Juan Ramon Gutierrez

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UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
In re 	No. 06-40657 TM
Chapter 7
JUAN RAMON GUTIERREZ,
Debtor.
___________________________/
MEMORANDUM OF DECISION
The 	above-captioned 	debtor 	(the 	“Debtor”) 	filed 	a 	motion,
seeking 	an 	order 	compelling 	his 	former 	bankruptcy 	attorney, 	Jaime
Alcabes 	(“Alcabes”), 	to 	disgorge 	all 	monies 	received 	in 	connection
with 	his 	representation 	of 	the 	Debtor 	in 	the 	above-captioned 	case.
Because the material facts presented by the motion were disputed, the
Court held an evidentiary hearing on the motion on November 17, 2006.
At 	the 	conclusion 	of 	the 	hearing, 	the 	Court 	took 	the 	matter 	under
submission. 	Having 	now 	considered 	the 	relevant 	evidence 	and
authority, the Court concludes that the motion should be granted.
SUMMARY OF FACTS
Alcabes 	represented 	the 	Debtor 	in 	connection 	with 	the 	above-
captioned 	bankruptcy 	case. 	Alcabes 	was 	paid 	$700 	for 	his 	legal
services 	by 	the 	ARAG 	Group 	(“ARAG”) 	through 	a 	plan 	provided 	by 	the
Signed: December 01, 2006
________________________________________
LESLIE TCHAIKOVSKY
U.S. Bankruptcy Judge
________________________________________
Entered on Docket
December 01, 2006
GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
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employer of his wife, Teresita (“Teresita”). 	The only money Alcabes
received from the Debtor and Teresita was $445 to cover the costs of
filing 	the 	bankruptcy 	case: 	i.e., 	$299 	for 	the 	filing 	fee, 	$50 	for
pre-petition credit counseling, and $90 for the post-filing financial
management course.
The Debtor and Teresita met with Alcabes for the first time on
or 	about 	March 	13, 	2006. 	At 	that 	time, 	the 	Debtor 	and 	Teresita
disclosed 	that 	they 	owned 	a 	home 	in 	San 	Pablo, 	California 	(the
“Home”). 	Based on their discussion, Alcabes concluded that the Home
had little unencumbered value.
Based 	on 	the 	information 	provided 	to 	him, 	Alcabes 	prepared
Schedules of Assets and Liabilities (the “Schedules”) and a Statement
of Financial Affairs (the “SOFA”) for the Debtor. 	Schedule A listed
100 	percent 	fee 	interest 	in 	the 	Home 	as 	an 	asset 	of 	the 	Debtor.
Schedule C claimed a homestead exemption in the Home in the amount of
$18,851, the difference between the estimated value of the Home and
the 	amount 	of 	the 	encumbrances. 	The 	box 	entitled 	None 	was 	checked
under 	item 	10 	of 	the 	SOFA, 	which 	directs 	the 	debtor 	to 	list 	any
transfers of property outside the ordinary course of business within
the last two years.
The 	Debtor 	and 	Teresita 	met 	with 	Alcabes 	again 	on 	March 	28,
2006. 	At that time, Teresita signed an information sheet on an ARAG
form (the “ARAG Form”), a copy of which was introduced into evidence
at 	the 	trial 	on 	this 	motion. 	On 	the 	same 	day, 	the 	Debtor 	signed 	a
quitclaim 	deed, 	transferring 	his 	interest 	in 	the 	Home 	to 	Teresita.
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Neither the Debtor nor Teresita disclosed this transfer to Alcabes.
The Deed was recorded on April 12, 2006.
The Debtor signed the bankruptcy petition, the Schedules and the
SOFA 	on 	May 	3, 	2006. 	The 	bankruptcy 	was 	filed 	on 	the 	same 	day.
Alcabes appeared with the Debtor at the meeting of creditors. 	At the
meeting, 	the 	chapter 	7 	trustee, 	Paul 	Mansdorf 	(“Mansdorf”) 	told
Alcabes about the Debtor’s pre-petition transfer of his interest in
the 	Home. 	Alcabes 	questioned 	the 	Debtor 	and 	Teresita 	about 	this
privately. 	The Debtor blamed Teresita for the transfer.
Teresita initially told Alcabes that the transfer had occurred
post-petition. 	Alcabes 	informed 	her 	that 	he 	knew 	this 	was 	not 	the
case. 	According 	to 	Alcabes, 	Teresita 	then 	apologized 	for 	lying.
