Ferrer Case: No Stay Violation of Creditor Not Notified

 

Read commentary about this opinion here.

UNITED STATES BANKRUPTCY COURT, MIDDLE DISTRICT OF FLORIDA JACKSONVILLE DIVISION

IN RE: JEFFREY EDWARD FERRER v. LOU SOBH AUTOMOTIVE OF JAX, INC. d/b/a HONDA OF THE AVENUES

Case No. 15-bk-03646, Adv. No. 16-00141

____________________________________

FINDINGS OF FACT AND CONCLUSIONS OF LAW

This proceeding came before the Court for trial on January 25, 2017, on Debtor JEFFREY EDWARD FERRER’S (“Debtor”) Amended Complaint, (Doc. 5), for an alleged violation of the automatic stay by Defendant LOU SOBH AUTOMOTIVE OF JAX, INC. D/B/A HONDA OF THE AVENUES (“Lou Sobh Automotive”) and Defendant’s Answer to the Amended Complaint.

Dated: January 30, 2017

ORDERED.

Upon the evidence and arguments presented by the parties, the Court makes the following Findings of Fact and Conclusions of Law.

Findings of Fact

On August 13, 2015, Debtor filed a voluntary petition under Chapter 13 of the Bankruptcy Code, which was later converted to a Chapter 7 case. Prior to filing the petition, Debtor purchased a vehicle from Lou Sobh Automotive. Debtor entered a retail-installment sales agreement with Lou Sobh Automotive for the purchase of this vehicle. Debtor admits that, at the time of the purchase, he was contemplating filing a bankruptcy petition; however, Debtor also admits that he gave no indication to Lou Sobh Automotive that he was contemplating bankruptcy at the time of the purchase. Debtor then filed his bankruptcy petition two days after purchasing the vehicle.

Debtor concedes he did not list Lou Sobh Automotive as a creditor, in his original petition.

After Debtor filed the petition, Lou Sobh Automotive contacted him, requesting he come to the dealership to sign a new retail-installment agreement because the first agreement had gone unfunded, which the evidence indicates occurs from time to time. Debtor claims he referred the dealership’s request to his bankruptcy attorney, at the time, but had no knowledge or other evidence of any communication from his then-attorney to Lou Sobh Automotive. The only mention of “bankruptcy” occurred when Debtor told Lou Sobh Automotive that he had retained a bankruptcy attorney. No evidence was presented that either Debtor, his attorney, or anyone else had communicated the filing of any bankruptcy petition or initiation of a bankruptcy case, to Lou Sobh Automotive. On cross exam, Debtor plainly admitted he had no evidence that anyone had communicated the initiation of a bankruptcy case, to Lou Sobh Automotive. Ultimately, a new retail-installment agreement was entered by Debtor and Lou Sobh Automotive, which resulted in lower monthly payments for Debtor. This new installment agreement was then funded/purchased by a third-party bank.

Further, the Finance Coordinator of Lou Sobh Automotive, who received the communication about Debtor retaining a bankruptcy attorney, testified that she regularly processed the funding of retail-installment agreements and that she was familiar with the bankruptcy process.

The Finance Coordinator testified, and the Court finds, that she and Lou Sobh Automotive understood that Debtor had simply retained an attorney but had not actually filed a bankruptcy petition. She further testified that, had she known a petition had been filed, Lou Sobh Automotive would not have continued further communication with Debtor. She testified she would have noted the bankruptcy filing in her spreadsheet logs at the dealership, which were available for any finance-department employee to see.

Conclusions of Law

“It is well established that the filing of a bankruptcy petition acts to automatically stay all efforts outside of bankruptcy . . . to collect debts from a debtor who is under the protection of the bankruptcy court.” Lodge v. Kondaur Capital Corp., 750 F.3d 1263, 1268 (11th Cir. 2014); see also 11 U.S.C. § 362(a)(3), (6). “In turn, § 362(k) provides that an ‘individual injured by any willful violation of a stay provided [by § 362] shall recover actual damages, including costs and attorneys’ fees . . . .’” Id.; 11 U.S.C. § 362(k). “A creditor’s conduct in violating the automatic stay is willful if the creditor: 1) knew that the automatic stay was invoked and 2) intended the actions, which violated the stay.” In re Zajni, 403 B.R. 891, 895 (Bankr. M.D. Fla. 2008) (citing Jove Eng’g, Inc. v. I.R.S., 92 F.3d 1539, 1555 (11th Cir. 1996)).

Here, there is no dispute that Lou Sobh Automotive did not receive actual notice of Debtor’s bankruptcy filing, particularly in light of Debtor’s failure to identify Lou Sobh as a creditor, in his initial petition. Debtor’s chief argument is that the communication, wherein Debtor conveyed that he had retained a bankruptcy attorney, constitutes evidence that Lou Sobh Automotive knew a stay had been invoked. However, at best, Debtor’s evidence demonstrates only knowledge of the possibility that bankruptcy might be initiated at some later date. Such a communication—without more—does not constitute sufficient knowledge of the stay for purposes of § 362(k). As such, there was no willful violation of the stay by Lou Sobh Automotive.

Additionally, there was absolutely no evidence presented on the issue of damages. Therefore, even assuming arguendo that Lou Sobh Automotive had knowingly and willfully violated the automatic stay, Debtor failed to prove “actual damages” as a result of any such violation.

***

Michael Curry of Curry Law Office in Mount Vernon, Illinois (http://michaelcurrylawoffice.com/) has helped thousands of individuals, family and small businesses in southern Illinois find protection under the Bankruptcy Code for almost twenty-five years. He is also available to help individuals and families with their estate planning (wills, power-of-attorney) and real estate and other sales transactions.

He is also the author of books on finance and bankruptcy available on Kindle through Amazon!

Whether you live in Mount Vernon, Salem, Centralia, or anywhere in Southern Illinois call Curry Law Office today at (618) 246-0993 and Finally Be Financially Free!

You can also access my website at http://www.mtvernonbankruptcylawyer.com

 

 

 

 

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No Automatic Stay Violation if the Creditor was not notified!

As a bankruptcy attorney in Mount Vernon, IL for over 20 years, I read through and analyze court rulings throughout the country. Here is a situation that happens a lot with bankruptcy filing. An experienced bankruptcy attorney would predict this case’s result.

Judge Funk (Bankr MD Fla.): Creditor did Not Violate Automatic Stay where it did Not receive actual Notice of the BK Filing; No Actual Damages either Debtor entered a retail-installment sales agreement with Lou Sobh Automotive for the purchase of this vehicle. Debtor admits that, at the time of the purchase, he was contemplating filing a bankruptcy petition; however, Debtor also admits that he gave no indication to Lou Sobh Automotive that he was contemplating bankruptcy at the time of the purchase. Debtor then filed his bankruptcy petition two days after purchasing the vehicle.

Debtor concedes he did not list Lou Sobh Automotive as a creditor, in his original petition. After Debtor filed the petition, Lou Sobh Automotive contacted him, requesting he come to the dealership to sign a new retail-installment agreement because the first agreement had gone unfunded, which the evidence indicates occurs from time to time.

