Angelina Zumpano

UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NORTH CAROLINA
RALEIGH DIVISION
IN RE:
ANGELINA ZUMPANO
WAYNE PATRICK LANIER
BRUCE LORENC
JAMIE WILLIAMS
THOMAS WILLIAMS
DELA WALDRON
MAGDALENA ISOM
SUSAN WEBB
DEBTORS
CASE NO.
05-04252-5-ATS
05-05359-5-ATS
05-05309-5-ATS
05-05411-5-ATS
05-05146-5-ATS
05-05380-5-ATS
05-05171-5-ATS
ORDER TO REFUND FEES, IMPOSING FINES,
AND ENJOINING BANKRUPTCY PETITION PREPARER
On February 14, 2006, this court issued an order directing BK
Document 	Processing 	Limited 	("BK") 	to 	appear 	and 	show 	cause 	to
address its failure to comply with prior orders of this court and
its 	ongoing 	obligations 	under 	11 	U.S.C. 	§ 	110. 	The 	show 	cause
hearing 	took 	place 	in 	Raleigh, 	North 	Carolina 	on 	April 	13, 	2006,
but no one appeared on behalf of BK.
SO ORDERED.
SIGNED this 02 day of May, 2006.
________________________________________
A. Thomas Small
United States Bankruptcy Judge
____________________________________________________________
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1A document provided by one of the chapter 7 trustees showing
that 	BK 	was 	at 	one 	time 	identified 	on 	one 	of 	the 	websites 	and 	a
copy 	of 	a 	credit 	card 	statement 	from 	one 	of 	the 	debtors 	showing
payment 	to 	BK, 	led 	to 	the 	determination 	that 	these 	websites 	are
operated by BK.
2
As outlined in the order of February 14, 2006, pro se chapter
7 	debtors 	in 	the 	Eastern 	District 	of 	North 	Carolina 	continue 	to
disclose at their meetings of creditors that they filed petitions
prepared 	through 	websites 	called 	usabankruptcyassociates.com 	and
debtoraid.com, both of which appear to be operated by BK. 1 These
debtors report that they paid fees ranging from $125 to $200, fees
which are far in excess of what this court has determined to be a
reasonable fee for the services provided by a bankruptcy petition
preparer. 	The petitions in the cases listed above have similar and
crucial 	deficiencies, 	the 	most 	basic 	being 	that 	they 	all 	fail 	to
give 	any 	indication 	that 	they 	were 	prepared 	by 	a 	bankruptcy
petition 	preparer. 	They 	do 	not 	disclose 	the 	name 	and 	address 	of
the 	petition 	preparer, 	or 	bear 	the 	preparer's 	signature, 	as
required 	by 	11 	U.S.C. 	§ 	110(b). 	They 	do 	not 	bear 	an 	identifying
social 	security 	number 	as 	required 	by 	§ 	110(c) 	or 	offer 	any
explanation for its absence. 	They do not disclose the receipt of
the fee from the debtor as required by § 110(h)(1). 	The omissions
obviously are not accidental.
The 	fees 	charged 	were 	far 	in 	excess 	of 	the 	amount 	that 	is
reasonable 	for 	the 	services 	provided. 	This 	court 	has 	previously
determined 	that 	$80 	is 	the 	reasonable 	value 	of 	the 	services 	that
may 	be 	provided 	by a bankruptcy 	petition 	preparer. 	See 	In 	re
Moore. 283 B.R. 852 (Bankr. E.D.N.C. 2002); In re Moore, 290 B.R.
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287 	(Bankr. 	E.D.N.C. 	2003). 	This 	court 	has 	entered 	orders
directing BK to disgorge its fees in excess of $80 to the debtors
herein, and BK has failed to do so or to appear to explain why its
fees are not excessive.
In 	the 	order 	of 	February 	14, 	2006, 	the 	court 	also 	expressed
concerns 	that 	BK 	may 	be 	engaged 	in 	the 	unauthorized 	practice 	of
law. 	Its 	websites 	guarantee 	discharge 	and 	promise 	to 	protect
debtors' property from liquidation by a trustee. 	The debtoraid.com
website 	goes 	so 	far 	as 	to 	advise 	would-be 	debtors 	that 	the
operators' 	"untold 	years 	of 	experience" 	enable 	them 	to 	advise
debtors "when it is okay to spend far more than you make and when
it 	is 	not 	okay," 	that 	"bankruptcy 	is 	better 	for 	your 	credit 	and
financial health than credit counseling [and debt consolidation],"
and that "Chapter 13 bankruptcy is generally not suitable for most
people since it does not give you a clean breakaway from your debts
and 	since 	may 	[sic] 	people 	who 	start 	with 	a 	chapter 	13 	end 	up
filing chapter 7 anyway."
