Brenda Marie Salazar

1 Section 110(e)(2) provides:
(A) A bankruptcy petition preparer may not offer a potential bankruptcy debtor
any legal advice, including any legal advice described in subparagraph (B).
(B) The legal advice referred to in subparagraph (A) includes advising the debtor-
(i) whether-
(I) to file a petition under this title; or
(II) commencing a case under chapter 7, 11, 12, or 13 is
appropriate;
(ii) whether the debtor’s debts will be discharged under this title;
(iii) whether the debtor will be able to retain the debtor’s home, car, or
other property after commencing a case under this title;
(iv) concerning -
(I) tax consequences of a case brought under this title; or
(II) the discharge of tax claims;
(v) whether the debtor may or should promise to repay debts to a creditor
or enter into a reaffirmation agreement with a creditor to reaffirm a debt;
(vi) concerning how to characterize the nature of the debtor’s interests in
property or the debtor’s debts; or
(vii) concerning bankruptcy procedures or rights.
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UNITED STATES BANKRUPTCY COURT
DISTRICT OF NEW MEXICO
In re: Brenda Marie Salazar, 	No. 7-08-12538 MA
Debtor.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
THIS MATTER came before the Court on the United States Trustee’s Motion for Order
Imposing Sanctions Against Bankruptcy Petition Preparer Pursuant to 11 U.S.C.§110 (“Motion
for Sanctions”). The United States Trustee requests the Court impose sanctions against Pamela
Brown, the bankruptcy petition preparer who assisted the Debtor in preparing her petition,
statements and schedules in this bankruptcy case. The United States Trustee asserts that Ms.
Brown violated 11 U.S.C.110(e)(2) 1 by providing legal advice regarding 1) which property the
Debtor could exempt and under what laws, 2) the listing and characterization of Debtor’s assets
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and liabilities and 3) bankruptcy procedures. The UST further asserts that providing legal advice
constitutes a fraudulent, unfair or deceptive act within the meaning of 11 U.S.C.§110(i)(1). The
United States Trustee requests that the Court impose sanctions in the amount of $2000.00, fines
in the amount of $2000.00 and order Ms. Brown to disgorge all of the fees the Debtor paid her in
connection with this case.
The Court held a final hearing on April 20, 2009 and took the matter under advisement.
After considering the testimony and evidence presented at the hearing, the Court finds that
Pamela Brown violated 11U.S.C.§110(e)(2) and will assess fines and order Ms. Brown to
disgorge a portion of the fees received in this case.
FINDINGS OF FACT
Based on the evidence and testimony presented at the final hearing, the Court enters the
following findings of fact:
1. Pamela Brown is a bankruptcy petition preparer. She is not an attorney licensed to
practice law in the state of New Mexico, nor is she a paralegal or legal assistant working under
the supervision and control of a licensed attorney.
2. Debtor filed a voluntary petition under Chapter 7 of the Bankruptcy Code on August 6,
2008 as Case No. 7-08-12538 MA.
3. Ms Brown prepared the documents filed by Debtor in this case, including the Petition
for Relief, Schedules A through J, Statement of Financial Affairs, and the Statement of Current
Monthly Income and Means Test Calculation (“Form B22A”) and the Disclosure of
Compensation of Bankruptcy Petition Preparer.
4. Ms. Brown prepared the Declaration and Signature of Non-Attorney Bankruptcy
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Petition Prepare pursuant to 11 U.S.C.§110. See Exhibit 4.
5. Debtor paid Ms. Brown $200.00 for her services in connection with this case.
6. Debtor testified that she met with Ms. Brown on three separate occasions. During the
these meetings Ms. Brown informed the debtor that she could file a bankruptcy for the debtor,
provided the debtor with paperwork to complete regarding the debtors assets and debts, and
instructed the debtor where to sign after the petition, statements and schedules were prepared.
7. Ms. Brown informed the Debtor that she would need to obtain counseling pre-petition
and gave the Debtor the telephone number in order to obtain counseling by telephone.
8. Ms. Brown also told the Debtor to file Chapter 7 and that her debts would be
eliminated.