Here, there is no dispute that Lou Sobh Automotive did not receive actual notice of Debtor’s bankruptcy filing, particularly in light of Debtor’s failure to identify Lou Sobh as a creditor, in his initial petition. Debtor’s chief argument is that the communication, wherein Debtor conveyed that he had retained a bankruptcy attorney, constitutes evidence that Lou Sobh Automotive knew a stay had been invoked. However, at best, Debtor’s evidence demonstrates only knowledge of the possibility that bankruptcy might be initiated at some later date. Such a communication—without more—does not constitute sufficient knowledge of the stay for purposes of § 362(k). As such, there was no willful violation of the stay by Lou Sobh Automotive.

Additionally, there was absolutely no evidence presented on the issue of damages.

Therefore, even assuming arguendo that Lou Sobh Automotive had knowingly and willfully violated the automatic stay, Debtor failed to prove “actual damages” as a result of any such violation.

***

                This is what is called a “technical” violation of the stay. The creditor did something bad without knowing it did something bad. They should have been sent a letter informing them of bankruptcy. If they continued their collection activity THEN sanctions could have been sought!

To read the entire opinion, click here.

***

Michael Curry of Curry Law Office in Mount Vernon, Illinois (http://michaelcurrylawoffice.com/) has helped thousands of individuals, family and small businesses in southern Illinois find protection under the Bankruptcy Code for almost twenty-five years. He is also available to help individuals and families with their estate planning (wills, power-of-attorney) and real estate and other sales transactions.

He is also the author of books on finance and bankruptcy available on Kindle through Amazon!

Whether you live in Mount Vernon, Salem, Centralia, or anywhere in Southern Illinois call Curry Law Office today at (618) 246-0993 and Finally Be Financially Free!

You can also access my website at http://www.mtvernonbankruptcylawyer.com

 

 

Bishop: the UST’s Counts against Upright

Continuing the Complaint against Upright Law in the case of In Re: Joyce Ellen Bishop, Case Number 16-20593 by the US Trustee in the US Bankruptcy Court for the Western District of New York (in Rochester).

You can read all of the parts (and by the time we are done there will be many) at this hub.

In the interest of full disclosure, I am an affiliate with Upright Law – I co-represent their (our) clients in the northern counties of the Eastern Division of the Southern District of Illinois

***

The past several blogs have shown the facts alleged in the Complaint. Now the document filed fits those facts to the laws and rules the US Trustee alleges Upright violated …

***

(the filed Complaint continues…)

COUNT I – INJUNCTION 11 U.S.C. § 526(c)(5)(A) – NATIONWIDE OFFICES

94) The allegations set forth above are incorporated by reference.

95) The Bankruptcy Code provides that:

“Notwithstanding any other provisions of Federal law and in addition to any other remedy provided under Federal or State law, if the court, on its own motion or on the motion of the United States trustee or the debtor, finds that a person intentionally violated this section, or engaged in a clear and consistent pattern or practice of violating this section, the court may—

(A) Enjoin the violation of such section; or

(B) Impose an appropriate civil penalty against such person. 11 U.S.C. § 526(c)(5).”

96) Upright and its affiliates have intentionally and/or systematically violated 11 U.S.C. §526(a)(3)(A) by, among other things, misrepresenting to prospective debtors that it is a firm with nationwide offices and is able to represent them in, for example, cases filed in New York.

97) Section 526 prohibits a debt relief agency from making a statement in a document filed in a bankruptcy case that is untrue or misleading. If the Court determines that a debt relief agency intentionally violated § 526 or engaged in a clear and consistent pattern or practice of violating § 526, the Court may enjoin the debt relief agency from further violations of the section, or impose a civil penalty.” 11 U.S.C. § 526(c)(5)(A)-(B).

98) Pursuant to 11 U.S.C. § 526(c)(5)(A), Upright and its affiliates should be enjoined from violating 11 U.S.C. § 526.

COUNT II – INJUNCTION 11 U.S.C. § 526(c)(5)(A) – COMPENSATION DISCLOSURE

99) The allegations set forth above are incorporated by reference.

100) The Bankruptcy Code provides that:

“Notwithstanding any other provisions of Federal law and in addition to any other remedy provided under Federal or State law, if the court, on its own motion or on the motion of the United States trustee or the debtor, finds that a person intentionally violated this section, or engaged in a clear and consistent pattern or practice of violating this section, the court may—

(C) Enjoin the violation of such section; or

(D) Impose an appropriate civil penalty against such person. 11 U.S.C. § 526(c)(5).”

101) Upright and its affiliates have intentionally and/or systematically violated 11 U.S.C. § 526(a)(3)(A) by, among other things, filing a Disclosure of Compensation that contains statements that are untrue and misleading, and which Mr. Racki knew or should have known were untrue or misleading. In addition to intentionally filing the misleading statements, after an opportunity for discovery, the evidence is expected to show that in Ms. Bishop’s case, Mr. Racki and or Upright have engaged in a clear and consistent pattern of filing false and misleading disclosures of compensation in the other Upright Cases. Mr. Racki’s and Upright’s conduct is therefore subject to sanction under either prong of § 526(c)(5).

102) Section 526 prohibits a debt relief agency from making a statement in a document filed in a bankruptcy case that is untrue or misleading. If the Court determines that a debt relief agency intentionally violated § 526 or engaged in a clear and consistent pattern or practice of violating § 526, the Court may enjoin the debt relief agency from further violations of the section, or impose a civil penalty. 11 U.S.C. § 526(c)(5)(A)-(B).

103) Pursuant to 11 U.S.C. § 526(c)(5)(A), Upright and its affiliates should be enjoined from violating 11 U.S.C. § 526.

(end of section reprinting the Complaint)

***

Filed by Kathleen Dunivin Schmit of the US Trustee’s office (WILLIAM K. HARRINGTON )

United States Trustee for Region Two) on April 28, 2017.

***

Check my blog’s search engine for more on this Complaint and Upright’s response. Just type “Upright Law” in my search engine for the Upright case law.

About the blogger:

Michael Curry of Curry Law Office in Mount Vernon, Illinois http://michaelcurrylawoffice.com/) has helped thousands of individuals, family and small businesses in southern Illinois find protection under the Bankruptcy Code for almost twenty-five years. He is also available to help individuals and families with their estate planning (wills, power-of-attorney) and real estate and other sales transactions.

He is also the author of books on finance and bankruptcy available on Kindle through Amazon!

Whether you live in Mount Vernon, Salem, Centralia, or anywhere in Southern Illinois call Curry Law Office today at (618) 246-0993 and Finally Be Financially Free!

 

You can also access my website at http://www.mtvernonbankruptcylawyer.com

A win for Debtor discharging student loans!

Reprinted from a post by NCBRC

A loan that is not itself an “educational benefit” does not fall under section 523(a)(8)(A)(ii)’s exception to discharge as an “obligation to repay funds received.” Essangui v. SLF V-2015 Trust, No. 16-12984, Adv. Proc. No. 16-201 (Bankr. Md. Oct. 2, 2017).

