Seller Of Bankruptcy Software To the Public Found To Violate Bankruptcy Code
February 28, 2007
Wow, who would have made this connection? Chuck Newton over at StayViolation.com reports on the 9th Circuit case of Reynoso v Frankfort Digital Services which upheld the U.S. Bankruptcy Court for the Northern District of California finding that Frankfort, a seller of web-based software that prepares bankruptcy petitions, acted as a “bankruptcy petition preparer” within the meaning of 11 U.S.C. § 110 (2002)1 and violated the requirements thereof. The bankruptcy court concluded that Frankfort had committed fraudulent, unfair, or deceptive conduct, and had engaged in the unauthorized practice of law.
Frankfort got itself in trouble based primarily on the representations it made on its website and allowing its computer program to select certain tasks. For example, the website explained that its program would select bankruptcy exemptions for the debtor and would eliminate the debtor’s “need to choose which schedule to use for each piece of information.” The site also offered customers access to the “Bankruptcy Vault”, which it described as a repository of information regarding “loopholes” and “stealth techniques.” For example, according to the site, the Vault would explain how to hide a bankruptcy from credit bureaus and how to retain various types of property.
The Debtor paid the service $219.00. The debtor imputed information, responded to questions, and the system produced a complete petition, schedules and other bankruptcy forms personalized for the Debtor. Unfortunately, I suppose to the software company, it also selected the schedules and exemptions for the Debtor. The Debtor stated he did not himself type in the various exemption and provisions.
The key for the court was that the software didn’t merely input the debtor’s answers onto the forms, but rather took the responses and restated them prior to including them on the official forms.
Technorati Tags: bankruptcy, Frankfort Digital Services, BAP
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