9. At the hearing the debtor testified with specificity about the information contained on
her petition, statements and schedules:
a. Debtor did not determine the “nature” of her debts identified on the Petition as
“consumer”; Ms. Brown made this choice. Debtor testified that she does not know the difference
between consumer and non-consumer debts.
b. Debtor testified that she did not instruct Ms. Brown to type “None” on
Schedule A; Ms. Brown completed Schedule A.
c. Debtor chose the values for the personal property listed on Schedule B except
for the last page which identifies other personal property as “accrued wages on the date of filing”
with a value listed as “unknown.” Debtor testified that Ms. Brown made the determination to list
the value as “unknown.”
d. Debtor testified that she did not complete Schedule C or select the box
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indicating the election of exemptions under 11 U.S.C. §522(b)(3). Ms. Brown completed
Schedule C and chose state exemptions for the debtor.
e. Ms. Brown prepared Schedule F. Debtor testified that she did not know what
information to list in each column.
f. Ms. Brown made the determination to check the box on Schedule G that states
that “debtor has no executory contracts or unexpired leases.” Debtor testified that she does not
know what an executory contract or unexpired lease is.
g. Ms. Brown prepared Schedule H without instruction from the debtor. Debtor
testified that she did not know what the term “codebtor” means.
h. Ms. Brown prepared the Statement of Financial Affairs without instruction
from the debtor. Debtor testified that she did not choose all of the boxes that are checked.
10. Debtor testified that she initialed the box on the right hand side at the top of the first
page of Form B22A which states “The presumption does not arise,” but does not know what that
statement means. Debtor further testified that Ms. Brown checked the box and instructed her to
initial the box.
11. Debtor testified that at the final meeting with Ms. Brown before filing her
bankruptcy petition, Ms. Brown told her where to sign and/or initial all of the documents.
12. The Debtor paid Ms. Brown’s fee with a check. Ms. Brown instructed the debtor
where to file the bankruptcy paperwork and the amount of the filing fee.
13. 	Debtor falls below the median income for a family of the same size in this district.
14. Phyllis Stice, a paralegal who works on bankruptcy matters for an attorney in
Albuquerque, New Mexico, testified that it takes approximately 1.5 to 2.0 hours to prepare the
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2 See 11 U.S.C. §110 (i) and (j).
3 11 U.S.C. §110(a)(1).
4 11 U.S.C. §110(a)(2).
5 11 U.S.C. §110(e)(2)(“A bankruptcy petition prepare may not offer a potential
bankruptcy debtor any legal advice...”)
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paper work to file a bankruptcy for an under-median debtor.
CONCLUSIONS OF LAW
1. Under 11 U.S.C. §110, persons who violate this section or in the preparation of
bankruptcy petitions fail to comply with the provisions of this section are subject to the
imposition of penalties.2
2. A bankruptcy petition preparer is defined as “...a person, other than an attorney for the
debtor or an employee of such attorney under the direct supervision of such attorney, who
prepares for compensation a document for filing[.]”3
3. A “document for filing” means “a petition or 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 this title.” 4
4. Ms. Brown is a bankruptcy petition prepare within the meaning of 11 U.S.C.
§110(a)(2).
5. Bankruptcy petition preparers are prohibited from offering legal advice.5
6. Legal advice includes advising the debtor 1) whether to commence a case under the
Bankruptcy Code; 2) where filing under Chapter 7 or 13 is appropriate; 3) whether the debtor’s
debts will be discharged in a case under this title; 4) how to characterize the debtor’s property
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6 11 U.S.C. §110(e)(2)(B)(i)(I)-(II), (ii),(vi) and (vii).
7 11 U.S.C. §110(i)(1) provides:
If a bankruptcy petition preparer violates this section or commits any act that the
court finds to be fraudulent, unfair, or deceptive, on motion of the debtor, trustee,
United States trustee (or the bankruptcy administrator, if any), and after notice
and a hearing, the court shall order the bankruptcy petition preparer to pay the
debtor-
(A) the debtor’s actual damages;
(B) the greater of-
(i) $2,000; or
(ii) twice the amount paid by the debtor to the bankruptcy petition
preparer for the preparer’s services; and
(iii) reasonable attorney’s fees and costs in moving for damages under this
subsection.
8 11 U.S.C. §110(h)(3)(B) provides:
All fees charged by a bankruptcy petition preparer may be forfeited in any case in
which the bankruptcy petition preparer fails to comply with this subsection or
subsection (b), (c), (d), (e), (f) or (g).
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interests or debts; and 5) about bankruptcy procedures and rights. 6
7. Ms Brown signed the Debtor’ bankruptcy petition as a “Non-Attorney Petition
Preparer.” By signing as a “Non-Attorney Petition Preparer” Ms. Brown acknowledged under
oath that she is subject to the provisions of 11 U.S.C. §110, governing non-attorney bankruptcy
petition preparers and thereby subject to the jurisdiction of this Court.
8. Pursuant to 11 U.S.C. §110(i)(1), upon finding that a bankruptcy petition preparer has
violated the provisions of this section, or has committed any fraudulent, unfair, or deceptive act,
the Court must order the bankruptcy petition preparer to pay the debtors a sanction.7
9. A bankruptcy petition preparer’s failure to comply with 11 U.S.C. §110(e) by
improperly offering the debtor legal advice may result in forfeiture of all fees charges by the
bankruptcy petition preparer in connection with the case.8
10. Any fee charged by a bankruptcy petition preparer which the Court finds exceeds the
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9 11 U.S.C. §110(h)(3)(A).
