James, Sr. v. Guidry (In re Guidry)

Summarized by Kevin Baum , Windels Marx Lane & Mittendorf, LLP
10 years 2 months ago

Citation:

James v. Guidry (In re Guidry), BAP No. CC-14-1531-TaKuKi, 2015 WL 8483726 (B.A.P. 9th Cir. Dec. 9, 2015)

Tag(s):

Ruling:

Reversing the Bankruptcy Court, the Bankruptcy Appellate Panel of the Ninth Circuit held that the Bankruptcy Court (1) erred in finding that a bankruptcy petition preparer violated section 110(b) and (c) of the Bankruptcy Code and (2) abused its discretion in ordering the disgorgement of the fee paid to the bankruptcy petition preparer and imposing a fine under section 110(l). In so holding, the BAP concluded that (a) the bankruptcy petition preparer had not been afforded procedural due process because the Bankruptcy Court’s OSC did not identify the grounds for relief upon which the Bankruptcy Court ultimately relied and the Bankruptcy Court did permit the bankruptcy petition preparer to cross examine the debtor, (b) the bankruptcy petition preparer may not have been subject to sanctions under section 110 of the Bankruptcy Code in connection with the conversion motion because Bankruptcy Court lacked evidence that the bankruptcy petition preparer accepted payment in exchange for his assistance in connection with that motion, (c) the Bankruptcy Court incorrectly relied on the debtor’s statement that the bankruptcy petition prepare suggested that the debtor convert to chapter 13 because such statement was not made in a declaration under penalty of perjury or under oath at the OSC hearing, and (d) the Bankruptcy Court incorrectly relied solely on the debtor’s non-evidentiary statement, without any evidence of what the bankruptcy petition preparer said in connection conversion motion, in assessing the bankruptcy petition preparer’s credibility.

Procedural context:

The Bankruptcy Court found that the bankruptcy petition preparer helped prepare the debtor’s conversion motion, and therefore, that he violated section 110(b) and (c) of the Bankruptcy Code by failing to list his name, address, and social security number on the motion. As a result, the Bankruptcy Court ordered the bankruptcy petition preparer to disgorge the fee he previously received in connection with the preparation of the petition and fined him pursuant to section 110(l). The bankruptcy petition preparer timely appealed. The BAP reviewed the order for an abuse of discretion.

Facts:

The bankruptcy petition preparer assisted the debtor in preparing his chapter 7 petition in exchange for a fee, which was properly disclosed to the Bankruptcy Court. The debtor’s schedules listed real property owned by the debtor. As the debtor did not claim an exemption in the real property, the trustee sought to sell it. The debtor initially responded by filing a motion to convert his case to chapter 13. The trustee opposed the motion, and the debtor replied, without a supporting declaration, that he intended to withdraw the conversion motion. The debtor’s reply alleged that the bankruptcy petition preparer advised him to convert the case chapter 13. The debtor reiterated the allegation at the conversion hearing. As a result of these allegations, the Bankruptcy Court issued an OSC as to why the bankruptcy petition preparer should not be ordered to disgorge his fees because he offered legal advice to the debtor and thus violated section 110(e) of the Bankruptcy Code. The OSC provided for written response by bankruptcy petition preparer and allowed the United States Trustee to request additional relief or sanctions against bankruptcy petition preparer on its own motion pursuant to § 110(i), (j), or (l). The UST did not file either a supportive response or its own motion. The bankruptcy petition preparer responded, without a supporting declaration, that (1) he had not offered legal advice to the debtor, including in connection with the conversion motion, and (2) he only helped prepare chapter 7 petitions and would refer individuals who wanted to file under a different chapter to attorneys or the court clinic. The bankruptcy petition preparer, however, also stated that he helped the debtor prepare the conversion motion but did not detail the help provided or indicate whether he charged the debtor for those services. At the OSC hearing, the bankruptcy petition preparer responded that the statement in his response, which had typed by his wife, was incorrect and should have stated that he prepared the chapter 7 petition – not the conversion motion. He further stated that he advised the debtor to seek legal counsel.

Judge(s):

Taylor, Kurtz, and Kirscher, Bankruptcy Judges

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