Teresita 	denied 	apologizing 	for 	lying. 	She 	testified 	that 	Alcabes
had accused her of getting him in trouble and she had apologized for
that.
At the evidentiary hearing, Teresita testified that the Debtor’s
interest 	in 	the 	Home 	had 	been 	transferred 	to 	her 	so 	that 	she 	could
use her better credit to refinance the mortgage. 	She testified that
she had intended to transfer the Debtor’s interest back to him later.
She 	testified 	that 	she 	had 	been 	advised 	to 	do 	this 	by 	real 	estate
agents. 	She admitted that she did not disclose her plans to Alcabes
or 	ask 	him 	whether 	this 	would 	be 	a 	problem 	in 	view 	of 	the 	Debtor’s
imminent bankruptcy filing.
On June 8, 2006, Mansdorf filed an adversary proceeding against
Teresita, seeking to avoid the Debtor’s pre-petition transfer of his
interest in the Home as an actually fraudulent transfer pursuant to
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11 	U.S.C. 	§ 	548(a)(1) 	and 	to 	recover 	the 	avoided 	transfer 	or 	its
value 	for 	the 	benefit 	of 	the 	estate 	pursuant 	to 	11 	U.S.C. 	§
550(a)(1). 	A 	trial 	has 	been 	scheduled 	in 	the 	adversary 	proceeding
for March 23, 2007.
On 	June 	9, 	2006, 	Mansdorf 	filed 	an 	objection 	to 	the 	Debtor’s
claim of a homestead exemption, anticipating the recovery of the Home
through 	the 	adversary 	proceeding. 	The 	basis 	for 	the 	objection 	was
that 	a 	debtor 	may 	not 	claim 	an 	exemption 	in 	property 	voluntarily
transferred 	pre-petition 	and 	recovered 	by 	the 	trustee 	through 	an
avoidance action. 	See 11 U.S.C. § 522(g)(1)(A).
On June 19, 2006, Alcabes filed a motion seeking to withdraw as
the 	Debtor’s 	bankruptcy 	counsel. 	The 	Debtor 	objected 	to 	Alcabes’
motion unless, as a condition, he were required to refund the money
paid 	for 	the 	case. 	The 	Court 	granted 	Alcabes’ 	motion 	to 	withdraw
without imposing this condition, concluding that the Debtor’s request
that 	the 	monies 	received 	be 	refunded 	should 	be 	considered 	as 	a
separate matter. 	The motion to withdraw was granted pursuant to an
order entered on August 15, 2006.
DISCUSSION
A. 	SUMMARY OF ARGUMENT
The 	Debtor 	contends 	that 	Alcabes 	did 	not 	comply 	with 	the
obligations 	imposed 	on 	a 	“debt 	relief 	agency” 	in 	representing 	an
“assisted person” in various respects as set forth in the provisions
of 	the 	Bankruptcy 	Abuse 	Prevention 	and 	Consumer 	Protection 	Act 	of
2005 (“BAPCPA”). 	As a consequence, he contends that, pursuant to 11
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1The Debtor also bases his motion on Rule 2017 of the Federal
Rules of Bankruptcy Procedure. 	Rule 2017(a) of the Federal Rules
of Bankruptcy Procedure provides that the court may, after notice
and a hearing, require an attorney to repay to the debtor any fees
received from the debtor for services rendered or to be rendered
which are determined to be excessive. 	See Fed. R. Bankr. Proc.
2017(a). 	Since the Debtor did not pay Alcabes any money for his
services, this rule is inapposite.
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U.S.C. 	§ 	526(c), 	Alcabes 	should 	be 	required 	to 	repay 	to 	ARAG 	all
payments received for his services. 1
The deficiencies in Alcabes’ services alleged by the Debtor are
as follows:
1. 	Alcabes 	did 	not 	prepare 	the 	petition 	and 	the 	Schedules
properly 	with 	information 	provided 	to 	by 	the 	Debtor. 	I.e., 	the
Debtor told Alcabes that he owned the Home jointly with Teresita and
that Alcabes inaccurately set forth in the Schedules that the Debtor
held a 100 percent fee interest in the Home.
