Chapter 7 Trustee Suspended

Posted by NCBRC - March 14, 2016

The Director of the Executive Office of the United States Trustee upheld the one-year suspension of a chapter 7 bankruptcy trustee for conduct in three separate 341 meetings that was egregiously aggressive, discourteous, and unprofessional. The trustee was also ordered to undergo diversity and sensitivity training. Final Agency Action 2015-0001 (March 4, 2016). [All identifying information was redacted from the decision]. The case was before the Director on appeal of a decision by the Regional United States Trustee issued September 10, 2014.

The Director began with 28 C.F.R. § 58.6(a)(6) which provides that a trustee may be suspended if he or she fails to display proper temperament when dealing with debtors. Section 58.3 requires that trustees be courteous and free of prejudices in their dealings with all parties.

In the first case, the debtor was a Spanish-speaking US citizen who worked as a cleaning person. The 341 meeting began with the trustee refusing to provide an interpreter and, instead, badgering the debtor about her ability to have passed the English proficiency test for citizenship ten years before. He questioned her ability to fill out tax forms, bankruptcy forms, etc. all with the accusation, implicit or explicit, that she was dishonest. Because the trustee did not provide an interpreter, a friend of the debtor who was present at the meeting helped translate the trustee’s questions for her. In addition to his inappropriate attacks on the debtor’s lack of English skills, the trustee questioned the debtor about a class action lawsuit in which she was a party and which she had included in her bankruptcy petition. He barraged her with questions based on his misunderstanding of the lawsuit, calling the suit a “travesty” and demanding answers but asking further questions before she was able to respond. Much of the interview was conducted with the debtor in tears. The debtor received her discharge.

The next debtors were a letter-carrier for the post office and his wife who worked as a part-time babysitter. The trustee focused on their home which they bought for $300,000 and owed over $500,000 at the time of the bankruptcy. Though the wife had taken care of the financial details, the home was in the husband’s name. When the wife attempted to answer questions, the trustee interrupted saying, “How about I ask the guy whose name is on the deed? Wouldn’t it make more sense?” The trustee continued to ask accusatory questions about the debt on the house and the wife’s chapter 7 bankruptcy from thirteen years before, interrupting the answers with such statements as, “How much did you refinance for? This is your second bankruptcy. You know the system. And now you’re back again for both of you to not pay your creditors.” Reminding them that they were under oath, the trustee demanded to know why they had not listed certain mortgage creditors on their petition. Both creditors were, in fact, listed. When the wife tried to answer the trustee’s questions as to how the debt on the house had risen so much without their having taken out further loans against the property, he instructed her not to “dig herself into a deeper hole,” and told her that what she was saying “can’t be truthful.” He threatened to take the case to the mortgage fraud department. Ultimately, he took none of the threatened actions against the debtors and they received their discharge.

The third debtor was a pro se actress whose income was from social security and food stamps and who had filed a previous bankruptcy that was dismissed. The trustee zeroed in on whether her previous bankruptcy had been dismissed with or without prejudice. The debtor, who explained that she was not feeling well and was on painkillers due to a root canal the day before, first said she did not know then that she believed it had been dismissed without prejudice. The transcript showed the debtor crying and asking the trustee to stop yelling at her. At some point she left the room and the trustee turned to the non-debtor husband, asking if he was a disbarred attorney, to which he said no. When the debtor returned she asked the trustee not to direct questions at her husband. Nonetheless he continued to ask the husband questions about the previous bankruptcy and his knowledge of the law. That case was transferred to a different district.

In reviewing the transcripts from each of these hearings, the Director agreed that the trustee’s conduct was “unprofessional, discourteous, overly aggressive, and inappropriate.” With respect to the Spanish-speaking debtor, the Director found the trustee failed to meet the Language Assistance Plan requirement to promptly provide an interpreter and inappropriately used a family friend to interpret instead. With respect to all the debtors the Director agreed that the trustee’s behavior demonstrated: “[1] Failure to cooperate and to comply with orders, instructions and policies of the court, bankruptcy clerk and the United States Trustee; [2] Failure to display proper temperament in dealing with judges, clerks, attorneys, creditors, debtors, the United States Trustee and the general public; and [3] Failure to attend in person or appropriately conduct the 11 U.S.C. 341(a) meeting of creditors.”

The Director rejected the trustee’s defenses that he was a long-term trustee and had received good reviews from the Office of the US Trustee. The Director found that length of service does not excuse a trustee from rules that less experienced trustees are bound to follow. Moreover, the good reviews were not without some suggestion of problems. The trustee had been subjected to reminders that his conduct must be courteous and professional by the US Trustee and the fact that he was not inappropriate in all his dealings with debtors and their attorneys merely justified the less “sweeping” discipline of suspension rather than termination. Nor was the court persuaded that the trustee’s yelling was due to his wearing hearing aids as he never mentioned the hearing aids when asked by debtors to stop yelling and the content of his words without regard to their volume was “unfair and, at times almost cruel.”

DOJ Final Agency Action March 2016

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6 Comments

  • Christian Veras
    Posted March 17, 2016 at 3:21 pm | Permalink

    Does anybody know why the identifying information is redacted and not public records?

  • Posted March 18, 2016 at 8:59 pm | Permalink

    Wow, sad that he feels the need to treat people like that. Hopefully the training helps this particular trustee. This is not how the system is supposed to work and his actions benefit absolutely nobody. I feel badly for the debtors that were subjected to this guy’s mistreatment.

  • John
    Posted August 22, 2016 at 11:46 pm | Permalink

    It is just too bad that there are just too few attorneys or accountants in the United States to fill these positions (yea right!). I mean given the conduct of John S. Pereira (16-cv-02599) this interim Chapter 7 Trustee should have been fired. Great to have friends because anyone who appeared in front of this individual or stands in the back listening to him during a creditor’s meeting would have to ask how he thinks he can get away with his conduct.

  • Gary Washington
    Posted October 22, 2017 at 1:42 am | Permalink

    Yes,indeed there is a grand plan to protect dirty attorneys that have made theur way into the US Trustee positions. Im fighting a case to have opened against Linda Barr, United States who withheld facts of equity in commercial proprty in order that South Carolina Community Bank fraud the Court abd foreclose. Pray for us. This system is corrupt when tbe trustee works for the bank.

  • Richard Goff
    Posted December 7, 2017 at 4:04 pm | Permalink

    I have been always paid on time. My Lawer keeps calling me to increase the payment ion the chapter 13 payments that are on time each month. I have paid $27,000.00 on $62,000. Yet the dept remaining is $47,000. Instead of $35,000.

  • Bea
    Posted May 2, 2018 at 1:02 pm | Permalink

    Sounds exactly like my trustee. I witnessed him do all of these things (different people, different circumstances) and all while the US Trustee and other attorneys and debtors were present.

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