UST After Attorney in Riverside in Chapter 7 Cases for Disgorgement

A thank you and tip of the hat to Keith Higginbotham, always looking out for us.

Dear Colleagues!

I came across an interesting UST adversary complaint filed yesterday that alleges improper Ch7 business practices as it relates to “bifurcating Ch7 atty fees between prepetition and post petition” and then “assigning the debt to a collection agency called BK Billing, Inc., to service the debt”.

   The complaint alleges violations of 9th Circuit law as it relates to a novel Ch7 fee arrangement.  My intent is to alert you to a company called BK Billing, LLC.
   Check out:  6:17-ap-01271-MJ  Docket #1

Keith A. Higginbotham
Note from MJH:  The docket states  “Complaint For Disgorgement Of Fees, Civil Penalties, Sanctions, And Declaratory, Injunctive, And Other Relief Nature of Suit: (14 (Recovery of money/property – other)),(72 (Injunctive relief – other)),(91 (Declaratory judgment)),(02 (Other (e.g. other actions that would have been brought in state court if unrelated to bankruptcy).

The complaint (147 pages) states:

2. During the past year, the Defendants increased their Chapter 7 consumer client base nearly five-fold by advertising that they would file individual Chapter 7 bankruptcy cases in exchange for “no money down.”

3. Under their new business model the Defendants claim to divide, or “bifurcate,” their representation of Chapter 7 consumer debtor clients into two parts: a prepetition component and a postpetition component.  The Defendants claim to provide the pre-petition services to clients for “free,” and claim that they charge clients only for the remaining post-petition services.  As part of the marketing appeal to would-be clients, the Defendants’ model contemplates that the attorney’s fees for post-petition services will be collected in post-petition monthly installments over the course of a year through ACH debits of customer bank accounts.

4. Although the Defendants’ model claims to charge fees only for the remaining postpetition services, in the “no money down” cases the Defendants charge debtors significantly more than they otherwise charge for a Chapter 7 case.  Particularly, the fees include interest and/or other charges exceeding 40 percent. To finance the Defendants’ ongoing business operations the Defendants assign their attorney’s fees for collection to a third party as soon as they file the petition in exchange for 70 percent of the account balance.

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