2. 	Alcabes 	did 	not 	ask 	the 	Debtor 	whether 	there 	had 	been 	any
changes in the information previously provided to him at the time he
asked the Debtor to sign the petition, the Schedules, and the SOFA.
3. 	Alcabes 	did 	not 	provide 	the 	Debtor 	with 	“a 	Bankruptcy
Truthfulness Notice” before the Debtor signed the petition.
4. 	Alcabes 	did 	not 	honestly 	disclose 	to 	the 	Court 	the 	amount
of the fees that he had collected in connection with the bankruptcy
case.
5. 	Alcabes provided substandard services in connection with the
challenge to the Debtor’s homestead exemption and in other litigation
involving the Debtor’s family.
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6. 	Alcabes 	did 	not 	give 	the 	Debtor 	a 	disclosure 	of 	the
differences 	between 	the 	various 	bankruptcy 	chapters 	before 	the
bankruptcy petition was filed.
7. 	Alcabes did not disclose the services and fees that he would
charge the Debtor within five days after he first met with the Debtor
to discuss the potential bankruptcy filing.
8. 	Alcabes 	failed 	to 	execute 	and 	have 	the 	Debtor 	execute 	an
attorney-client retention agreement.
In 	response, 	Alcabes 	contends 	that 	there 	is 	no 	basis 	for
requiring 	him 	to 	refund 	his 	fees 	to 	ARAG. 	He 	notes 	that 	he 	has
represented 	clients 	covered 	by 	the 	ARAG 	legal 	plan 	for 	over 	twenty
years 	and 	has 	handled 	several 	hundred 	matters, 	with 	no 	prior
complaints. 	He notes that the ARAG plan requires him and the client
to sign the ARAG Form. 	At the evidentiary hearing, he testified that
he has never executed a separate attorney-client retention agreement
with a client covered by the ARAG plan and knows of no other attorney
who does so.
Alcabes 	denies 	failing 	to 	or 	inaccurately 	setting 	forth 	the
amount or the source of his fees in his filings with the bankruptcy
court. 	He 	admits 	that 	he 	owed 	the Debtor a refund for the cost of
a 	credit 	counseling 	course. 	He 	included 	this 	cost 	in 	the 	amount
demanded from the Debtor. 	However, the Debtor then paid for his own
course. 	He declares that he sent the Debtor a check to reimburse him
for this cost, but that the Debtor has not cashed it.
With respect to the Home, Alcabes declares that he discussed the
Home 	in 	detail 	with 	the 	Debtor 	and 	Teresita 	on 	several 	occasions.
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He 	contends 	that 	the 	Debtor 	was 	well 	aware 	of 	the 	contents 	of 	the
Schedules 	when 	he 	signed 	the 	petition. 	At 	no 	time 	did 	the 	Debtor
disclose to him that he had transferred his interest in the Home to
Teresita.
B. 	DECISION
The alleged deficiencies cited by the Debtor may be divided into
two 	categories: 	(1) 	deficiencies 	related 	to 	the 	Home 	and 	(2) 	other
deficiencies. 	The 	Court 	will 	address 	each 	of 	these 	categories 	in
turn.
1. 	Deficiencies Related to Home
Three 	of 	the 	deficiencies 	alleged 	above–-items 	1, 	2, 	and 	5–-
relate to the Home. 	As noted above, the Debtor contends that Alcabes
should not have indicated on the Schedules that he held a 100 percent
fee 	interest 	in 	the 	Home 	since 	he 	had 	been 	advised 	that 	the 	Debtor
and 	Teresita 	owned 	the 	Home 	jointly. 	Moreover, 	he 	contends 	that
Alcabes should have asked him at the time the Schedules were signed
whether there had been any changes in his circumstances, making the
information previously provided to Alcabes inaccurate. 	Finally, the
Debtor 	contends 	that 	it 	was 	negligent 	for 	Alcabes 	to 	claim 	as 	a
homestead exemption only an amount reflecting the difference between
the estimated value of the Home and the balance of the encumbrances.
Section 526(a)(2) provides, in pertinent part, that:
A debt relief agency shall not–
...
(2) 	make 	any 	statement, 	or 	counsel 	or 	advise
any 	assisted 	person...to 	make 	a 	statement 	in 	a
document 	filed 	in 	a 	case 	or 	proceeding 	under
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this 	title, 	that 	is 	untrue 	and 	misleading, 	or
that 	upon 	the 	exercise 	of 	reasonable 	care,
should 	have 	been 	known 	by 	such 	agency 	to 	be
untrue or misleading[.]
