Law Firm Does Not Qualify for Attorney Exemption in the Kansas Credi...

By:  Lisa Fresolone

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

A law firm did not qualify for protection under the attorney “safe harbor” provisions of the Kansas Credit Services Organization Act (the “KCSOA”) in In re Kinderknecht, because none of the firm’s attorneys were licensed to practice in Kansas, and they were not acting in the course and scope of practicing law.[1]  In February 2009, Levi Kinderknecht (the “Debtor”), enrolled in a debt settlement program offered by the defendant, Persels & Associates, LLC (the “Law Firm”).[2]  The Law Firm assigned the case to a “field attorney,” Stan Goodwin (“Goodwin”),[3] who was an independent contractor working for the Law Firm.[4]  Goodwin called the Debtor for a “welcome call”[5] and did not speak to him again until he was sued by one of his creditors—five months later.[6]  At that time, the Debtor contacted Goodwin who advised him that he could represent himself pro se and prepared form pleadings for him.[7]  Goodwin told the Debtor that he would try to persuade the creditor to drop its lawsuit, but he never contacted the creditor.[8]  The Debtor filed for bankruptcy, and the trustee brought a lawsuit against both the Law Firm and Goodwin[9] alleging various violations of the KSCOA and the Kansas Consumer Protection Act (“KCPA”), as well as several common law claims.[10]

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