10 11 U.S.C. §110(h)(3)(C) provides:
An individual may exempt any funds recovered under this paragraph under
section 522(b).
11 11 U.S.C. §110(l)(1) provides:
A bankruptcy petition preparer who fails to comply with any provisions of
subsection (b), (c), (d), (e), (f), (g) and (h) may be fined not more than $500 for
each such failure.
12 In re Gomez, 259 B.R. 379, 386 (Bankr.D.Colo. 2001) (“[a] petition preparer may not
assist a debtor in determining what information should be included on such documents of
offer any information or advice as to what the law is or how it applies to the debtor’s
circumstances. [A] petition preparer is limited by section 110 to copying and typing
bankruptcy documents.”)
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value of services provided must be turned over to the bankruptcy trustee.9 The Debtors may
exempt the funds recovered by the trustee in accordance with 11 U.S.C.§522(b).10
11. The Court may also fine a bankruptcy petition preparer up to $500.00 for each
violation or failure to comply with subsections (b)-(h) of 11 U.S.C. §110. 11
12. Ms. Brown gave the Debtor legal advice by 1) determining under which chapter of
the Bankruptcy Code to file; 2) advising that the debts would be discharged by the bankruptcy
proceeding; 3) determining the classification of each debt; and 4) determining the debtor should
take New Mexico exemption and applying them to the Debtor’s assets. The actions violated 11
U.S.C. §110(e)(2)(b).12
13. Based on the Ms. Salazar’s testimony, it is evident that the Debtor did not know what
debts should be listed on which schedules nor did she understand which exemptions were
available to her or what property to claim exempt. Ms. Brown completed the schedules and
made the elections on Schedule C. These actions constitute the unauthorized practice of law and
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13 In re Agrue, 2005 WL 3263863, *1-2 (Bankr.W.D.Ky. 2005)(“advising clients about
exemptions and determining how a client’s debts should be classified constitutes the
unauthorized practice of law.”); In re Kaitangian, 218 BR 102, 110 (Bankr.S.D.Cal.
1998)(finding that bankruptcy petition preparer violated section 110 by choosing exemptions.)
14 In re Rojero, 399 B.R. 913, 920 (Bankr.D.N.M. 2008)(citing In re Bush, 275 B.R. 69,
84(Bankr.D.Idaho 2002)
15 Id. at 399 B.R. 920.
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violate 11 U.S.C. §110(e)(2)(B).13
14. Section 110(h)(3) of the Bankruptcy Code requires the disallowance and immediate
turnover of all fees required to be disclosed by a bankruptcy petition preparers pursuant to
section (h)(2), if the fees are found to be in excess of the reasonable value of the services. A
bankruptcy petition preparer can perform only the modest service of transcribing or typing
bankruptcy forms that the debtors alone must prepare without assistance, a reasonable fee for
such services should be similar to those that a professional typist or word processor would
charge.14 Ms. Brown charged Debtor $200 to prepare her petition, statements and schedules.
15. The fee charged by Ms. Brown in this bankruptcy case was excessive, and $100 of
the fee will be disallowed in accordance with 11 U.S.C. §110(h)(3)(A). Because the Debtor has
sufficient New Mexico exemption amounts in excess of those claimed on Schedule C, the
disallowed portion of the fee shall be paid over to the Debtor in accordance with 11 U.S.C.
§110(h)(3)(C) 15
16. The instances of giving legal advice to the Debtor subjects Ms. Brwon to a fine of
not more that $500.00 for each violation. The Court has discretion to determine the amount of
the fine provided that it does not exceed $500 per violation. The Court concludes that a fine in
the amount of $200 is appropriate.
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These findings of fact and conclusions of law are entered in accordance with Rule 7052,
Fed.R.Bankr.P. The Court will enter an order consistent with these findings and conclusions.
_____________________________
MARK B. McFEELEY
United States Bankruptcy Judge
Date Entered on Docket:June 2, 2009
Copies to:
Leonard K Martinez-Metzgar
PO Box 608
Albuquerque, NM 87103-0608
Pamela Brown
Southwest Document Service
2917 Carlisle Blvd. NE, Suite 211
Albuquerque, NM 87110
Brenda Marie Salazar
6219 Calle Vizcaya NW
Albuquerque, NM 87114
Michael J. Caplan, Trustee
827 E Santa Fe Ave
Grants, NM 87020-2458
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