11 U.S.C. § 526(a)(2). 	The Debtor apparently contends that the first
two 	deficiencies 	violated 	11 	U.S.C. 	§ 	526(a)(2). 	He 	does 	not 	cite
the Court to a specific rule or statute that the third deficiency is
alleged to violate. 	Presumably, he contends that the manner in which
the exemption was listed constitutes common law malpractice.
With respect to the first alleged deficiency, Alcabes does not
deny 	that 	he 	was 	advised 	by 	the 	Debtor 	and/or 	Teresita 	that 	the
Debtor 	and 	Teresita 	owned 	the 	Home 	jointly. 	The 	Debtor 	apparently
contends 	that, 	even 	if 	the 	Debtor 	had 	not 	transferred 	his 	interest
in 	the 	Home 	prior 	to 	filing 	the 	bankruptcy 	petition, 	it 	would 	have
been 	inaccurate 	to 	list 	him 	as 	holding 	a 	100 	percent 	fee 	interest.
However, 	the 	Debtor 	did 	not 	present 	any 	evidence 	establishing 	the
precise 	manner 	in 	which 	the 	Home 	was 	held 	prior 	to 	the 	Debtor’s
transfer of his interest in it. 	At the trial, Teresita referred to
the 	Home 	as 	community 	property. 	It 	is 	accurate 	for 	a 	debtor 	that
owns 	his 	home 	as 	community 	property 	with 	his 	nondebtor 	spouse 	to
claim 	a 	100 	percent 	interest 	in 	the 	Home. 	Thus, 	this 	claim 	of
deficiency fails.
With respect to the second alleged deficiency, Alcabes did not
recall 	specifically 	whether 	he 	had 	asked 	the 	Debtor 	at 	the 	time 	he
signed the Schedules whether any information previously provided was
inaccurate. 	However, 	the 	issue 	is 	whether, 	if 	he 	had 	asked 	this
question, 	the 	Debtor 	would 	have 	advised 	him 	of 	the 	transfer. 	The
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Court does not believe that he would have. 	As noted above, the Deed
was signed the same day as the ARAG Form. 	Teresita admitted that she
did 	not 	discuss 	the 	propriety 	of 	the 	transfer 	with 	Alcabes. 	Given
the timing of the two events, the Court is unable to believe that the
transfer 	simply 	slipped 	her 	mind. 	She 	appears 	to 	have 	made 	a
conscious decision not to disclose it to Alcabes. 	Thus, the second
claim of deficiency fails as well.
With respect to the third alleged deficiency-–item 5 above–-the
Court 	agrees 	with 	the 	Debtor 	that 	it 	was 	substandard 	practice 	to
claim 	as 	a 	homestead 	exemption 	only 	the 	difference 	between 	the
estimated value of the Home and the balance of the encumbrances. 	The
estimate 	could 	prove 	inaccurate 	or 	the 	value 	of 	the 	Home 	might
increase. 	To 	prevent 	the 	loss 	of 	the 	full 	exemption 	to 	which 	a
debtor 	is 	entitled, 	it 	is 	appropriate 	to 	claim 	the 	full 	exemption
amount provided by law.
However, no harm has been established by the Debtor as a result
of 	Alcabes’ 	substandard 	practice 	in 	this 	regard. 	A 	claim 	of
exemption 	can 	be 	amended 	to 	increase 	the 	amount 	claimed 	if
circumstances indicate that there is more equity than was previously
anticipated. 	See 	Fed. 	R. 	Bankr. 	Proc. 	4003(b)(giving 	party 	in
interest 	30 	days 	after 	any 	amendment 	to 	the 	list 	to 	object 	to 	an
amended 	claim 	of 	exemption) 	If 	the 	Debtor 	loses 	his 	homestead
exemption here, it will not be the result of an understatement of the
amount 	of 	the 	exemption 	claimed. 	It 	will 	be 	the 	result 	of 	the
Debtor’s voluntary transfer of his interest in the Home to Teresita
pre-petition.
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Moreover, 	unlike 	the 	other 	alleged 	deficiencies, 	this 	alleged
deficiency does not constitute a violation of 11 U.S.C. §§ 526, 527,
or 528. 	Thus, it does not give rise to a remedy under 11 U.S.C. §
526(c).