In 	light 	of 	the 	continuing 	violations 	of 	§ 	110 	and 	BK's
unwillingness to remedy them, the court issued an order requiring
BK to appear and show cause why it should not be held in contempt
for 	failure 	to 	disgorge 	fees 	as 	required. 	The 	show 	cause 	order
also 	provided 	that 	the 	court 	would 	assess 	whether 	additional
proceedings were warranted to determine whether BK engaged in the
unauthorized 	practice 	of 	law, 	which 	this 	court 	considers 	to 	be 	a
fraudulent, unfair or deceptive act as contemplated by § 110(i)(1),
and 	whether 	its 	activities 	constitute 	unfair 	and 	deceptive 	trade
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2All of the debtors for whom BK prepared petitions filed their
petitions before October 17, 2005, and the amendments made to § 110
by the Bankruptcy Abuse Prevention and Consumer Protection Act of
2005 are not applicable.
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practices 	under 	the 	laws 	of 	North 	Carolina. 	As 	noted 	above, 	BK
failed to appear at the show cause hearing to explain or defend its
activities.
JURISDICTION AND AUTHORITY
This 	court 	has 	jurisdiction 	over 	the 	subject 	matter 	of 	this
proceeding 	pursuant 	to 	28 	U.S.C. 	§§ 	151, 	157, 	and 	1334, 	and 	the
General 	Order 	of 	Reference 	entered 	by 	the 	United 	States 	District
Court for the Eastern District of North Carolina on August 3, 1984.
This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A).
BK's 	failure 	to 	respond 	to 	the 	show 	cause 	order 	may 	be 	the
result 	of 	an 	erroneous 	belief 	that 	because 	it 	is 	located 	outside
the United States it is not subject to the requirements of § 110 or
to this court's jurisdiction. 	Section 110 2 of the Bankruptcy Code
regulates the conduct of bankruptcy petition preparers defined in
§ 110(a) as follows:
(1)"bankruptcy petition preparer" means a person, other than
an 	attorney 	or 	an 	employee 	of 	an 	attorney, 	who 	prepares 	for
compensation a document for filing; and
(2)"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 this title.
11 U.S.C. § 110(a). 	The 	term 	"person" 	as 	defined in § 101(41)
includes, 	subject 	to 	exceptions 	not 	relevant 	here, 	individuals,
partnerships, and corporations. 	There is no exception under either
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§ 	110(a)(1) 	or 	101(14) 	for 	persons 	located 	outside 	the 	United
States.
"It 	is 	a 	longstanding 	principle 	of 	American 	law 	'that
legislation of Congress, unless a contrary intent appears, is meant
to 	apply 	only 	within 	the 	territorial 	jurisdiction 	of 	the 	United
States.'" 	French 	v. 	Liebmann (In re French) , 	440 	F.3d 	145, 	149
(4th Cir. 2006) (quoting EEOC v. Arabian Am. Oil Co., 499 U.S. 244,
248, 111 S. Ct. 1227 (1991) (quoting Foley Bros., Inc. v. Filardo,
336 U.S. 281, 285, 69 S. Ct. 575 (1949))). 	"The presumption has no
bearing when 'the conduct which Congress seeks to regulate occurs
largely 	within 	the 	United 	States' 	-- 	that 	is, 	when 	regulated
conduct 	is 	domestic 	rather 	than 	extraterritorial." 	French, 	440
F.3d at 149 (quoting Environmental Def. Fund, Inc. v. Massey, 986
F.2d 528, 531 (D.C. Cir. 1993)).
BK's 	websites 	are 	designed 	to 	provide 	"full" 	chapter 	7
petition preparation services in all fifty states, including North
Carolina. 	Their services are advertised through "sponsored links"
on 	the 	popular 	search 	engine 	Google, 	and 	pop 	up 	in 	response 	to 	a
query 	including 	the 	words 	"bankruptcy" 	and 	"help." 	The 	websites
assert that their "professionals" will prepare debtors' chapter 7
bankruptcy petitions and will even "provide . . . 	the location of
the court in your area as well as their contact numbers and other
instructions." 	There is no question that BK purposefully solicited
business from every state in the country, including North Carolina.
BK 	completed 	its 	transactions 	with 	and 	was 	paid 	by 	residents 	of
North Carolina with the express purpose of having its product filed
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in 	the 	bankruptcy 	courts 	for 	the 	Eastern 	District 	of 	North
Carolina.
