Taub v. Weber (9th
Cir. 2004)
BK PETITION PREPARER WAS PRACTICING LAW WITHOUT LICENSE
Taub and the Greenwaldts disagreed about how to treat a
401(k) retirement account on the bankruptcy forms. Schedule
B, an official form included with the Greenwaldts' Chapter 7
filing, required listing the "market value" of the debtors'
personal property. The heading on the form read: "CURRENT
MARKET VALUE OF DEBTOR'S INTEREST IN PROPERTY, WITHOUT
DEDUCTING ANY SECURED CLAIM OR EXEMPTION." In their draft
documents, the Greenwaldts indicated that the retirement
account held approximately $80,000. The Greenwaldts also
noted that they had borrowed $39,000 against the account.
The Greenwaldts thus filled out draft bankruptcy forms
listing what they believed was the net value of the
account-$41,000. Taub, however, prepared the forms with a
market value listing of $80,000. As the bankruptcy court
explained: "The discrepancy was pointed out, but Taub gave
no explanation. [The] Greenwaldts asked him to change the
entry but he refused. They eventually relented, assuming
that he knew what he was doing."
The Court held, [A]ll personal contact between defendants
and their customers in the nature of consultation,
explanation, recommendation or advice or other assistance in
selecting particular forms, in filling out any part of the
forms, or suggesting or advising how the forms should be
used in solving the particular customer's marital problems
does constitute the practice of law.
In the area of Bankruptcy law, Congress
has attempted to protect the debtor from this
type of abuse. They have passed a law (11
U.S.C. Section 110) which limits the amount an unlicensed person
can charge for preparing bankruptcy documents (in Arizona is it
usually limited to $200.00). The law also requires that the
person preparing the documents disclose their name and other
information. They cannot collect the filing fees from the Debtor.
There are fines and penalties of $500 for each failure up to $2,000,
plus more. In addition, as of July 1, 2004 the
Bankruptcy Court General Order 89 requires all document
preparers comply with the Arizona Supreme Court Rule and be licensed
as a document preparers.
11
U.S.C. Section 110 prohibits
these document preparers from "giving legal
advice". Deciding this type of bankruptcy to file is legal
advice. Explaining the terms: secured creditors, unsecured
creditors, executory contracts, lease assumptions, etc are all
deemed to be legal advice. Using these services would be akin
to asking your next door neighbor to diagnosis your cancer and
recommend the proper medical treatment. There is a reason that
your doctor and lawyer spent years in school and continue to take
education classes in their areas of practice.
There are serious problems that arise from filing the
wrong type of bankruptcy, filing at the wrong time, failing to properly plan for your bankruptcy, or
failing to disclose assets and liabilities. These problems
include losing your
home or car, losing the ability to file any bankruptcy, being sued
despite your bankruptcy and/or spending time in jail for
bankruptcy fraud. Is this all worth the small, if any,
additional financial outlay you would have made if you used a
qualified, licensed attorney? Your choice - your life.
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