In re Springs

• Decision Date: 07 December 2006
• Docket Number: No. 06-50854.,06-50854.
• Citation: 358 B.R. 236
• Parties: In re Kenneth Brian SPRINGS, Debtor.
• Court: U.S. Bankruptcy Court — Middle District of North Carolina

358 B.R. 236

In re Kenneth Brian SPRINGS, Debtor.

No. 06-50854.

United States Bankruptcy Court, M.D. North Carolina, Winston-Salem Division.

December 7, 2006.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Kenneth Brian Springs, Winston-Salem, NC, pro se.

MEMORANDUM OPINION

THOMAS W. WALDREP, JR., Bankruptcy Judge.

THIS MATTER came before the Court for hearing on November 15, 2006 upon a motion by the Bankruptcy Administrator (the "Motion") to determine the propriety of certain actions and fees of Clarence Williams, Sr. and/or Clarence Williams Entertainment, Inc ("Mr.Williams"). At the hearing, Sarah Bruce represented the Bankruptcy Administrator, Mr. Williams failed to appear, and Kenneth Brian Springs (the "Debtor") appeared pro se.

PROCEDURAL BACKGROUND

The Debtor filed a Chapter 7 petition on July 3, 2006 and C. Edwin Allman, III was appointed as the Chapter 7 trustee. The petition was signed only by the Debtor. The "Certificate of [Non-Attorney] Bankruptcy Petition Preparer" was left blank. The Bankruptcy Administrator filed the Motion at bar on October 4, 2006, and requested that the Court conduct a hearing regarding Mr. Williams' activities and fees as a petition preparer. Mr. Williams did not file a response to the Motion. A Show Cause Order was entered by the Court on October 6, 2006, directing Mr. Williams to appear before the Court to determine (a) whether Mr. Williams had violated various provisions of Section 110, (b) whether Mr. Williams had been overcompensated for the services rendered as bankruptcy petition preparer in this case, (c) whether Mr. Williams should be penalized for any violation of Section 110, (d) whether Mr. Williams should be enjoined from engaging in further conduct in violation of Section 110, and (e) whether Mr. Williams should be enjoined from further acting as a bankruptcy petition preparer. A hearing was held on November 15, 2006, and evidence was received. Based upon the evidence and arguments presented at. the hearing, a review of the Motion and the Show Cause Order, and a review of the entire official file, this Court makes the following findings of fact and conclusions of law.

JURISDICTION

The Court has jurisdiction over the subject matter of this proceeding pursuant to 28 U.S.C. §§ 151, 157, and 1334. This is a core proceeding within the meaning of 28 U.S.C. § 157(b)(2)(A), which this Court may hear and determine.

FACTS

On July 3, 2006, the Debtor filed his bankruptcy. The initial filing consisted of a voluntary Chapter 7 bankruptcy petition and several other documents ostensibly prepared by the Debtor. On July 14, 2006, the Debtor filed his schedules, statement of intention, and statement of financial affairs. On August 18, 2006, the Debtor's Section 341 meeting was held. At the Section 341 meeting, the Debtor testified that a company by the name of Clarence Williams Entertainment, Inc. assisted in the preparation of his bankruptcy petition. The Debtor produced a business card bearing the names "Clarence Williams, Sr." and "Clarence Williams Entertainment, Inc." and further testified that he paid Clarence Williams and/or Clarence Williams Entertainment, Inc.¹ the amount of $400.00² for its services.

At the November 15, 2006 hearing, the Debtor testified that he met Mr. Williams at a party and that they discussed the Debtor's financial problems. Mr. Williams told the Debtor that he had a computer program and an instruction manual that would enable the Debtor to file his own bankruptcy. The Debtor went to Mr. Williams' residence and used the computer program and instruction manual to complete his bankruptcy petition and the other documents required by Rule 1007 of the Federal Rules of Bankruptcy Procedure, including his schedules, statement of intention, and statement of financial affairs. Mr. Williams was involved to a significant degree in advising the Debtor and preparing the Debtor's bankruptcy documents.³

DISCUSSION

Section 110 of the Bankruptcy Code regulates the conduct of bankruptcy petition preparers. Congress enacted Section 110 to "address the growing problem of bankruptcy [petition] preparers who abuse the system in the course of preparing documents for debtors to file." 2 Collier on Bankruptcy, ¶ 110.LH (15th ed. rev. A. Resnick & H. Sommer 2003)(p.110-22-110-24) (citing S.Rep. No. 103-168, 103rd Cong., 1st Sess. 51 (1993)). Mr. Williams acted as a bankruptcy petition preparer.⁴ The Motion requires the Court to address several portions of Section 110. Each portion will be addressed separately.

