Going for Broke

It's the morning of July 3 at the Peoria residence of Gabriel Murrietta and Ramona Flores Seja. They are explaining what it's like to lose their dream home to foreclosure.

"We really expected to see that tree grow up and give us shade," says Flores, pointing to a small tree in the yard. "Instead, I'm just gonna water it one more time before they kick us out of here."

They have good jobs--Murrietta is a wire bonder at Intel, his wife works on a computer for Bank of America. But the couple found themselves in financial straits last year after Flores was unemployed for a time.

In September, the Murriettas decided to file for bankruptcy, choosing the lengthy route of Chapter 13. It usually allows debtors to keep key assets--a home and two cars, in their case--while paying off creditors through a court-approved plan.

That didn't happen. The couple already have had a car repossessed. Within days they'll vacate their residence of three years and move into an apartment in Tempe.

The details of their financial freefall fill a six-inch-thick binder at United States Bankruptcy Court. It tells of botched paperwork, missed deadlines, failures to appear for hearings. The Murriettas can't blame their attorney, because they didn't retain one.

Instead, they paid $1,295 to a Tempe-based document-preparation firm called People's Paralegal, Inc. By law, such firms may not do much more than to prepare a customer's bankruptcy petition; they aren't to give legal advice.

Apparently, People's Paralegal did.
"They told us not to make our house and car payments after we filed, so we didn't," says Gabe Murrietta, a small man who seems dazed by his ordeal. "[People's Paralegal founder] Dick Berry messed up our case so bad we never could set things straight. But he made sure we paid them. It was our fault for getting into money trouble. . . . But everyone has told us we didn't have to lose this place."

This is not sour grapes.
Authorities familiar with the case say Murrietta and Flores needn't be losing their home.

"Telling someone in the Murriettas' situation not to make house payments is . . . an incredibly dangerous and stupid thing to do," says Joel Nordquist, an attorney for Chapter 13 trustee Ralph McDonald. "What it does is put people in a better position to pay off People's Paralegal. But it also puts them in a deeper and deeper hole as their creditors pound on them."

Even People's Paralegal founder Dick Berry says the Murrietta case hasn't been his firm's finest hour: "I feel very badly about this one. Everything that possibly could have gone wrong did go wrong."

Gabe Murrietta is not in a forgiving mood.
"Here we are," Murrietta says, "broke as you know what, even though we work all the time. . . . It just pisses me off no end to think that they're probably raking in money over there [at People's Paralegal] right now."

A few hours later, at People's Paralegal in Tempe, director of operations Paul Dvorscak sits at his desk. In front of him are neat stacks of bills--fives, tens, twenties and fifties.

He stops counting to greet a guest.
"How can I help you, sir?" he asks.
Francine and Nelson Bregio drove to U.S. Bankruptcy Court last month looking for a fresh financial start.

The Mesa couple and nine other debtors anxiously shuffled into a hearing chaired by Ed Maney, attorney for a Chapter 13 trustee; a trustee, among other tasks, makes sure that creditors have a voice in the repayment plan.

Each of the 9,000 Arizonans who have filed personal bankruptcy this year--up 30 percent from a year ago--must attend one of these "341" hearings, so named for a section of the Bankruptcy Code. Those who don't attend have their cases dismissed.

Maney asks debtors, who are under oath, if their bankruptcy petitions are accurate, and informs them if any paperwork is missing. Finally, he allows attorneys for creditors--usually lending institutions--to question debtors about their finances and intentions.

About half of the debtors in the Bregios' group appeared pro se, without a lawyer. The Bregios had considered themselves in that category until that day.

The couple had paid People's Paralegal--also known as People's Services, Why Pay a Lawyer?, and, formerly, as People's Law--$664 of a $995 bill to prepare their petition.

They and thousands of other Valley residents in financial trouble were lured by a television ad featuring bombastic ex-talk-show host Morton Downey Jr.

"I've checked these folks out, and they know what they're doing," Downey Jr. booms from the front entrance of People's Paralegal, near the intersection of McClintock and Broadway. "Get a fresh start from the very start."

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Paul Rubin
Contact: Paul Rubin