Chapter 7 debtor, Yolande Essangui, enrolled in a Medical Education Readiness Program (MERP, or Program) in preparation for entering Ross University School of Medicine. Because MERP was not a Title IV institution, students were not eligible to receive federal student loans to attend the Program. Ms. Essangui financed her attendance in MERP with the private loan at issue, which, by the time of her bankruptcy, totaled $37,175.25. She used the money to pay tuition, buy books and pay for housing and other expenses during her schooling. Ms. Essangui completed the Program and enrolled in Ross University, but never graduated.

As it was undisputed that the loan was not an “educational benefit overpayment or loan” under section 523(a)(8)(A)(i), or a “qualified education loan” under section 523(a)(8)(B), the issue was whether the debt was “an obligation to repay funds received as an educational benefit, scholarship, or stipend,” under section 523(a)(8)(A)(ii).

After a walk through the history of student loan treatment in bankruptcy, the court arrived at the relevant language in BAPCPA, which it found was intended to “enhance fairness” to both creditors and debtors. Citing Inst. of Imaginal Studies v. Christoff (In re Christoff), 527 B.R. 624, 635 (B.A.P. 9th Cir. 2015), the court adhered to the minority position that Congress’s separation, in 2005, of “an educational benefit overpayment or loan” in paragraph (A)(i) and “funds received” in paragraph (A)(ii) indicates that Congress did not intend the latter paragraph to cover loans.

The court rested its decision on principals of statutory interpretation in which Congress is presumed to organize statutes meaningfully and give different meanings to different words. The court found it significant that the funds received in paragraph (A)(ii) must be “as” an educational benefit rather than be “for” an educational benefit. Under this language, the funds themselves must be the educational benefit rather than be provided for the purpose of acquiring the educational benefit. Furthermore, paragraph (A)(ii) delineates three types of funds: an “educational benefit,” a scholarship and a stipend. Where scholarships and stipends typically need to be repaid only upon the debtor’s failure to complete her education, the court reasoned that Congress intended “educational benefit,” to be similarly contingent. This contingent “obligation to repay funds” is not equivalent to a “loan.”

The court further found that applying paragraph (A)(ii) to loans would render the language in paragraph (A)(i), which specifically covers government-related loans, and paragraph (B), which covers “any other educational loan that is a qualified education loan,” superfluous. Paragraph (A)(ii), if given the broad interpretation endorsed by the creditor here, would already cover those loans. The minority position also comports with the general principal of narrowly interpreting exceptions to discharge.

The court concluded that “the language of the statute suggests that Congress worked to strike a delicate balance between the fresh start policy for debtors and the protection of certain educational programs and lenders offering loans for such programs.” Where the creditor did not argue that the funds themselves were an “educational benefit,” and section 523(a)(8)(A)(ii) does not apply to loans, Ms. Essangui was entitled to summary judgment.

***

About the blogger:

Michael Curry of Curry Law Office in Mount Vernon, Illinois http://michaelcurrylawoffice.com/) has helped thousands of individuals, family and small businesses in southern Illinois find protection under the Bankruptcy Code for almost twenty-five years. He is also available to help individuals and families with their estate planning (wills, power-of-attorney) and real estate and other sales transactions.

He is also the author of books on finance and bankruptcy available on Kindle through Amazon!

Whether you live in Mount Vernon, Salem, Centralia, or anywhere in Southern Illinois call Curry Law Office today at (618) 246-0993 and Finally Be Financially Free!

You can also access my website at http://www.mtvernonbankruptcylawyer.com

In Re Bishop (Upright NY lawsuit): the Complaints…

 

Continuing the Complaint against Upright Law in the case of In Re: Joyce Ellen Bishop, Case Number 16-20593 by the US Trustee in the US Bankruptcy Court for the Western District of New York (in Rochester).

You can read all of the parts (and by the time we are done there will be many) at this hub.

Now we get to the real meat of the Complaint: what the UST alleges Upright and their local counsel did and did not do …

In the interest of full disclosure, I am an affiliate with Upright Law – I co-represent their (our) clients in the northern counties of the Eastern Division of the Southern District of Illinois

***

The attorney is responsible for reviewing documents filed with the court. If there is any inconsistency, it had better be explained. It happens at times – someone’s current income does not reflect their past income because they changed jobs etc. But you have to “tell the story” of why it is different.

And Illinois has the same rule about providing documents to the Trustee. Secretaries have been fired for consistently missing this deadline.

Illinois does NOT have the same laws as New York as to “stale debt”, but a client should always be given alternatives. For example: if someone is on social security and is basically judgment-proof, do they need to file (they usually want to avoid the aggravation of collection)?

I refer people facing foreclosure to consider arbitration by a state agency; but by the time they come to see me its usefulness has passed.

***

(the filed Complaint continues…)

Mr. Racki Knew or Should Have Known that Information was not Accurate

84) Mr. Racki, knew or should have known that not all the information contained in the Schedules and SOFA was accurate and/or complete.

85) By way of example and not limitation, the income provided on the Means Test for CMI does not reflect the actual benefits and earnings received by Ms. Bishop. Even assuming these were numbers incorrectly listed by his assistant, Mr. Racki should have known after even a cursory review that there was a problem as the numbers were significantly inconsistent with the actual amounts. Moreover, Schedule J reflects that the Debtor, who has very modest expenses, is operating at a loss of more than $400 per month. This should have raised concerns and led to a more detailed examination of the debtor’s income or extra expenses, which in turn most likely would have led to discussion about Ms. Bishop’s daughter living with her. Further inquiry would have eliminated the household issue and revealed the fluctuating income. Similarly, if a title search had been completed and reviewed, the undisclosed automobile would have been noted. Further, a review of the firm’s legal fee payment schedule would have shown that the SOFA inaccurately indicated that the Debtor paid funds to “Upright Law, LLC” in one payment in March 2016 vs. over multiple months spanning both 2015 and 2016; that the amount disclosed is not what the debtor paid or was quoted as a fee in her Retainer Agreement; and that the credit counseling fee was not included. A review of the Rule 2016(b) statement would have shown the obvious contrasts to the Engagement Letter.

 Mr. Racki Failed to Comply with Local Rule

86) At the time of the § 341 meeting of creditors was held on June 24, 2016, the trustee had not yet been served with the required documents (petition, schedules, tax returns, deeds, titles, valuations, etc.) despite local requirements that counsel are to provide them seven days in advance of the meeting. The disregard for the Local Rule negatively impacted the administration of the case because without these documents, particularly the tax returns, deeds and titles, the chapter 7 trustee could not timely complete his due diligence and examination of the debtor, requiring the trustee to review documents after the fact, in what the trustee later described as a case that should have been a routine no asset case.

ii. Upright and Mr. Racki Failed to Provide Legal Advice on New York Law Prior to Filing

87) On information and belief, at the time Ms. Bishop filed for bankruptcy relief and when she first contacted Upright in October of 2015, Upright did not have a licensed New York attorney in their Chicago call center.

88) Indeed, it would appear that no New York licensed attorney advised Ms. Bishop on bankruptcy alternatives best suited to benefit her based on the type and age of her unsecured debt before she completed her payments and met with Mr. Racki or his New York assistant.

89) At no point prior to hiring Upright and or during the months of paying installment fees did Upright advise Ms. Bishop on New York law and how it affected her potential filing – either with regard to how mortgage deficiencies work or how stale dated debt is treated under 37, lines 1-25; p. 38, lines 1-18; p. 39, lines 14-25; p. 40, lines 1-14; p. 43, lines 22-25; p. 44, lines 10-15; p. 56, lines 20-25; and p. 57, lines 1-15 and lines 23-25.