2. 	Other Deficiencies
The 	other 	alleged 	deficiencies 	do 	not 	relate 	to 	the 	Home. 	As
noted above, the Debtor complains that:
(a) Alcabes did not provide him with a “Bankruptcy Truthfulness
Notice” before the Debtor signed the petition.
(b) 	Alcabes 	did 	not 	honestly 	disclose 	to 	the 	Court 	the 	amount
of the fees that he had collected in connection with the bankruptcy
case.
(c) 	Alcabes 	did 	not 	give 	the 	Debtor 	a 	disclosure 	of 	the
differences 	between 	the 	various 	different 	bankruptcies 	before 	the
bankruptcy petition was filed.
(d) 	Alcabes 	did 	not 	disclose 	the 	services 	and 	fees 	he 	would
charge the Debtor within five days after he first met with the Debtor
to discuss the potential bankruptcy filing.
(e) 	Alcabes 	failed 	to 	execute 	and 	have 	the 	Debtor 	execute 	an
attorney-client retention agreement.
These alleged deficiencies are discussed below.
(a) 	Bankruptcy Truthfulness Notice.
As 	noted 	above, 	the 	Debtor 	contends 	that 	Alcabes 	did 	not 	give
him a Bankruptcy Truthfulness Notice before he signed the bankruptcy
petition. 	Section 527(a)(2) requires a debt relief agency to provide
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the 	assisted 	person 	with 	a 	clear 	and 	conspicuous 	written 	notice
advising the assisted person that:
(A) all information that the assisted person is
required 	to 	provide 	with 	a 	petition 	and
thereafter 	during 	a 	case...is 	required 	to 	be
complete, accurate, and truthful;
(B) all assets and all liabilities are required
to be completely and accurately disclosed in the
documents 	filed 	to 	commence 	the 	case, 	and 	the
replacement 	value 	of 	each 	asset 	as 	defined 	in
section 	506 	must 	be 	stated 	in 	those 	documents
where 	requested 	after 	reasonable 	inquiry 	to
establish such value;
(C) 	current 	monthly 	income, 	the 	amounts
specified 	in 	section 	707(b)(2), 	and, 	in 	a 	case
under 	chapter 	13 	of 	this 	title, 	disposable
income 	(determined 	in 	accordance 	with 	section
707(b)(2), 	are 	required 	to 	be 	stated 	after
reasonable inquiry; and
(D) 	information 	that 	an 	assisted 	person
provides 	during 	their 	case 	may 	be 	audited
pursuant 	to 	this 	title, 	and 	that 	failure 	to
provide such information may result in dismissal
of the case under this title or other sanction,
including a criminal sanction.
11 U.S.C. § 527(a)(2). 	This notice must be provided to the assisted
person “not later than 3 business days after the first date the debt
relief agency first offers to provide any bankruptcy assistance....”
11 U.S.C. § 527(a)(2).
At 	the 	evidentiary 	hearing, 	Alcabes 	admitted 	that 	he 	did 	not
provide 	the 	Debtor 	with 	this 	notice 	three 	business 	days 	after 	the
first 	date 	they 	met 	to 	discuss 	the 	filing 	of 	a 	bankruptcy 	case 	for
the Debtor. 	Thus, Alcabes clearly violated 11 U.S.C. § 527(a)(2).
(b) Disclosure of Fees Collected
The 	Debtor 	contends 	that 	Alcabes 	did 	not 	honestly 	disclose 	to
the Court the amount of the fees that he had collected in connection
with 	the 	bankruptcy 	case. 	The 	requirement 	that 	a 	debtor’s 	counsel
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accurately 	disclose 	to 	the 	court 	the 	fees 	collected 	in 	connection
with a bankruptcy case is not new. 	Since its enactment in 1978, 11
U.S.C. 	§ 	329(a) 	has 	required 	“[a]ny 	attorney 	representing 	a 	debtor
in 	a 	[bankruptcy] 	case...whether 	or 	not 	the 	attorney 	applies 	for
compensation...[to] 	file 	with 	the 	court 	a 	statement 	of 	the
compensation paid or agreed to be paid...for services rendered or to
be 	rendered...and 	the 	source 	of 	such 	compensation.” 	11 	U.S.C. 	§
329(a). 	Rule 	2016(b) 	of 	the 	Federal 	Rules 	of 	Bankruptcy 	Procedure
requires 	this 	statement 	to 	be 	filed 	within 	15 	days 	after 	the 	order
for relief.
