of the required information. The filing of an unsigned, late-filed, blank Form B22 cannot meet the statutory requirement of a timely filed, properly completed Form B22. 11 U.S.C. § 521. The Form B22, as filed, is nonsense.

If that were the only discrepancy, the Court might still consider whether the statute allows for equitable relief. However, the Court has reviewed the other materials filed by Mr. Irons and finds these materials to be equally troubling. For example:

• The statute requires the filing of a Statement of Financial Affairs. Mr. Irons has carefully checked None as to each question asked. Accordingly, he has sworn that he has no income (a statement inconsistent with his pay advice filing), no losses, no spouse (a spouse is shown on his Schedule I), no business, no books and records, etc.

• Mr. Irons forecasts that he will have gross income of $14,200 per month. He claims $4,600.00 in monthly expenses attributable to his business. He refers to an attached statement for the itemization of this amount but fails to attach the itemization. He proposes to pay his monthly mortgage both on his Schedule J (as a monthly direct expenditure) and through his proposed plan. This double counting reduces the amount available for creditors by $1,850.00 per month.

• The chapter 13 bankruptcy plan submitted by Mr. Irons proposes to pay $51,000 for a 2007 Infiniti qx56 automobile and $21,000 for a 2007 Toyota Truck. He proposes to surrender a 2006 Landrover vehicle with an $80,000 lien against it.¹ He lists his home as having no value before considering the secured debt on the home, but claims to owe $180,000 in mortgage debt. He elects to claim the to-be-surrendered Landrover as exempt property, but does not claim his to-be-retained vehicles as exempt.

It is apparent that the documents were not filed with the diligence required of a chapter 13 debtor or his counsel. Equitable relief is denied.

Hearing and Possible Relief Related to Actions by Counsel

Debtor's motion alleges that the deficiencies in the documents are his counsel's fault. As stated above, the Court understands that honest and occasional errors will occur, and such errors are not matters for undue concern. But if Debtor's allegations are correct, then counsel's performance in this case is so utterly ineffective and deficient that the Court must fulfill its duty to review that engagement and to issue orders for appropriate relief.

Bankruptcy Courts had authority to review the quality of legal representation long before the adoption of the Bankruptcy Abuse and Consumer Protection Act of 2005. Section 329 authorized the Court to order the disgorgement of compensation that exceeded the reasonable value of counsel's work. 11 U.S.C. § 329. Section 330 provided for Court approval of counsel's fees. 11 U.S.C. § 330(a)(4)(B). The Court could refer counsel who violated State Bar obligations to the appropriate disciplinary authorities. See TEX. DISCIPLINARY R. PROF'L CONDUCT 1.01 reprinted in TEX. GOV'T CODE ANN., tit. 2, subtit. G app. A (Vernon Supp.2007) (TEX. STATE BAR R. art. X, § 9) (requiring competent and diligent representation) and TEX. DISCIPLINARY R. PROF'L CONDUCT 8.03 (requiring reporting of violations). The Court held inherent power to regulate the practice of counsel appearing before the Court. In re Placid Oil Co., 158 B.R. 404, 411 (N.D.Tex. 1993); In re Johnson, 921 F.2d 585 (5th Cir.1991). Rule 9011 of the Federal Rules of Bankruptcy Procedure authorized sanctions for failure to use reasonable care in the preparation of documents. All of those previous sources of authority remain effective today.

When BAPCPA was adopted, it included new sections 526, 527 and 528. Although the new statutory sections may provide added definition of counsel's obligations and potential remedies, these new sections are not divorced from pre-BAPPA jurisprudence.

The Court will conduct a hearing on January 10, 2008, at 1:30 p.m. to determine what, if any, relief to award in this case. The Court will consider all sources of its authority and responsibility to review Mr. Broach's conduct. In addition, the Court will inquire of the United States Trustee, the State of Texas, and Mr. Irons whether they will seek other relief against Mr. Broach.

Furthermore, the Court, acting on its own motion pursuant to § 526(c)(5), will consider whether the Court should conduct a proceeding to determine whether the Court should enjoin Mr. Broach from future violations of § 526 of the Bankruptcy Code, and whether the Court should impose an appropriate civil penalty against him.

Because § 526 is new and not completely explored in the jurisprudence, the Court will provide Mr. Broach some guidance in understanding the Court's view of how the statute applies to him in this situation and what issues he should be prepared to address.

The Court's Case Manager shall serve a copy of this order on Mr. Broach, Mr. Irons, the State Bar of Texas, and the United States Trustee. Mr. Broach is ordered to attend the hearing.

Application of 526

Section 526 imposes certain requirements on Debt Relief Agencies and sets forth remedies for violations of its provisions.

There are few published opinions dealing with the provisions of § 526, and fewer still dealing directly with the issues of the extent of counsel's duties under § 526, the means to enforce those duties, and the remedies available if a violation occurs. However, the Court will first address the threshold issue of whether Mr. Broach is a Debt Relief Agency whose actions are covered by § 526.

The term Debt Relief Agency is defined in § 101(12A) of the Bankruptcy Code as follows (12A) The term debt relief agency means any person who provides any bankruptcy assistance to...