90) Similarly, when she met with Mr. Racki, he appears to have failed to explain how New York law affected her specific debt and whether bankruptcy was needed to discharge the foreclosure deficiency debt. Id.

91) This is critical because in this case, Schedule E/F lists a creditor, Tammac Holdings Corp, for “Real Estate Specific – Deed in Lieu” in the amount of $93,811. The entry provides that this real property debt results from a foreclosure in 2010. However, according to Ms. Bishop’s testimony at the Rule 2004 examination, no deficiency judgment was pursued by the bank within 90 days. As a result, there was no debt owed by Ms. Bishop to Tammac Holdings. See In Re Tyler, 166 B.R. 21, 26 (Bankr. W.D.N.Y. 1994) (because “motion was not made within the required ninety-day period pursuant to RPAPL § 1371(3) the foreclosure sale proceeds were taken in full satisfaction . . . and no right to recover any deficiency in any action or proceeding exists. State law determines the validity and legality of claims. In re Calton Crescent, Inc., 173 F.2d 944, 946 (2d Cir. 1949), aff’d 338 U.S. 304, 70 S. Ct. 127, 94 L. Ed. 107 (1949).”) Moreover, because that debt would be 6 years old in just 90 days, it would be rendered stale dated and unenforceable. See e.g., In re Hess, 404 B.R. 747, 749 (Bankr. S.D.N.Y. 2009) (objection to proof of claims is sustained where claim is time barred under New York 6-year statute of limitation; In Re Brill, 318 B.R. 49, (Bankr. S.D.N.Y. 2004) (claim disallowed under §502(b)(1) where New York 6-year state of limitations in C.P.L.R. § 213 had expired); and In re Jones, 2016 WL 1265716 (Bankr. W.D.N.Y. 2016) (claims barred by the state statute of limitations could be disallowed under § 502(b)(1) unless the debtor’s conduct revived or tolled the claim.)

92) Ms. Bishop stated that she was not facing an eviction, garnishment, etc. … but when she contacted Upright in 2015, she was exploring bankruptcy relief in 2015 because she was thinking about the foreclosure debt. Id. at p. 28, lines 18-25; and p. 29, lines 1-3. The remainder of her general unsecured debt totals only $12,845.19. Schedule E/F [ECF Doc No. 1].

93) Based upon the foregoing, the Defendants have acted in bad faith.

(end of section reprinting the Complaint)

***

Filed by Kathleen Dunivin Schmit of the US Trustee’s office (WILLIAM K. HARRINGTON )

United States Trustee for Region Two) on April 28, 2017.

***

Check my blog’s search engine for more on this Complaint and Upright’s response. Just type “Upright Law” in my search engine for the Upright case law.

About the blogger:

Michael Curry of Curry Law Office in Mount Vernon, Illinois http://michaelcurrylawoffice.com/) has helped thousands of individuals, family and small businesses in southern Illinois find protection under the Bankruptcy Code for almost twenty-five years. He is also available to help individuals and families with their estate planning (wills, power-of-attorney) and real estate and other sales transactions.

He is also the author of books on finance and bankruptcy available on Kindle through Amazon!

Whether you live in Mount Vernon, Salem, Centralia, or anywhere in Southern Illinois call Curry Law Office today at (618) 246-0993 and Finally Be Financially Free!

You can also access my website at http://www.mtvernonbankruptcylawyer.com

In Re Bishop: Death (Complaint) by a Thousand Cuts …

Continuing the Complaint against Upright Law in the case of In Re: Joyce Ellen Bishop, Case Number 16-20593 by the US Trustee in the US Bankruptcy Court for the Western District of New York (in Rochester).

You can read all of the parts (and by the time we are done there will be many) at this hub.

In the interest of full disclosure, I am an affiliate with Upright Law – I co-represent their (our) clients in the northern counties of the Eastern Division of the Southern District of Illinois

***

Some of the issues here are arguably not that large of an issue taken separately. A car was not listed, social security was incorrect, etc.

But they add up, and also to add to these minor problems the major issues of the case adds up to why this lawsuit was filed.

The Debtor was the co-owner with her granddaughter on a vehicle. She might have forgotten to tell her attorney. That’s okay. People forget. I even did a blog on it. I review all paperwork with the Debtors. If they remember the vehicle at signing it is added. Sometimes at the court hearing the Trustee says that an asset search at the Secretary of State’s website reveals a car or truck. “That’s my son’s car, not mine.” “Your name is on the title.” “It is?”

That’s okay, it happens.

But in this case, it happened …  and so did this and so did this…

An adult daughter was not listed in household size. This may or may not be fatal. Does she work? Does she pay her own expenses? I usually do not list anyone living in the house whom the Debtor does not care for or depend on. They might live in your house, but are they part of your household? This might vary from district to district: New York may require anyone living in the house be listed – from your roommates to your meathead son-in-law…

Incomes vary and fluctuate. I usually use the average, although at times I use the maximum, as was done here with Social Security. If at the bottom of Schedule I (income) a note said, “Amount of Social Security varies per month; maximum amount received is shown,” it may never had been an issue.

And in our district we DO have to specify household goods and electronics rather than just a general statement: sofa, loveseats, washer and dryer, TVs include their size and formerly their format (hardly anyone has standard definition anymore…); so if this was filed in my district the lack of specificity would have drawn an objection, too…

***

(the filed Complaint continues…)

iii. Other Errors/Omissions/Lack of Specificity in Ms. Bishop’s Filed Documents

64) Ms. Bishop’s schedules and other bankruptcy documents were incomplete, incorrect, vague and inaccurate in many other aspects such that Ms. Bishop could have faced dischargeability actions.

Missing Car from Schedule A/B

65) At the Meeting of Creditors, the chapter 7 trustee identified several deficiencies, including but not limited to, the omission of a second automobile on Ms. Bishop’s Schedule A/B. Specifically, Schedule A/B listed one vehicle, a 2004 Ford Explorer, but failed to disclose the debtor’s ownership of a 2002 Buick LeSabre titled in her name.

66) Upon questioning at the meeting, Ms. Bishop disclosed her ownership of the LaSabre, which she testified is her granddaughter’s car and in her name for insurance purposes. An amended Schedule A/B was filed months after her § 341 meeting of creditors to add the LaSabre but it incorrectly listed the owner as Ms. Bishop’s daughter, not her granddaughter. Upon questioning by the undersigned, Ms. Bishop testified it was her granddaughter’s car, not her daughter’s, and that she did not know why the amended schedule incorrectly states that it is her daughter’s. Id. at p. 16, lines 15-25; p. 17, lines 1-25; p. 18, lines 1-25; p. 19, lines 1-20. To date, no amended Schedule A/B has been filed to correct the error.