Item 9 of the SOFA directs the debtor to disclose all payments
made 	for 	debt 	counseling 	or 	bankruptcy 	within 	the 	preceding 	year,
including 	payments 	to 	attorneys. 	Alcabes 	prepared 	the 	SOFA. 	For
some 	reason, 	he 	caused 	the 	box 	entitled 	“None” 	to 	be 	checked 	under
this 	item. 	This 	was 	accurate 	since 	Alcabes 	did 	not 	receive 	any
payment from the Debtor for his services, either before or after the
bankruptcy was filed. 	In addition, Alcabes filed with the petition
a 	form 	entitled 	Disclosure 	of 	Compensation 	of 	Attorney 	for 	Debtor.
In this form, he disclosed that he was owed $700 for his services and
that 	the 	source 	of 	the 	compensation 	was 	the 	ARAG 	Legal 	Plan. 	This
information was also accurate.
The 	Debtor 	contends 	that 	Alcabes 	violated 	the 	Bankruptcy 	Code
and/or 	Rules 	by 	failing 	to 	disclose 	the 	payments 	received 	from 	the
Debtor. 	Alcabes 	initially 	admitted 	receiving 	only 	$420 	from 	the
Debtor. 	However, 	after 	being 	reminded 	of 	the 	receipt 	of 	an
additional check for $25, he admitted receiving $445. 	However, these
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payments 	were 	an 	advance 	for 	costs, 	not 	a 	payment 	of 	fees.
Therefore, the disclosure requirements set forth above do not apply.
The 	Debtor’s 	complaint 	concerning 	this 	alleged 	deficiency 	has 	no
merit.
(c) Disclosure of Differences Between Chapters
In 	his 	declaration 	in 	support 	of 	the 	motion, 	the 	Debtor’s
current attorney declared that the copy of the Debtor’s file received
from 	Alcabes 	did 	not 	contain 	the 	notice 	required 	by 	11 	U.S.C. 	§
342(b)(1). 	In his trial brief, the Debtor admitted to receiving this
notice 	on 	the 	day 	the 	petition 	was 	signed. 	Nevertheless, 	he
contended 	that 	Alcabes 	violated 	the 	statute 	by 	failing 	to 	give 	the
Debtor the notice within three days of their first meeting.
Section 	527(a)(1) 	of 	the 	Bankruptcy 	Code 	requires 	“[a] 	debt
relief agency providing bankruptcy assistance to an assisted person”
to provide the debtor with “the written notice required under section
342(b)(1)....” 	11 	U.S.C. 	§ 	527(a)(1). 	Section 	342(b)(1) 	requires
a 	debt 	relief 	agency 	to 	provide 	the 	assisted 	person, 	before 	the
filing 	of 	the 	case, 	with 	a 	“written 	notice 	containing...a 	brief
description of...chapters 7, 11, 12, and 13 and the general purpose,
benefits, 	and 	costs 	of 	proceeding 	under 	each 	of 	those 	chapters.”
11 U.S.C. § 342(b)(1)(emphasis added).
The 	Debtor 	contends 	that 	Alcabes 	violated 	the 	Bankruptcy 	Code
by not giving him the notice required by 11 U.S.C. § 342(b)(1) within
three 	days 	of 	their 	first 	meeting. 	This 	contention 	has 	no 	merit.
As the highlighted language above indicates, a debt relief agency is
only required to give the assisted person this notice prior to filing
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the bankruptcy case. 	There is no evidence or even a clear contention
that Alcabes failed to comply with this requirement.
(d) Disclosure of Services and Fees
The Debtor contends that Alcabes did not disclose the services
and fees he would charge the Debtor within five days after he first
met 	with 	the 	Debtor 	to 	discuss 	the 	potential 	bankruptcy 	filing.
This contention overlaps with the final alleged deficiency and will
be discussed in the next subsection.
(e) Attorney-Client Retention Agreement
The 	Debtor 	contends 	that 	Alcabes 	did 	not 	execute 	a 	written
contract with him at all, let alone one that complied with 11 U.S.C.