A threshold issue is whether the various documents filed with the Court constitute separate documents or one document for the purposes of Section 110. Section 110(a)(2) provides that "`document for filing' means 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 title 11." 11 U.S.C. § 110(a)(2). Courts are divided as to what this portion of the statute means, Compare In re Jolly, 313 B.R. 295, 300 (Bankr. S.D.Iowa 2004)(noting that the "majority of courts that have considered the issue have held that the petition, the schedules, and the various statements constitute separate documents for the purposes of § 110"); In re Hartman, 208 B.R. 768, 777 (Bankr.D.Mass.1997)(petition, schedules, statement of financial affairs, statement of intention, and verification of creditor matrix are all separate "document[s] for filing"); In re Hobbs, 213 B.R. 207, 212 (Bankr.D.Me.1997)(petition, plan, schedules, statement of financial affairs, and certification of creditor matrix "is each a separate `document for filing'"); In re Paskel, 201 B.R. 511, 516 (Bankr.E.D.Ark.1996) (the voluntary petition, the schedules, and the statement of financial affairs were all separate documents for the purposes of an analysis under Section 110 and could give rise to separate violations); In re Rausch, 197 B.R. 109, 120 (Bankr.D.Nev.1996)(relying on Advisory Committee Notes to the 1995 amendments to the Official Forms, and finding that the petition, the schedules, the statement of financial affairs, and the statement of intention are all separate "document[s] for filing") with In re Brokenbrough, 197 B.R. 839, 843 (Bankr. S.D.Ohio 1996)(various documents only constituted a single "document for filing"); In re Burdick, 191 B.R. 529, 536 n. 5 (Bankr.N.D.N.Y.1996)("... where the schedules and statements are included with the petition at the time of filing, the Court finds that for purposes of Code § 110 a single document has been filed"). This Court agrees with the majority. The petition, the schedules, the statement of intention, the statement of financial affairs, and the verification of creditor matrix are each a separate "document for filing" and may each give rise to separate violations of the statute.

A. Disgorgement of Fees Under Section 110(h) (3)(A)

Section 110(h)(3)(A) provides that a court "shall disallow and order the immediate turnover to the bankruptcy trustee any fee. . . found to be in excess of the value of any services." Section 110(h)(4) provides that several entities, including the Bankruptcy Administrator, may file a motion requesting this remedy. The Motion filed by the Bankruptcy Administrator in this case is such a motion, and the Court therefore is called upon to determine whether the $100.00 charged by Mr. Williams is in excess of the value of the services provided by Mr. Williams as a petition preparer.

Under Section 110, the burden of proving the reasonableness of a fee collected by a bankruptcy petition preparer rests upon the petition preparer. See, e.g., In re Froehlich, 23 Fed.Appx. 572, 574, 2001 WL 1530594 (7th Cir.2001)(petition preparer, as the party seeking fees, "has the burden of establishing that he or she is entitled to them once a question regarding their reasonableness has been raised."); In re Haney, 284 B.R. 841, 850-51 (Bankr.N.D.Ohio 2002)(same); In re Doser, 281 B.R. 292, 313 (Bankr.D.Idaho 2002)(same); In re Bush, 275 B.R. 69, 85-86 (Bankr.D.Idaho 2002)(same). In this case, the Bankruptcy Administrator has shown that Mr. Williams acted as a petition preparer and that he collected a fee from the Debtor. The burden of proof regarding the reasonableness of Mr. Williams' fee rested with Mr. Williams, who failed to attend the hearing and thus failed to show, by a preponderance of the evidence or any other standard, that the fee that he collected was reasonable compensation for his services as a petition preparer. Because he has failed to prove the reasonableness of his fee, the Court finds that all fees paid to Mr. Williams are in excess of the value of his services.⁵ Therefore, Mr. Williams shall turn over $100.00, the entirety of the fee received, to the Trustee.

B. The Failure to Comply With Section 110

I. Failure to Comply with Section 110(b)(1)

Section 110(b)(1) provides that a "bankruptcy petition preparer who prepares a document for filing shall sign the document and print on the document the preparer's name and address." 11 U.S.C. § 110(b)(1). Nowhere on any of the documents filed by the Debtor in this case is there any mention of Mr. Williams. Therefore, the Court finds that Mr. Williams failed to comply with Section 110(b)(1). As noted above, this failure will give rise to five separate violations of the statute as Mr. Williams failed to comply with regard to the petition, the schedules, the statement of intention, the statement of financial affairs, and the verification of creditor matrix. For each of these violations, Mr. Williams shall be ordered to pay a fine pursuant to Section 110(l)(1).

II. Failure to Comply with Section 110(b)(2)(A) and (B)

Section 110(b)(2)(A) provides that "[b]efore preparing any document for filing or accepting any fees from a debtor, the bankruptcy petition preparer shall provide to the debtor a written notice." 11 U.S.C. § 110(b)(2)(A). Section...