Household Size is Incorrect

67) On questioning at the § 341 meeting of creditors, the trustee learned Ms. Bishop’s adult daughter lives with the Debtor, and had been at the time of filing. Official Form 122A-1, commonly referred to as the Means Test form, however, discloses that Ms. Bishop is a household of 1. Ms. Bishop’s counsel did not file an amended form to reflect her true household size until just days before her Rule 2004 examination. [ECF No. 23]

Income Disclosed on Schedule I and Means Test is not Accurate

 Income from Bethany Nursing Home

68) Schedule I lists monthly gross wages of $746.10 for debtor’s work as an LPN at Bethany Nursing Home & HRF.

69) This would appear to be greatly understated based on the fact that the Means Test lists monthly gross wages of $1,270.63.

70) This understatement of income is further supported by the Statement of Financial Affairs, which lists annual income from wages of $23,570 for 2015, which equates to $1,964 per month.

71) On her “Currently Monthly Income Details for the Debtor” Ms. Bishop disclosed that her actual income from Bethany Nursing Home for the month of January 2016 was $851.60.

72) The debtor’s earning statement, dated February 4, 2016 (for the period ending January 30, 2016), however, shows year to date earnings of $1,568, which time period would only include the month of January 2016.

73) When questioned at the Rule 2004 examination about the difference, Ms. Bishop stated that she did not know why her income for January is listed at such a low amount. Id. at p. 24, lines 10-20.

74) A review of the Debtor’s pay stubs shows that Ms. Bishop’s wages fluctuate based on the number of hours and different shifts she works. Because of this, in order to correctly determine CMI for the Means Test, one needs to review all pay advices for the six month CMI period. Through discovery, the United States Trustee requested pay advices for the time period in question. Several pay advices were missing, specifically, December 20, 2015 through January 16, 2016 and February 1, 2016 through February 13, 2016 (issued, respectively, in January 2016 and on February 18, 2016.)

75) Even with the missing pay advices, certain months are able to be ascertained. For instance, as noted supra, the pay stub for the period ending January 30, 2016 shows the year to date income as $1,568.67 not the amount $851.60 listed.

Social Security Income

76) Schedule I lists that the debtor receives Social Security income of $774.00 per month.

77) On her “Current Monthly Income Details for the Debtor” the debtor disclosed that her actual non-estimated non-CMI income from Social Security was $834 each month. Specifically, she listed the following.

78) Through discovery, Ms. Bishop produced her Benefit & Payment Details from the Social Security Administration for the time period November 2014 through March of 2016. This document revealed that the Debtor’s benefits fluctuated during the CMI period ranging from a low of $729.00 to a high of $834.00. See Exhibit 15. When asked why the document stated that she received $834 each and every month when her actual payments varied, Ms. Bishop said that she did not know. Rule 2004 Examination Transcript at p. 26, lines 11-25; and p. 27, lines 1-8.

79) These differences carry over to the Statement of Financial Affairs where the debtor listed that in 2015 her SSI Benefits totaled $5,794.00 while the debtor’s statement from https://secure.ssa.gov shows that her benefits in 2015 totaled $6,565.00.

80) The substantiating documents provided by Ms. Bishop demonstrate that the information listed on the Schedules and Statement of Financial Affairs with regard to her income is not accurate.

81) No amendments have been filed following the Rule 2004 examination to reflect the actual amounts received or expected to be received on a going forward basis.

Schedules Lack Required Specificity

82) A review of Ms. Bishop’s Schedule A/B, Part 3 reveals that it lacks the specificity necessary to inform parties in interest of what is owned by the debtor without further questioning. For example, in response to Question 6, which asks a debtor to describe their household goods and furnishings, Ms. Bishop lists “[v]arious used household goods and furnishings.” Similarly in response to Question 7, which asks the debtor to describe any electronics owned at the time of filing, with more than a dozen examples provided above the response, Ms. Bishop only lists “[v]arious used household electronics.”

83) It also is unclear from a review of the docket, petition and schedules in Ms. Bishop’s case what law firm actually represents the Debtor and where it is located. Specifically, the docket shows Mr. Racki operates from the Law Office of Jason Racki, located at 10314 Spook Woods Rd, Port Byron, NY 13140. The petition, however, shows he operates out of the law firm Allen Chern, located at 140A Metro Park, Rochester, NY 14623. And a mailing received in the U.S. Trustee’s Office shows a third address for Mr. Racki at P O Box 310, Brutus, NY 13166.

(end of section reprinting the Complaint)

***

Filed by Kathleen Dunivin Schmit of the US Trustee’s office (WILLIAM K. HARRINGTON )

United States Trustee for Region Two) on April 28, 2017.

***

Check my blog’s search engine for more on this Complaint and Upright’s response. Just type “Upright Law” in my search engine for the Upright case law.

About the blogger:

Michael Curry of Curry Law Office in Mount Vernon, Illinois http://michaelcurrylawoffice.com/) has helped thousands of individuals, family and small businesses in southern Illinois find protection under the Bankruptcy Code for almost twenty-five years. He is also available to help individuals and families with their estate planning (wills, power-of-attorney) and real estate and other sales transactions.

He is also the author of books on finance and bankruptcy available on Kindle through Amazon!

Whether you live in Mount Vernon, Salem, Centralia, or anywhere in Southern Illinois call Curry Law Office today at (618) 246-0993 and Finally Be Financially Free!

You can also access my website at http://www.mtvernonbankruptcylawyer.com

[1] The one payment advice for January 2016 that was received shows gross pay as $717.07. See Exhibit

  1. Similarly, payment advices for March show two checks — one with a gross pay of $262.48 and the other for

$586.55 (see Exhibit 14), for a total gross earnings of $849.03 — not the $1,528.43 disclosed by the Debtor supra.

 

In Re: Bishop – problems with the fee disclosure

Continuing the Complaint against Upright Law in the case of In Re: Joyce Ellen Bishop, Case Number 16-20593 by the US Trustee in the US Bankruptcy Court for the Western District of New York (in Rochester).

You can read all of the parts (and by the time we are done there will be many) at this hub.

In the interest of full disclosure, I am an affiliate with Upright Law – I co-represent their (our) clients in the northern counties of the Eastern Division of the Southern District of Illinois

***

Problems with Upright’s fee arrangements are made clearer – why was the WDNY more draconian than the Northern District of Ohio in its suit for excessive fees?  Look at the exceptions (items that are charged extra) in Paragraph 59. In the District in which I practice, only #s a), e) and f) are allowed extra fees beyond the initial flat fee. And e) only for avoidance of judicial liens. This obviously does not include filing fees for amendments, etc.

If the other items are anticipated (and a good initial or subsequent consultation will reveal whether to expect those items), in our district attorneys are allowed discretion to charge more-than-normal fees. “Why did you charge me $100.00 more than my friend?” “You had 5 Motions to Avoid Liens, 4 more Reaffirmation Agreements, a Motion to Redeem and we anticipated the Objection by the Trustee on those Objections…”

Additionally, in this part of the Complaint some of the problems with the bankruptcy filing become evident: basic and mistake easily avoidable by carefully going through the bankruptcy paperwork with the client.

I usually meet clients at my office. Sometimes I meet them at their homes, local libraries and occasionally at a restaurant, coffee shop or other public place. We huddle together and carefully (and quietly) go through every page. Doing so would have avoided every mistake found by the Trustee below. Every. One.