§ 528(a)(1). 	Section 528(a)(1) requires a debt relief agency:
not 	later 	than 	5 	business 	days 	after 	the 	first
date 	on 	which 	such 	agency 	provides 	any
bankruptcy 	assistance 	services 	to 	an 	assisted
person...[to] 	execute 	a 	written 	contract 	with
such 	assisted 	person 	that 	explains 	clearly 	and
conspicuously--
(A) 	the 	services 	such 	agency 	will 	provide 	to
such assisted person; and
(B) the fees or charges for such services, and
the terms of payment[.]
11 	U.S.C. 	§ 	528(c)(1). 	Section 	528(a)(2) 	requires 	the 	debt 	relief
agency 	to 	“provide 	the 	assisted 	person 	with 	a 	copy 	of 	the 	fully
executed and completed contract.”
Alcabes 	admits 	that 	he 	did 	not 	execute 	any 	agreement 	with 	the
Debtor 	describing 	the 	services 	he 	would 	provide 	and 	the 	fees 	or
charges 	for 	such 	services. 	Three 	documents 	were 	offered 	into
evidence: (1) an ARAG form; (2) a Bankruptcy Questionnaire & Document
Request; 	and 	(3) 	a 	one 	page 	document 	in 	Spanish. 	None 	of 	these
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2The Debtor bases its standing to seek this on the ground that
the dollar amount of services covered by the ARAG legal plan is
limited. 	Thus, if the amount received by Alcabes is reimbursed,
the Debtor and Teresita will have additional coverage available.
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documents is signed by both Alcabes and the Debtor and none explains
the services to be provided by Alcabes. 	Only the one page document
in 	Spanish 	refers 	to 	any 	charges 	to 	be 	paid. 	It 	appears 	to 	relate
to 	the 	costs 	to 	be 	advanced 	by 	the 	Debtor. 	However, 	the 	amounts
requested 	do 	not 	appear 	to 	correspond 	to 	the 	costs 	required 	to
advanced. 	Clearly, Alcabes did not comply with the requirements of
11 U.S.C. § 528(a)(1) or (2).
3. 	Availability of Relief Requested
The 	Debtor 	contends 	that 	the 	Court 	should 	order 	Alcabes 	to
reimburse ARAG in the amount of $700 on account of the deficiencies
alleged above. 2 	In support of this contention, he cites 11 U.S.C.
§ 526(c)(1), which provides as follows:
Any 	contract 	for 	bankruptcy 	assistance 	between
a debt relief agency and an assisted person that
does 	not 	comply 	with 	the 	material 	requirements
of 	this 	section, 	section 	527, 	or 	section 	528
shall 	be 	void 	and 	may 	not 	be 	enforced 	by 	any
Federal 	or 	State 	court 	or 	by 	any 	other 	person,
other than such assisted person.
11 	U.S.C. 	§ 	526(c)(1)(emphasis 	added.) 	He 	contends 	that, 	if 	his
contract 	with 	Alcabes 	is 	void, 	Alcabes 	should 	not 	be 	entitled 	to
retain 	the 	$700. 	The 	Debtor 	also 	seeks 	payment 	of 	his 	reasonable
attorneys’ in the amount of $675 pursuant to 11 U.S.C. § 526(c)(1).
The 	Court 	does 	not 	read 	11 	U.S.C. 	§ 	526(c)(1) 	as 	requiring
reimbursement 	of 	attorneys’ 	fees 	already 	paid 	or 	as 	authorizing 	an
award 	of 	attorney’s 	fees 	for 	filing 	a 	motion 	to 	recover 	such 	fees.
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3Section 526(c)(2)(B) is particularly harsh. 	It appears to
give an assisted person the right to recover its fees from an
attorney who in a previous case has been found to have
intentionally or negligently failed to comply with 11 U.S.C. § 526,
527, or 528 with the result that the case was dismissed or
converted even if the attorney has done nothing wrong in the
subsequent case. 	See 11 U.S.C. § 526(c)(2)(B).
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Rather, it reads 11 U.S.C. § 526(c)(1) as preventing an attorney who
fails 	to 	comply 	with 	the 	requirements 	of 	11 	U.S.C. 	§§ 	526, 	527, 	or
528 	from 	obtaining 	a 	court 	order 	compelling 	the 	debtor 	to 	pay
additional attorneys’ fees otherwise be due and owing.