Section 	110 	regulates 	the 	activity 	of 	those 	who 	prepare
petitions 	and 	other 	documents 	for 	filing 	in 	the 	courts 	of 	the
United States. 	It is not known where the BK personnel who prepared
the 	petitions 	reside, 	but 	even 	if 	they 	reside 	outside 	the 	United
States, 	BK 	is 	still 	subject 	to 	the 	requirements 	of 	§ 	110 	because
the only place that the prepared documents may be filed is with the
federal 	courts 	in 	the 	United 	States. 	The 	conduct 	of 	bankruptcy
petition preparers is subject to § 110, and the requirements of §
110 may be enforced by this court.
The court has made substantial efforts to provide due process
to 	BK. 	All 	of 	the 	orders 	entered 	with 	respect 	to 	BK 	have 	been
mailed 	to 	an 	address 	provided 	by 	the 	chapter 	7 	trustee 	that 	he
obtained from the usabankruptcyassociates.com website:
BK Document Processing Limited
72 New Bond Street
Mayfair, London
UK W1S 1RR
The 	show 	cause 	order 	was 	also 	mailed 	to 	a 	different 	address
provided 	through 	a 	United 	Kingdom 	register 	of 	companies 	known 	as
Companies 	House. 	That 	agency 	lists 	BK 	Document 	Processing's
registered office at
7 Petworth Road
Haslemere
Surrey GU27 1ER
The original orders to disgorge fees were mailed by the court
to 	the 	London 	address. 	Of 	those, 	mail 	was 	returned 	to 	the 	court
for the cases of Zumpano, Lanier, Waldron and Isom, but it was not
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returned in the cases of Lorenc, Williams and Webb. 	In addition,
the 	show 	cause 	order 	dated 	February 	14, 	2006, 	was 	sent 	to 	both
addresses, and was not returned to the court. 	Finally, the court's
Information Technology department was able to decipher three email
addresses 	for 	BK 	Document 	Processing 	Limited, 	and 	the 	order 	of
February 14, 2006, was electronically sent to all three addresses.
None of the electronic notices was returned as undeliverable.
Section 	105 	of 	the 	Bankruptcy 	Code 	authorizes 	the 	court 	to
"issue 	any 	order, 	process 	or 	judgment 	that 	is 	necessary 	or
appropriate to carry out the provisions of this title." 	11 U.S.C.
§ 	105. 	Further, 	it 	provides 	that 	"[n]o 	provision 	of 	this 	title
providing for the raising of an issue by a party in interest shall
be 	construed 	to 	preclude 	the 	court 	from, 	sua 	sponte, 	taking 	any
action 	or 	making 	any 	determination 	necessary 	or 	appropriate 	to
enforce or implement court orders or rules, or to prevent an abuse
of 	process." 	11 	U.S.C. 	§ 105(a); 	see 	also 	In 	re 	Bankruptcy
Petition Preparers Who Are Not Certified Pursuant to Requirements
of the Arizona Supreme Court, 307 B.R. 134, 143 (9th Cir. BAP 2004)
(discussing 	bankruptcy 	courts' 	ability 	to, 	sua 	sponte, 	enjoin
unauthorized 	practice 	of 	law 	and 	regulate 	practice 	under 	Federal
Rule of Bankruptcy Procedure 9029(b)).
VIOLATIONS AND SANCTIONS
BK has ignored its obligations under § 110 of the Bankruptcy
Code 	and 	ignored 	multiple 	orders 	of 	this 	court. 	Furthermore, 	BK
continues to prepare petitions for excessive fees while completely
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3 The cases presently before the court were filed prior to the
effective 	date 	of 	the 	Bankruptcy 	Abuse 	Prevention 	and 	Consumer
Protection 	Act 	of 	2005, 	and 	the 	former 	§ 	110 	applies 	in 	these
cases. 	BAPCPA revised § 110, however, and § 110(l)(1) now provides
that 	a 	bankruptcy 	petition 	preparer 	who 	fails 	to 	comply 	with 	any
provision of subsections (b), (c), (d), (e), (f), (g) or (h) may be
fined not more than $500 for each such failure, and the court shall
triple 	the 	amount 	of 	any 	fine 	assessed 	in 	any 	case 	in 	which 	the
court finds the petition preparer "prepared a document for filing
in a manner that failed to disclose the identity of the bankruptcy
petition preparer." 	Based on the multiple violations of § 110 in
these seven cases, the court would impose a fine of $52,500 ($500
x 5 violations x 7 cases) in these cases if they fell under the new
law. 	Because 	BK 	continues 	to 	prepare 	petitions 	under 	BAPCPA
without 	disclosing 	its 	participation, 	it 	may 	be 	subject 	to 	the
trebled fines in the future.
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disregarding its obligations and responsibilities under the law and
this court's orders.
