LAWRENCE — As a last resort, Pinnacle Financial Consulting LLC advised their clients they needed to file bankruptcy petitions to save their homes.
“When their loan modification efforts fail, sometimes just days before the distressed homeowner’s home is scheduled to be sold at foreclosure, defendants pressure distressed homeowners into paying defendants thousands of dollars to file bankruptcy on their behalf in order to delay the foreclosure sale,” according to a lawsuit the state Attorney General’s Office filed against the downtown business.
But about a quarter of the bankruptcy cases prepared by Pinnacle Financial were defective, according to court records filed in connection with the complaint.
“Defendants’ bankruptcy filings on behalf of consumers are often incomplete or consist of erroneous paperwork, ultimately resulting in the dismissal of the bankruptcy proceedings,” the lawsuit alleged.
“The U.S. Bankruptcy Trustee of Region I, District of Massachusetts, has identified, and the Commonwealth is aware of, 107 bankruptcy cases initiated by Defendants, at least 27 of which had fundamental defects in the documents Defendants prepared and filed,” the complaint noted.
In eight of those cases, the U.S. Trustee has initiated disgorgement proceedings against defendants for illegally-prepared bankruptcy petitions.
A Dracut woman who paid Pinnacle Financial to prepare a loan modification to avoid foreclosure said the company later intended to charge her $850 to prepare a bankruptcy petition – something the company said was needed to avoid losing her home, according to court records.
She said Pinnacle Financial and its owner Robert Burton completed the petition without soliciting any input from her,
“At 1 p.m. on Jan. 31, 2012, the day before the foreclosure auction was scheduled at my home, a Pinnacle staff member brought the completed bankruptcy paperwork to my workplace in Salem, N.H., and told me to sign the entire stack of documents,” the woman said in a court affidavit.
“I was not given any opportunity to meaningfully review the documents. Instead, I was told just to sign in several places beside post-it notes,” she said.
Less than a week later, she received a call from the U.S. Bankruptcy Trustee advising her that the petition prepared by Burton and Pinnacle Financial was “grossly deficient,” according to court records.
“After the call, I feared that Burton and Pinnacle had also mismanaged my loan modification and immediately contacted the mortgage lender for my home in Dracut to determine what Burton had done,” the woman said.
“My lender’s representative advised me that the lender had denied my loan modification request on Jan. 23, 2012, and that it had informed Burton of this fact immediately thereafter,” she said.
“The representative also told me that it first received a loan modification application from Pinnacle in November 2011, even though Pinnacle and Burton said that they had submitted my paperwork in August soon after I hired them.”
Despite meeting with the woman on several occasions after Jan. 23, Burton never told her that her loan modification had been denied, according to the affidavit.
“Instead, Burton specifically told me that I needed to file bankruptcy and pay him an additional fee in order to buy time to complete my loan modification process a week after my loan modification request had already been denied,” she said.
The woman ended up hiring an attorney to “completely redo” her bankruptcy paperwork.
Meanwhile, she struggles with attempts by her lender to foreclose on her Dracut home.
She insisted that she would have been better off financially to use the money she paid Burton and Pinnacle on her loan payments instead of following their advice to allow the mortgage payments to become delinquent in the hopes of obtaining a loan modification.
The Attorney General’s Office maintains in its lawsuit that Pinnacle’s solicitation and acceptance of advance fees for loan modification and preparation of bankruptcy petitions was illegal.
A Suffolk County Superior Court judge recently issued a preliminary injunction which prohibits Pinnacle from soliciting or receiving any fees for loan modification services, bankruptcy petition preparation services and investment advising services.