***

(the filed Complaint continues…)

  1. Documents Filed with the Court
  2. Fees Disclosed vs. Fees Paid

49) The Disclosure of Compensation of Attorney for Debtor(s) filed in this case (“Rule 2016 Disclosure”) and signed by Mr. Racki, stated he, Jason Racki of Allen Chern, 140A Metro Park, Rochester, NY 14623, notices@Uprightlaw.com, Rackiesq@outlook.com, agreed to accept $1,600 in this case and received $1,600 from the debtor. The response to question 16 in the original Statement of Financial Affairs for Individuals Filing for Bankruptcy (“SOFA”), stated within one year before filing, the debtor paid “Allen Chern” located at 79 W. Monroe St., 5th Floor, Chicago, IL 60603 a total of “$1,600.00” in “March 2016” for “Attorney Fees” and an additional “$335.00” for “Filing Fees” for a total amount of payment of “$1,935.00.” Upon information and belief, this response was prepared by Upright Law.

50) Guidance on SOFA question 16 advises to include any fees paid to attorneys, bankruptcy petition preparers or credit counseling agencies for services required in their bankruptcy. Ms. Bishop does not disclose any credit counseling fees in her answer to SOFA question 16.

51) As noted infra at ¶ 32, Mr. Arnold (the panel trustee at Ms. Bishop’s 341 Meeting of Creditors) inquired about the fee, noting that it was above the W.D.N.Y. “presumptively reasonable” fee in chapter 7 cases of without any apparent justification. Following that discussion, Mr. Racki volunteered to refund $300.00 to the Debtor as well as provide documentation to the trustee that the refund was made.

52) In the information provided to Mr. Arnold, it showed that Upright refunded $250.00 to Ms. Bishop on a Visa card on 6/27/16. Mr. Racki also provided the trustee with a computer-generated printout, showing that the Debtor paid Upright for her bankruptcy via credit card payments, and that the attorney fee refund appeared to have been made to her credit card.

53) No explanation for the different amount or method of refund was provided to Mr. Arnold.

54) On September 30, 2016, Mr. Racki informed the undersigned that the information disclosed in his Rule 2016(b) statement and on the Debtor’s Statement of Financial Affairs, question 16 was not correct – Ms. Bishop actually paid $1,550 in legal fees in this case not the $1,600 disclosed. Mr. Racki also stated that the payment was not made on March 2016 as disclosed on the SOFA but rather was made over time between October 19, 2015 and March of 2016. Finally, Mr. Bishop stated that she paid for credit counseling in connection with this case to an organization called Moneysharp.

55) Mr. Racki filed an amended Rule 2016(b) statement disclosing that a total of $1,300 was paid for services in this case; this amount reflected the $250.00 that was returned to the debtor following the chapter 7 trustee questioning the fees at the § 341 meeting of creditors ($1,550 – $250 = $1,300).

56) Subsequent to the United States Trustee’s motion for disgorgement filed on January 6, 2017. Mr. Racki filed an amended SOFA on January 31, 2017, disclosing $1,300 paid for attorney’s fees that still stated the date of the payment was March 2016 and failed to include the fee for credit counseling.

57) Another amendment to the SOFA filed on February 11, 2017, finally discloses the range of dates payments had been made and included the credit counseling, but reflects an attorney fee of $1,550.

  1. ii. Retainer Agreement Does Not Match Disclosure of Compensation

58) Not only does Mr. Racki’s original Disclosure of Compensation (the Rule 2016(b) Statement) conflict with the actual amount paid for services and the dates of those payments but it also conflicts with the terms of the Engagement letter provided to Ms. Bishop. Specifically, Mr. Racki informed the Court that he had agreed to “render legal services for all aspects of the bankruptcy case, …” and that the only services that were excluded were in part 7, which provided “[b]y agreement with the debtor(s), the above-disclosed fee does not include the following services: (a) Representation of the debtors in any dischargeability actions, judicial lien avoidances, relief from stay actions or any other adversary proceeding.”

59) This relatively small number of exclusions appears to be in contrast with the Engagement Letter Upright sent to Ms. Bishop, which under the terms of paragraph 9 exclude from the “base legal services” the following 15 post-petition services:

(a) Discharge proceedings, including those related to student loans, taxes or undue hardships;

(b) Motions for relief from, or continuation, defense or enforcement of the Automatic Stay;

(c) Motions to redeem personal property;

(d) Rule 2004 examinations (hourly);

(e) Motions to avoid liens/judgments ($500.00);

(f) Contested matters or adversary proceedings;

(g) Contested matters regarding Client’s claim of exempt property;

(h) Filing any amendments to the schedules … (hourly);

(i) Motions to continue the 341 meeting of creditors and/or appearing for a continued 341 hearing;

(j) Motions or adversary complaints to abandon/refinance/sell/purchase property;

(k) Assisting in carrying out the Debtor’s Statement of Intentions (hourly);

(l) Monitoring an “asset case” (hourly);

(m) Re-opening a bankruptcy case to submit post-filing proof of pre-discharge counseling ($355)

(n) Issues that arise that are not specifically listed in the Retainer (hourly). The Retainer Agreement also goes on to exclude from “base legal services” reaffirmation agreements. Moreover, the Agreement is internally inconsistent in that the purported “included” services include amendments while the “excluded” services list amendments. This is a violation of 11 U.S.C. § 528 as it makes the Agreement unclear as to what is included and what isn’t.

60) In addition, pursuant to the Retainer Agreement, Ms. Bishop is required to pay administrative costs, defined as “postage, parking, copies, gas limited to a flat fee of $100,” . . . and cost of amended schedules ($176.00). These potential additional fees also are not set forth in Mr. Racki’s disclosure to the Court.

61) To ensure that the above costs are paid, Ms. Bishop signed a document authorizing Law Solutions Chicago, LLC, to charge her account ending in 8718 for any charges incurred pursuant to the Retainer Agreement, which would necessarily include charges for “nonbase legal services” and costs noted above.

62) In light of these provisions contained in the Retainer Agreement signed by Ms. Bishop, Mr. Racki’s Disclosures of Compensation to this Court are false and misleading.

63) The United States Trustee filed a motion to disgorge attorney’s fees, among other things, in this case. After concluding that the Rule 2016(b) Statement the Defendant filed with the original petition when compared to the more recently filed Rule 2016(b) Statement were so radically different, bearing no relationship to the retainer agreement signed by the debtor, as to be misleading and fatally infirm, on April 4, 2017, the Court ordered full disgorgement under 11 U.S.C. § 329 due to the failure to adequately disclose the sum and substance of the engagement contract and ordered that any agreement for further compensation is cancelled.

(end of section reprinting the Complaint)

***

Filed by Kathleen Dunivin Schmit of the US Trustee’s office (WILLIAM K. HARRINGTON )

United States Trustee for Region Two) on April 28, 2017.

***

Check my blog’s search engine for more on this Complaint and Upright’s response. Just type “Upright Law” in my search engine for the Upright case law.

 

About the blogger:

Michael Curry of Curry Law Office in Mount Vernon, Illinois http://michaelcurrylawoffice.com/) has helped thousands of individuals, family and small businesses in southern Illinois find protection under the Bankruptcy Code for almost twenty-five years. He is also available to help individuals and families with their estate planning (wills, power-of-attorney) and real estate and other sales transactions.

