February 25, 2014 at 5:06 pm

Bankruptcy petition preparer gets sentenced to nearly 4 years in prison

Detroit— A bankruptcy petition preparer was ordered Tuesday to serve nearly four years in prison for criminal contempt in a case that brought U.S. Bankruptcy Judge Steven Rhodes to the witness stand.

Inkster resident Derrick Hills, 54, was sentenced by U.S. District Judge Sean F. Cox to serve 46 months after being convicted by a jury in September of five counts of criminal contempt following a five-day trial in federal court in Detroit.

Hills violated five court orders from Rhodes barring him from assisting in personal bankruptcy filings. Hills was facing any number of years in federal prison, since the charge has no statutory maximum penalty.

“Today’s sentencing sends a strong message: There is a high price to pay for blatantly disregarding bankruptcy court orders and repeatedly disrespecting the authority of the bankruptcy court,” U.S. Trustee Daniel M. McDermott said in a statement. “We deeply appreciate the strong commitment of U.S. Attorney Barbara L. McQuade to combating bankruptcy-related crimes, as demonstrated by this successful prosecution.”

Federal officials said Hills’ sentence was lengthened for impeding the administration of justice after he failed to appear last week at a sentencing hearing. As a result, a bench warrant was issued and the U.S. Marshals Service took Hills into custody Friday after forcibly entering his home and arresting him.

Rhodes testified for nearly an hour for the prosecution, laying out bankruptcy preparation procedure for the jury. Rhodes, who has served 29 years on the bankruptcy bench, was assigned in July to oversee Detroit's historic bankruptcy case.

Hills, who is not an attorney, was not authorized to file Chapter 7 paperwork and violated five court orders from Rhodes.

Rhodes testified that Hills continually violated orders he issued from 2007 to 2009 for not complying with bankruptcy rules. The judge eventually referred a recommendation to the U.S. District Court for criminal contempt charges.

Under the law, non-lawyers are permitted to serve some functions in bankruptcy preparation, but not without restrictions.

Hills was convicted of preparing bankruptcy petitions for compensation and violating orders seeking to stop him from being involved with any bankruptcy case work, unless under the direct supervision of an attorney.

Hills denied wrongdoing, maintaining he had the legal authority to process the paperwork on behalf of others.

At Hills’ trial, several debtors testified they paid cash for Hills to process their bankruptcy paperwork. All admitted they didn't understand portions of the documents and that Hills told them to indicate it was prepared without assistance.

“Compliance with court orders is essential to our system of justice,” McQuade added in the Tuesday statement. “The court’s sentence today demonstrates that strong consequences follow the willful failure to obey courts orders.”

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