By contrast, 11 U.S.C. § 526(c)(2) provides that:
Any 	debt 	relief 	agency 	shall 	be 	liable 	to 	an
assisted 	person 	in 	the 	amount 	of 	any 	fees 	or
charges in connection with providing bankruptcy
assistance to such person that such debt relief
agency has received, for actual damages, and for
reasonable 	attorneys’ 	fees 	and 	costs 	if 	such
agency is found, after notice and a hearing, to
have–
(A) 	intentionally 	or 	negligently 	failed 	to
comply 	with 	any 	provision 	of 	this 	section,
section 	527, 	or 	section 	528 	with 	respect 	to 	a
case 	or 	proceeding 	under 	this 	title 	for 	such
assisted person;
(B) 	provided 	bankruptcy 	assistance 	to 	an
assisted 	person 	in 	a 	case 	or 	proceeding 	under
this 	title 	that 	is 	dismissed 	or 	converted 	to 	a
case under another chapter of this title because
of 	such 	agency’s 	intentional 	or 	negligent
failure to file any required document including
those specified in section 521; or
(C) intentionally or negligently disregarded
the 	material 	requirements 	of 	this 	title 	or 	the
Federal Rules of Bankruptcy Procedure applicable
to such agency.
11 U.S.C. § 526(c)(2)(emphasis added). 	Thus, 11 U.S.C. § 526(c)(2)
makes an attorney who acted intentionally or negligently liable for
fees 	already 	received, 	actual 	damages, 	and 	attorneys’ 	fees 	if 	the
attorney’s conduct was negligent or intentional. 3 	Thus, to grant the
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relief 	requested 	by 	the 	Debtor, 	the 	Court 	must 	find 	that 	Alcabes
acted (or failed to act) intentionally or negligently.
No 	evidence 	was 	presented 	that 	Alcabes 	knew 	about 	the
requirements 	with 	which 	he 	failed 	to 	comply. 	Therefore, 	the 	Court
does 	not 	find 	that 	his 	conduct 	was 	intentional. 	Whether 	it 	was
negligent presents a closer question. 	The requirements of 11 U.S.C.
§ 	527 	and 	528 	first 	became 	effective 	in 	October 	2005. 	Alcabes
undertook 	to 	represent 	the 	Debtor 	in 	March 	2006. 	He 	had 	not
previously represented a bankruptcy debtor after the effective date
of BAPCPA. 	The obligations imposed on a debtor’s counsel by BAPCPA
are 	numerous 	and 	detailed. 	These 	considerations 	weigh 	against
finding Alcabes’ conduct negligent.
However, 	Alcabes 	appears 	to 	have 	made 	little 	or 	no 	attempt 	to
determine 	what 	new 	obligations 	were 	imposed 	by 	BAPCPA 	or 	to 	comply
with 	them. 	The 	publicity 	regarding 	the 	enactment 	of 	BAPCPA 	was
widespread. 	Alcabes cannot have been unaware of its enactment or of
the 	dramatic 	change 	it 	made 	to 	the 	practice 	of 	consumer 	bankruptcy
law. 	Alternatively, if Alcabes was not paying sufficient attention
to such a fundamental change in this area of law, he should not have
been representing a debtor in a bankruptcy case. 	Consequently, the
Court concludes that Alcabes did act negligently by failing to comply
with 11 U.S.C. §§ 527(a)(2) and 528(a)(1) and (2). 	As a consequence,
the Court is compelled to award the Debtor the amounts specified by
11 U.S.C. § 526(c)(2).
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CONCLUSION
The 	Debtor 	has 	failed 	to 	establish 	any 	actual 	damages 	as 	a
result of Alcabes’ failure to comply with 11 U.S.C. §§ 527 and 528.
However, 	Alcabes 	will 	be 	required 	to 	repay 	to 	ARAG 	the 	$700 	fee
received from it and to pay the Debtor his reasonable attorneys’ fees
for 	prosecuting 	the 	motion. 	The 	Court 	finds 	that 	$675 	is 	a
reasonable attorneys’ fee under the circumstances. 	Counsel for the
Debtor is directed to submit a proposed form of order in accordance
with this decision.
END OF DOCUMENT
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COURT SERVICE LIST
Jaime A. Alcabes
1814 Franklin St., Ste. 630
Oakland, CA 94612
Gerard Launay
Law Office of Gerard Launay
2119 Addison St., Unit A
Berkeley, CA 94704
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