He is also the author of books on finance and bankruptcy available on Kindle through Amazon!

Whether you live in Mount Vernon, Salem, Centralia, or anywhere in Southern Illinois call Curry Law Office today at (618) 246-0993 and Finally Be Financially Free!

You can also access my website at http://www.mtvernonbankruptcylawyer.com

In Re: Bishop continued – how the Trustee discovered the problems/issues…

Continuing the Complaint against Upright Law in the case of In Re: Joyce Ellen Bishop, Case Number 16-20593 by the US Trustee in the US Bankruptcy Court for the Western District of New York (in Rochester).

You can read all of the parts (and by the time we are done there will be many) at this hub.

In the interest of full disclosure, I am an affiliate with Upright Law – I co-represent their (our) clients in the northern counties of the Eastern Division of the Southern District of Illinois

***

The first problem that appears are the fees charged. Upright has been accused of charging excessive fees in Ohio. Read about that here. They were not so lucky in New York … it is later explained that the fees charged were over the W.D.N.Y. “presumptively reasonable” fees in chapter 7 cases. There were also problems with items excluded from the flat fee in the original retainer agreement.

Frankly, the local affiliate attorney should have pointed out the possibility of an objection to Upright. This could have been avoided.

***

(the filed Complaint continues…)

  1. The § 341 Meeting of Creditors

 40) Mike Arnold, Esquire, who was appointed to serve as the chapter 7 trustee in this case, conducted the Meeting of Creditors in June of 2016. At this meeting, he questioned the debtor regarding, among other things, the fees charged in this case as they were higher than the presumed reasonable fee in the Western District of New York, about a car that was not disclosed on Schedule A/B. Following that discussion, Mr. Racki agreed to refund $300 to Ms. Bishop.

41) The chapter 7 trustee brought the case to the United States Trustee’s attention as a result of the omissions and errors on the schedules, his concerns regarding the fees charged in this case, and the appearance that the fees paid to Upright were made by the debtor using her credit card over several months and not on “March 2016” as stated on the SOFA #16.

The Rule 2004 Examination of the Debtor

 42) After reviewing the information and the docket, the United States Trustee filed a motion to conduct a Rule 2004 Examination of the Debtor along with a request for the production of documents, which was granted by this Court’s oral ruling of September 30, 2016.

43) Three days prior to the Rule 2004 examination, the Debtor filed amended schedules to include the previously undisclosed automobile and to reflect that she paid $1,300 for legal fees in this case.

44) The United States Trustee conducted the Rule 2004 examination of the Debtor on September 30, 2016. At that meeting, the Debtor agreed to provide several additional documents to the United States Trustee because certain pages were missing from the documents produced prior to the 2004 examination. Those documents were received on November 9, 2016.

United States Trustee Motion

45) On January 6, 2017, the United States Trustee filed a motion, pursuant to 11 U.S.C. §§ 105(a); 329; 526-528; Fed R. Bankr. P. 2017 and the court’s inherent authority to examine transactions and fees, seeking disgorgement of attorney fees, cancellation of any agreement for compensation, and imposing sanctions such as civil penalties and enjoining counsel from further violations (the “United States Trustee’s motion”), with an original return date of February 2, 2017.

46) On January 30, 2017, Steven A. Donato, Esq., and Camille W. Hill, Esq., entered Notices of Appearance as counsel for Allen Chern, Allen Chern Law, Law Solutions of Chicago, LLC and Upright Law LLC.

47) On February 6, 2017, responses and objections were filed by Camille Hill, Esq., and Jason Racki, Esq., and a hearing was held on the United States Trustee’s motion on February 16, 2017.

48) Following oral argument, the Court granted the United States Trustee’s request to disgorge all compensation, cancelled any agreement for further compensation and ruled that the request to review transactions and impose sanctions may be refiled as an adversary proceeding complaint. The order was signed on April 4, 2017.

(end of section reprinting the Complaint)

***

Filed by Kathleen Dunivin Schmit of the US Trustee’s office (WILLIAM K. HARRINGTON )

United States Trustee for Region Two) on April 28, 2017.

***

Check my blog’s search engine for more on this Complaint and Upright’s response. Just type “Upright Law” in my search engine for the Upright case law.

 

About the blogger:

Michael Curry of Curry Law Office in Mount Vernon, Illinois http://michaelcurrylawoffice.com/) has helped thousands of individuals, family and small businesses in southern Illinois find protection under the Bankruptcy Code for almost twenty-five years. He is also available to help individuals and families with their estate planning (wills, power-of-attorney) and real estate and other sales transactions.

He is also the author of books on finance and bankruptcy available on Kindle through Amazon!

Whether you live in Mount Vernon, Salem, Centralia, or anywhere in Southern Illinois call Curry Law Office today at (618) 246-0993 and Finally Be Financially Free!

You can also access my website at http://www.mtvernonbankruptcylawyer.com

New York’s lawsuit against Upright Law: client hiring allegations

 

Continuing the Complaint against Upright Law in the case of In Re: Joyce Ellen Bishop, Case Number 16-20593 by the US Trustee in the US Bankruptcy Court for the Western District of New York (in Rochester).

You can read all of the parts (and by the time we are done there will be many) at this hub.

In the interest of full disclosure, I am an affiliate with Upright Law – I co-represent their (our) clients in the northern counties of the Eastern Division of the Southern District of Illinois

***

In this part of the Complaint we are shown how the Debtor hired Upright Law…

***

(the filed Complaint continues…)

C.  Timeline with Ms. Bishop

     i.  The Internet Search and First Call with the “Closer”

29) In October of 2015, while contemplating filing a bankruptcy, Ms. Bishop searched the internet for a bankruptcy attorney to assist her with her worries about a possible foreclosure. Ms. Bishop located Upright’s website and made an online inquiry. She then spoke to Upright’s non-attorney agents over the phone. She testified that she does not recall to whom she spoke but she believes the person was not a lawyer.

30) Ms. Bishop said this non-lawyer went over the different types of bankruptcy options, including chapters 7 and 13, discussed payment plans for Upright fees, and quoted her a price for filing a chapter 7. This person also explained how she could make payments over time and stated that he would electronically send her documents to read, sign and return. During that initial call, Ms. Bishop authorized a $5.00 payment to Upright. She believed she had hired Upright during that initial call. She was told that a local New York attorney would be contacted to represent her.

31) An Upright internal Transaction Report provided by Mr. Racki, shows that Ms. Bishop authorized the initial $5.00 payment to Upright on October 19, 2015.

