By Amy Silverman
By Olivia LaVecchia
By Monica Alonzo and Stephen Lemons
By Chris Parker
By Michael Lacey
By Weston Phippen
Attorneys, however, often collect most, if not all, of their fees in Chapter 13 cases over the three- to five-year term of the debtor's repayment plan.
That's an important distinction, says Ed Maney, attorney for a Chapter 13 trustee.
"If you can't afford $30 or whatever extra per month in your plan to pay your attorney," Maney says, "then Chapter 13 isn't where you need to be. How can a debtor claim he or she can't afford an attorney, then dole out five hundred or a thousand bucks to a document preparer?"
People's Paralegal, meanwhile, seeks to get as much money up-front as it can from customers.
But even if People's Paralegal complied with the court order and charged no more than $200 per case, customers still might not be getting a bargain.
Court records indicate that Chapter 13 debtors who use People's Paralegal or other Valley document-preparation services are about 10 times less likely to have their plans approved than those who hire attorneys.
"The failure rate of such cases is staggering," Bankruptcy Judge James Marlar wrote in a recent ruling. "Ultimately, it is the debtors who suffer the most from such dismissals, especially where home foreclosures, auto repossessions, and/or tax levies are pending. Debtors are being lulled into a false sense of security and are paying a very high price for the limited service preparers . . . are able to provide."
Those who choose Chapter 13 must have jobs or some steady income. The paperwork in an average Chapter 13 case dwarfs that of a Chapter 7 case, and it must be accurate and complete. Chapter 7s usually are simpler--like liquidation sales in which debtors forfeit many possessions but evade paying unsecured creditors.
The Chapter 13 trustees say filings by People's Paralegal and other document-preparation services are often riddled with errors and omissions.
"We grew too fast, like a damned weed," Dick Berry admits, "and we made mistakes, especially during the supergrowth spurt in the third quarter of '96. But Adrianne [Kalyna, U.S. trustee] and her yesmen have had it in for us because they want to protect the status quo, the attorneys."
The war has become personal between Berry and Kalyna.
"Mr. Berry needs to be told that this scam is over," Kalyna told Judge Marlar during a hearing last month. "It's just outrageous to me that this continues to go on."
Countered Berry: "We are being held to a much higher standard. I understand how the politics is played. I understand that game. There is just no question that Ms. Kalyna has become the Bar's shill."
Kalyna's office--which is an arm of the Department of Justice--acts as a watchdog in bankruptcy cases. Attorneys and nonattorneys who deal with her say she's no shill.
But, as an ex-attorney himself, Dick Berry knows that lawyers make easy targets.
Berry's attack on his former profession is perhaps intended to obscure his own brazen disregard of the $200 limit. His excuse that he didn't understand the court's January order seems disingenuous.
Remarkably, there's no person, computer or central registry at Bankruptcy Court that can state how many people People's Paralegal has overcharged, and how much.
"We could have one attorney assigned just to do Berry stuff," says Kalyna. "This whole thing just ballooned too fast for the system to keep up with it."
New Times read each of the 600-plus petitions prepared by People's Paralegal from January 24--the date the $200 limit went into effect--until May 23, when Judge Baum kicked it out of court.
The records indicate that, during that stretch, People's Paralegal has billed customers about $270,000 more than it should have. It charged $200 (or less) less than 10 percent of the time.
What's more, Berry and his firm this year have evaded court-imposed fines totaling about $50,000 and counting.
Bankruptcy Court insiders say People's Paralegal has been able to skip its fines and overcharge customers because judges have been slow to grasp the magnitude of the crisis, and slow to enact remedies.
One problem is that the seven federal bankruptcy judges sitting in Arizona are insulated from each other, often knowing little about proceedings outside their own courtrooms.
And chief judge George Nielsen Jr. apparently wants the general public to remain in the dark as well. Through his secretary, Nielsen declined a request for comment. "He cannot talk about People's Paralegal, or any aspects of bankruptcy," the secretary says.
People's Paralegal blossomed last year after it began dumping more than $10,000 into advertising, according to one of Dick Berry's courtroom avowals.
Berry says People's Paralegal provides its customers "far more than a typing service," but he stops short of admitting he and his employees give legal advice.
"[Lawyers] think that if it's not typing; ergo, it must be practicing law," Berry testified in April. "And that's not true. . . . If we charge $395 or $595 for a bankruptcy--and as a product . . . the public perceives value and it's done properly, [then they] didn't get defrauded, then we've met the statutory standard."
But at least one judge has ruled People's Paralegal has engaged in the unauthorized practice of law. That and other violations of the 1994 Bankruptcy Reform Act have led to numerous fines, which Berry usually ignores, with little consequence.