Michigan Bankruptcy Blog

Michigan Bankruptcy Petition Preparer to Serve Jail Time for Criminal Contempt

Section 110 of the United States Bankruptcy Code provides that a non-attorney can assist in the preparation of the bankruptcy petition. However, as an Inkster, Michigan man just learned (the hard way), the Bankruptcy Code places numerous requirements on bankruptcy petition preparers and subjects those who do not comply to substantial penalties.

On Tuesday, February 25, Derrick Hills of Inkster was sentenced by U.S. District Court Judge Sean F. Cox to 46 months in prison after being convicted by a jury in September of five counts of criminal contempt. The contempt proceedings stemmed from repeated violations of orders issued by U.S. Bankruptcy Judge Steven Rhodes from 2007 to 2009. According to a press release issued by the U.S. Attorney's Office following Hills' conviction at trial:

The evidence presented at trial showed that Hills had acted as a bankruptcy petition preparer since 2007, assisting people in filing for bankruptcy. Hills continued to act as a bankruptcy petition preparer despite five bankruptcy court orders issued by Bankruptcy Judge Steven Rhodes, permanently enjoining Hills from doing so for various non-compliance with bankruptcy rules and complications caused by his acting in the capacity of a bankruptcy petition preparer. Hills assisted individuals with consumer debts in preparing and filing their Chapter 7 bankruptcy paperwork. However, his actions went well beyond what was allowed by law and clearly violated Judge Rhodes Orders.

As is clear from the outcome of this case, assisting with the preparation of bankruptcy documents is serious business that poses significant risks. While criminal charges and prison sentences are not common, they are by no means unprecedented, and the Eastern District of Michigan is not the only jurisdiction dealing with such issues. A recent article (We have identified that the following link is no longer active, and it has been removed) in the Milwaukee Journal Sentinel details similar petition preparer problems impacting the Eastern District of Wisconsin.

So, what are some of the things that bankruptcy petition preparers must, and must not, do in order to comply with the law?

Examples Of Things Petition Preparers Must Do

Section 110 of the Bankruptcy Code includes a number of actions a petition preparer must take. For example, before preparing any document for filing or accepting any fee from a debtor, a preparer must notify the debtor in writing on an official form that:

• The bankruptcy petition preparer is not an attorney;
• The bankruptcy petition preparer may not practice law; and
• The bankruptcy preparer cannot give legal advice.

The document must be signed by the debtor and the preparer and be filed with the court. The preparer must also notify the debtor of the maximum allowable fees as set by the U.S. Supreme Court in its rules or the U.S. Judicial Conference in its guidelines.

Examples Of Things Petition Preparers Must Not Do

Section 110 of the Bankruptcy Code prohibits petition preparers taking numerous actions, including:

• Using the term "legal" in advertisements;
• Offering legal advice (including whether to file for bankruptcy, and/or under which chapter); and
• Executing documents on behalf of the debtor.

If you have any questions about the issues raised in this post, or about bankruptcy issues in general, please contact Laura Genovich at lgenovich@fosterswift.com or 616.726.2238.

Categories: Chapter 7, Did you Know?, Eastern District of Michigan