32) Although the debtor had no contact with Mr. Racki on or before October 19, 2015, the Retainer Agreement purportedly was signed electronically by both the debtor and Mr. Racki on October 19, 2015. Other documents bearing the debtor’s and Mr. Racki’s electronic signatures and also dated October 19, 2015 include: Disclosures Regarding Auto-Dialed and Pre-Recording Telemarketing Messages; A Debt Relief Agency, Disclosures to an Assisted Person in Relation to a Bankruptcy Consultation; Important information about Bankruptcy Assistance Services from an Attorney or Bankruptcy Petition Preparer; Client Instructions Pursuant to 11 U.S.C. Section 342(b); Acknowledgement of Receipts Rules for Filing Bankruptcy; Client Instructions Pursuant to 11 U.S.C. Section 527(c) and Automatic Payment Program Application and Authorization for Withdrawals. Although the acknowledgment attached as Exhibit 9 states that an attorney had reviewed with the debtor the documents attached as Exhibits 6-8 and 10, the evidence is expected to show that no attorney reviewed such documents with the debtor on or before October 19, 2015.

     ii.  Second Call

33) About a week after speaking with the first Upright representative, Ms. Bishop said that she spoke by phone with a second Upright representative, who she believes identified herself as Rachel. Ms. Bishop did not believe this person was a lawyer. Like the initial call with the “closer”, during her call with Rachel, Ms. Bishop did not recall reviewing her mortgage foreclosure debt, including the age of that debt, whether the bank took any action following the foreclosure, or the effect New York law might have on that debt as a result of its age or as a result of the bank taking no further action against her following the foreclosure. She also does not believe Rachel asked for any documents during the call or discussed with her the fees, her payment plan or what services were covered by the fee. Similarly, she does not recall Rachel or the initial representative saying she may be charged an additional $100 or other fee if she wanted to meet in person with an attorney or if amended schedules were needed, regardless of who was responsible for the error in schedules. Likewise, Ms. Bishop testified that she did not recall anyone going over the Rules for Filing bankruptcy or Definitions during either of these two calls.

34) While Ms. Bishop’s signature is electronically affixed to various documents prepared by Upright and dated October 19, 2015, Ms. Bishop testified that she did not recall signing the documents the day she first spoke with the Upright “closer” and authorized the $5.00 payment to Upright. She emphatically stated she never would have signed a document allowing telemarketers to call her. She does not recall anyone explaining the paperwork that authorized telemarketer calls, or that by signing the engagement letter, she gave Upright a power of attorney to file other lawsuits on her behalf, despite documents to the contrary.

     iii. Contact with Local “Partner” Mr. Racki

35) Ms. Bishop does not recall exactly when she first spoke with Mr. Racki or his assistant Tracy, but she knew it was some time after she spoke by phone with the two representatives from Upright in Chicago. Therefore, it is clear she did not speak with Mr. Racki on the date the agreement is purportedly signed by Ms. Bishop and Mr. Racki. She believed the point of the initial call with Mr. Racki was for him to verify he would handle the case. She did not recall if he asked any questions or asked her to provide him with information during the initial call. She believes the call lasted about 15 minutes. At no time during that initial call did anyone discuss with her New York mortgage deficiencies and the requirement that they must be pursued within 90 days in order for a mortgagor to be responsible for a deficiency. She also did not recall if Mr. Racki ever discussed New York law and its treatment of stale dated debts. Similarly, she did not recall any lawyer, including Mr. Racki, going over the details of her retainer agreement with her.

36) Ms. Bishop recalled someone from Upright explaining the various options in bankruptcy available to her. She believes when she met with Mr. Racki’s assistant, Tracy, to go over the schedules, Tracy may have gone over the Rules for Filing Bankruptcy, Important Information about Bankruptcy Services, and Client Instructions at that time. Tracy is not an attorney.

37) Despite documents to the contrary, Ms. Bishop does not believe a lawyer ever reviewed with her a copy of the 1) Rules for Filing Bankruptcy; 2) Important Information about Bankruptcy Assistance Services; 3) Definitions and/or 4) the Retainer Agreement.

38) Ms. Bishop stated she met with Mr. Racki in person when she went to sign the petition and schedules, recalling they agreed to meet in Watkins Glen in the bankruptcy courtroom at a time when Mr. Racki was going to be there. The court’s calendar for May 2016 shows hearings conducted on Friday, May 20, 2016.

39) On May 24, 2016, Mr. Racki filed Ms. Bishop’s voluntary petition, schedules etc. The filed documents state that Ms. Bishop signed the document on Tuesday, May 24, 2016, not Friday, May 20, 2016.

(end of section reprinting the Complaint)

***

Filed by Kathleen Dunivin Schmit of the US Trustee’s office (WILLIAM K. HARRINGTON )

United States Trustee for Region Two) on April 28, 2017.

***

Paragraph 34 is astounding: as an affiliate with Upright I am unaware of any authorizations to allow telemarketing calls or powers of attorney to bring lawsuits. I am looking forward to see what the Court makes of those authorizations…

The last few lines of Paragraph 35 give us a hint as to the main problem, in my opinion: because of laws protecting debtors in New York (laws that do not apply in Illinois, for example), she may have been immune from collection. She might not have even had to file bankruptcy at all!  More allegations and theories in the Complaint may make that more clear … stay tuned …

But for now the bankruptcy petition has been filed. The next blog will continue the Complaint in which it states other areas where the US Trustee says Upright and its local affiliate made errors …

***

Check my blog’s search engine for more on this Complaint and Upright’s response. Just type “Upright Law” in my search engine for the Upright case law.

About the blogger:

Michael Curry of Curry Law Office in Mount Vernon, Illinois http://michaelcurrylawoffice.com/) has helped thousands of individuals, family and small businesses in southern Illinois find protection under the Bankruptcy Code for almost twenty-five years. He is also available to help individuals and families with their estate planning (wills, power-of-attorney) and real estate and other sales transactions.

PAC Finds Law Firm Records Are Public Records Under FOIA

In a recent, non-binding request for review, the PAC found that law firms that represent units of local government are performing a “governmental function” such that the law firm’s records are considered “public records” under FOIA (Freedom of Information Act).  2017 PAC 43089

A requester had filed a FOIA request with a school district, seeking all records mentioning and pertaining to an attorney and her law firm. The district responded, but withheld certain records held by its attorneys under Section 7(2) of FOIA, arguing that the records were not “public records.”  The PAC disagreed with the district, finding that the requested records are “public records” if they directly related to a government function that the law firm has contracted to perform for the district. Although the district argued that the law firm was not performing a governmental function, the PAC rejected that argument, finding that the law firm’s litigation services support the district’s education services.  As a result, the PAC ordered the school district to obtain any responsive records from the law firm and disclose them to the requester.

The PAC’s opinion does not address any exemptions that might apply to this request, such as attorney-client privilege. Presumably, the district can still assert those exemptions before turning over any responsive records as ordered by the PAC.

Although this is merely an advisory opinion and binding on any other public bodies, it is a good reminder that public bodies should list all possible arguments and exemptions in their FOIA response letters, as well as their responses for requests for review to the PAC, because we never know when the PAC might try to make “new law” in one of its opinions.

Post Authored by Erin Pell and Julie Tappendorf of Ancel Glink law firm in Chicago

***

Quite an interesting argument, although I doubt a non-binding PAC opinion can pierce attorney-client privilege. Attorneys who work with municipal and other government bodies can couch their communications in such a way as to asset the privilege.

It will be interesting to see what will happen when these two theories collide!

***

Michael Curry of Curry Law Office in Mount Vernon, Illinois (http://michaelcurrylawoffice.com/) has helped thousands of individuals, family and small businesses in southern Illinois find protection under the Bankruptcy Code for almost twenty-five years. He is also available to help individuals and families with their estate planning (wills, power-of-attorney) and real estate and other sales transactions.