## Facts

- Edward Jonak, a nonlawyer, owned and operated Affordable Law Center (ALC) and related entities with multiple offices in Minnesota.
- ALC was not a law firm and employed no attorneys admitted to practice in Minnesota.
- Jonak advertised bankruptcy and legal-aid services through the internet, newspapers, and a phonebook listing under “Attorneys, Bankruptcy,” which led some consumers to believe ALC was a law office or that Jonak was an attorney.
- Several consumer debtors hired ALC after seeing the advertising, seeking help filing bankruptcy petitions (primarily Chapter 7).
- Jonak required debtors to complete detailed questionnaires designed by a third-party bankruptcy-petition processing center; the questionnaires resembled official bankruptcy forms in content and structure.
- Jonak forwarded the completed questionnaires to the processing center, which typed the bankruptcy petitions, schedules, and related forms for filing.
- During the debtors’ bankruptcy cases, concerns arose about Jonak’s interactions with debtors and the quality and accuracy of filings connected to his services.
- Debtors reported that Jonak gave them substantive guidance on bankruptcy matters, including which exemptions to claim, how to keep a home in bankruptcy, and how to obtain discharge of particular debts.
- Some debtors reported confusion about whether Jonak was a lawyer or whether ALC would provide attorney representation.
- In 15 of 18 debtor cases, the filed papers did not disclose Jonak’s role in preparing the petitions or the fees paid to him, even though the Bankruptcy Code and required forms call for those disclosures.
- The United States Trustee filed an adversary complaint against Jonak and his entities, alleging violations of the Bankruptcy Code’s requirements for bankruptcy petition preparers (11 U.S.C. § 110) and debt relief agencies (11 U.S.C. §§ 526–528).
- The bankruptcy court granted summary judgment for the Trustee and ordered injunctive relief, disgorgement, and statutory fines and penalties; Jonak appealed to the U.S. District Court for the District of Minnesota.

## Issues

1. Whether Jonak and ALC qualified as “bankruptcy petition preparers” under 11 U.S.C. § 110 and violated § 110 by, among other conduct, providing prohibited legal advice and failing to include required preparer identification and disclosures.
2. Whether Jonak and ALC qualified as “debt relief agencies” under 11 U.S.C. §§ 526–528 and violated those provisions through deficient notices and contracts, misleading representations, and conduct leading to untrue or misleading filings.
3. Whether the bankruptcy court properly granted summary judgment and imposed an injunction, fee disgorgement, and statutory fines and penalties.

## Decision

- The district court affirmed the bankruptcy court’s judgment.
- The court held that Jonak and ALC were bankruptcy petition preparers under § 110 because they caused bankruptcy documents to be prepared for filing for compensation, even if a separate processing center performed the typing.
- The court agreed that Jonak and ALC violated § 110, including by giving debtors prohibited legal advice and by failing to ensure required preparer disclosures and identifying information appeared on filed documents.
- The court held that Jonak and ALC were debt relief agencies under §§ 526–528 because they provided bankruptcy assistance to consumer debtors for a fee.
- The court agreed that Jonak and ALC violated §§ 526–528 by failing to provide required disclosures and written materials and by misrepresenting, or causing confusion about, the nature of the services offered, and by contributing to untrue or misleading bankruptcy forms.
- The court upheld the remedies imposed by the bankruptcy court, including injunctive relief, disgorgement of fees, and statutory fines and penalties.

## Legal Principles

- A “bankruptcy petition preparer” under 11 U.S.C. § 110 includes a non-attorney who, for compensation, is responsible for the preparation of documents for filing, even if another entity performs ministerial typing.
- Section 110 restricts petition preparers to non-substantive assistance and prohibits giving legal advice on exemptions, chapter selection, discharge, or treatment of assets and debts.
- Consumer-bankruptcy assistance providers who serve “assisted persons” for a fee may qualify as “debt relief agencies” under 11 U.S.C. §§ 526–528 and must satisfy the statutes’ notice, contract, and advertising requirements.
- Conduct that misleads consumers about whether legal representation will be provided, or that contributes to inaccurate or misleading bankruptcy filings, can violate §§ 526–528.
- Bankruptcy courts may impose injunctions, order fee disgorgement, and assess statutory damages and civil penalties for § 110 and §§ 526–528 violations; appellate courts generally uphold such relief when supported by the record and authorized by statute.

## Conclusion

In Jonak v. McDermott, the district court affirmed summary judgment and broad remedies against a nonlawyer bankruptcy-services business, holding that Jonak and ALC functioned as both bankruptcy petition preparers and debt relief agencies and repeatedly violated the Bankruptcy Code’s disclosure, conduct, and consumer-protection requirements, justifying an injunction, disgorgement, and statutory penalties.


Jonak v. McDermott, 511 B.R. 586 (2014)