The 	debtors 	used 	credit 	cards 	to 	pay 	for 	BK's 	services, 	and
the debtors may seek refunds from the credit card companies for all
charges in excess of $80 made by BK. 	The credit card companies, of
course, may seek restitution from BK.
Further, 	§ 	110 	provides 	for 	fines 	of 	not 	more 	than 	$500 	for
each violation of §§ 110(b) and (c) and for the failure to disgorge
funds within 30 days of an order to do so. 	See 	§ 	110(b)(2),
(c)(3), and (h)(4). 3 In each of these cases, BK has (1) failed to
sign the document and print its name and address as required by §
110(b)(1), 	(2) 	failed 	to 	provide 	an 	identifying 	number 	of 	the
person preparing the documents as required by § 110(c)(1), and (3)
failed 	to 	disgorge 	fees 	in 	excess 	of 	the 	value 	of 	the 	services
provided as provided in § 110(h)(2). 	There are three violations of
§ 	110(b), 	(c) 	and 	(h) 	for 	each 	of 	the 	seven 	cases 	now 	before 	the
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court, each of which subjects BK to a fine of $500 per violation,
which totals $10,500 ($500 x 3 violations x 7 cases).
Finally, 	the 	court 	finds 	that 	BK 	has 	failed 	to 	disgorge 	all
fees 	ordered 	by 	the 	court 	and 	that 	BK 	has 	engaged 	in 	fraudulent,
unfair 	or 	deceptive 	conduct 	by 	failing 	to 	disclose 	its
participation 	in 	the 	preparation 	of 	petitions, 	failing 	to 	comply
with 	multiple 	requirements 	of 	§ 	110, 	and 	engaging 	in 	the
unauthorized practice of law. 	Each of these findings is sufficient
for the court to enjoin BK from acting as a petition preparer under
§ 110(j)(2). 	See also In re Reynoso, 315 B.R. 544, 551 (9th Cir.
BAP 	2004) 	(affirming 	order 	permanently 	enjoining 	internet-based
bankruptcy 	petition 	preparer). 	Accordingly, 	BK 	is 	enjoined 	from
providing further services, and from advertising its services, in
this 	district 	and 	other 	districts 	throughout 	the 	United 	States.
Though the court does not intend to monitor whether BK continues to
advertise its services, the bankruptcy administrator may do so and
may 	take 	steps 	based 	on 	this 	order 	to 	advise 	companies 	(such 	as
Google) 	with 	which 	BK 	advertises 	of 	the 	injunction 	and 	to 	take
other 	appropriate 	steps 	to 	advise 	potential 	customers 	that 	BK 	is
prohibited from providing petition preparation services to debtors.
CONCLUSION
Based 	on 	the 	foregoing, 	THE 	CREDIT 	CARD 	CHARGES 	THAT 	THE
DEBTORS 	INCURRED 	WITH 	RESPECT 	TO 	THE 	SERVICES 	PROVIDED 	BY 	BK 	IN
EXCESS 	OF 	$80 	ARE 	INVALID 	AND 	THE 	DEBTORS 	MAY 	RECOVER 	THOSE 	SUMS
FROM 	THE 	APPROPRIATE 	CREDIT 	CARD 	COMPANY, 	AND 	THE 	CREDIT 	CARD
COMPANY MAY BE REIMBURSED BY BK DOCUMENT PROCESSING LIMITED.
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WITHIN 	20 	DAYS 	OF 	THE 	DATE 	OF 	THIS 	ORDER, 	BK 	DOCUMENT
PROCESSING 	LIMITED 	IS 	DIRECTED 	TO 	PAY 	THE 	SUM 	OF 	$10,500 	TO
PEGGY B. DEANS, CLERK, U.S. BANKRUPTCY COURT, EASTERN DISTRICT OF
NORTH CAROLINA, 1760-A PARKWOOD BOULEVARD, WILSON, NORTH CAROLINA
27894.
BK 	DOCUMENT 	PROCESSING 	IS 	HEREBY 	ENJOINED 	FROM 	PROVIDING
FURTHER 	SERVICES 	AS 	A 	BANKRUPTCY 	PETITION 	PREPARER 	OR 	ASSISTING
INDIVIDUALS IN ANY WAY WITH THE PREPARATION OF DOCUMENTS NECESSARY
TO FILE FOR BANKRUPTCY RELIEF, AND FROM ADVERTISING THOSE SERVICES,
IN THIS DISTRICT AND OTHER DISTRICTS THROUGHOUT THE UNITED STATES.
Violation 	of 	this 	injunction 	by 	BK 	may 	result 	in 	a 	referral 	for
criminal contempt.
SO ORDERED.
END OF DOCUMENT
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