Waiting For A Good Trustee: Bankruptcy Misconduct Draws Two-Year Suspension In Colorado

A mishandled bankruptcy led to a two-year suspension imposed by Colorado Presiding Disciplinary Judge.

Ted Taggart (“Respondent”) was hired to file a bankruptcy petition for a married couple. After filing the petition, he failed to submit the required financial documents, and the bankruptcy case was dismissed. He promised to refile the petition but he did not do so promptly, so the clients terminated his representation. He did not refund any of his fees. The clients filed a second bankruptcy petition pro se, yet later learned that Respondent had filed a third petition for them after he had been terminated. He then disregarded requests for information from the disciplinary authorities, and he defaulted in this proceeding.

The facts

Cora Gipson and her husband met with Respondent at a Starbucks cafe on November 17 or 18, 2014, to discuss filing for bankruptcy. At the time, Gipson was sixty-six years old and the couples’ finances were in dire straits. They paid Respondent $905.00 to file a Chapter 7 bankruptcy petition for them.  Gipson signed a fee agreement but never received a copy of the agreement from Respondent, even though she requested a copy on several occasions. Respondent cashed the check on receipt, using the funds for his personal needs before earning them. He did not maintain adequate records of the funds he received from the couple.

The couple told Respondent they wanted their bankruptcy filed promptly because of an upcoming court date. Respondent told the couple not to worry about the court date or paying creditors. He advised the couple to file under Chapter 13 rather than Chapter 7. Gipson was concerned about filing under Chapter 13 because of her age and the uncertainty  of the required monthly payment amount. Respondent decided to file a Chapter 7 petition for Gipson and a Chapter 13 petition for her husband. Gipson did not understand his reasoning. Respondent did not answer her questions about filing under Chapter 13.

When Respondent sent Gipson the draft of the Chapter 7 petition, it was riddled with errors, including misspelling Gipson’s name, checking a box indicating that Gipson lacked a social security number, and misstating her salary. Gipson gave Respondent a list of corrections yet he failed to implement them.

Respondent did not file the bankruptcy petitions until April 7, 2015.Respondent told Gipson that the filing was delayed because he was “waiting for a good trustee” and that the current trustee was “terrible.”  A meeting of creditors was set for May 5, 2015. Even though the couple twice sent Respondent their required bank statements, he did not send them to the trustee. As a result, Gipson’s petition was dismissed on May 29, 2015. Respondent did not tell Gipson that her petition had been dismissed.

On June 5, 2015, Gipson was notified by the court that her petition had been dismissed. Gipson called Respondent but received a recording that his voice mailbox was not activated. She then emailed Respondent and sent him a message through Facebook. Respondent did not respond.  Gipson called the court and was directed to file a letter with the judge. The couple wrote the letter but it was too late as a matter of law to reopen her Chapter 7 bankruptcy. Thereafter, Respondent emailed Gipson, stating that he would refile her Chapter 7 petition for no charge. He then sent her a new draft of the petition; again, it contained many errors. Respondent failed to answer Gipson’s questions about the refiling.

Respondent again delayed the filing of the second petition, claiming that he was waiting for a “good trustee.” Gipson realized that the credit counseling course that she and her husband completed had expired, which would have resulted in the dismissal of the second petition had Respondent filed it.

On July 20, 2015, Gipson emailed Respondent and terminated his representation, effective immediately. She requested that Respondent pay any filing fees associated with her pro se Chapter 7 filing. On August 3, 2015, Gipson filed a Chapter 7 petition pro se, attended the meeting of creditors on August 28, 2015, and later received a discharge of her debts. Gipson herself paid the additional filing fee of $335.00.

Gipson later discovered that Respondent had filed a third Chapter 7 petition for her on August 7, 2015—two weeks after he had been terminated. Gipson was shocked to learn
of this and immediately called Respondent. She received a recording that his number was no longer in service. Respondent never told Gipson he had filed another petition, nor did he give her his new address or phone number. Gipson’s credit report shows three bankruptcies as opposed to one.

The People sent Respondent numerous letters during their investigation. He failed to respond to any correspondence or to participate in this disciplinary proceeding.

Harm to the client

At the sanctions hearing, Gipson testified about how Respondent’s conduct caused her harm. Gipson explained that Respondent’s failure to act with diligence and his filing of a third bankruptcy petition after he had been terminated resulted in three bankruptcies, rather than just one, appearing on her credit report. As a result, she stated, her credit was tarnished and she was unable to qualify for a new apartment lease. She and her husband wanted to downsize from a two-bedroom apartment to a one-bedroom apartment to save money on rent, but they were unable to due to their credit report. Additionally, Gipson testified that she was engaged in payment negotiations with the Internal Revenue Service (“IRS”) concerning the couple’s tax debts. She explained that the IRS stopped negotiating with her after it discovered three bankruptcies on her credit history, and as a result, she was penalized in the amount of $3,000.00 in interest and penalties. Respondent’s conduct also caused Gipson unnecessary stress and anxiety because he did not inform her about the status of her case and because she had discovered that Respondent had filed a third petition without her authorization.

Sanction

Respondent’s misconduct, coupled with his disregard for these disciplinary proceeding, persuades the Court that the public cannot be protected unless Respondent is required to demonstrate his fitness to practice law before seeking to reinstate his law license. Thus, taking into account the presumptive sanction, the balance of aggravating and mitigating factors, and the relevant case law, the Court concludes suspension for two years is warranted here.

(Mike Frisch)