DENVER - Kevin Heupel, the high-profile lawyer who has blitzed the airwaves with TV ads urging debtors to declare bankruptcy, is accused by the U.S. Trustee of violating federal bankruptcy rules and collecting hundreds of thousands of clients' dollars to which he was not entitled.
Heupel’s TV ads, some on KMGH-TV, portray him as a savior for souls in debt, giving more consumers access to bankruptcy court. He claims to file more bankruptcy cases than any other firm in Colorado.
CALL7 Investigator John Ferrugia found that in some cases Heupel charges clients double or more for a Chapter 7 bankruptcy filing because he allows them to sign an agreement to pay his fees over time rather than prior to filing the case.
-- Watch this story tonight at 10 p.m. and hear from Heupel about the case --
Heupel’s "zero-money-down" pitch has enticed hundreds of clients like Andy Nielson to choose Heupel's firm over others that ask for fees in advance.
"Zero down... that was it," Nielson said. "That was 100 percent the only thing that sold me on it."
Adia Paysinger could not afford another lawyer’s $900 fee, plus a $300 court filing fee, because he asked for the money before filing the case. She went to Heupel, who charged her much more, but allowed her to make payments over time.
"I was kind of upset about having to pay for so much more," she said, "but in the predicament I was in, I really didn't see another way out honestly."
Ultimately, Paysinger agreed to pay Heupel $2,500 in addition to a $300 court filing fee.
But CALL7 Investigator John Ferrugia found that once a client files bankruptcy, accounts are locked. No creditor can take money out of the account, including the lawyer who files the case, unless the bankruptcy judge approves what is called a "reaffirmation agreement."
With that agreement, a judge gives a creditor permission to remove payments from the account. That is why bankruptcy lawyers usually seek payment for cases before filing.
Stephen Berken, the state chair of the National Association of Consumer Bankruptcy Attorneys, said Heupel not only has an ethical conflict of interest, he has also violated federal bankruptcy laws.
"You put yourself in a conflict where you're saying to the client, in essence, 'We're going to get rid of all these debts,'" Berken said. "'I'm one of those debts that you can get rid of, but I'm not really going to explain that to you. We're just going to let the monies keep flowing out of the account.'"
CALL7 Investigator John Ferrugia uncovered documents from a federal lawsuit by the U.S. Trustee, the federal agency that oversees bankruptcies. They detail how Heupel initially asked permission from the court to withdraw money for his fees from clients' accounts and how some were approved. But, the documents show that in a number of cases Heupel was denied, but withdrew the money anyway.
The CALL7 Investigation also found hundreds of cases in which Heupel never asked permission from the court by filing a "reaffirmation agreement." He simply took the money from client accounts.
Lawyer Geoffrey Atzbach, who represents both Andy Nielsen and Adia Paysinger, said documents filed by Heupel’s own lawyer make it clear Heupel was "still collecting from these clients even after the reaffirmation was denied."
In an interview,, Heupel admitted what he had done, but said, "...it certainly was not intentional; it was just an oversight."
When pressed, Heupel had no good explanation for taking hundreds of thousands of dollars from client accounts to which the U.S. Trustee charges he is not entitled.
"It is my issue. I take responsibility," Heupel said.
Ferrugia asked, "How could you not know they weren't being filed?"
Heupel paused and stammered, indicating that question was at the heart of the lawsuit. He finally replied, "You know, right now we are working on the resolution with the U.S. Trustee."
Even so, Heupel was unapologetic.
"We are a larger firm. We have more people to help... get our clients through the process... we deliver a better customer service in my opinion… so yeah, it is worth the money."
But former client Adia Paysinger has a simple question: "If you are trying to help me, then why are charging me double?"
Despite the "no money down" pitch, Paysinger and other clients later realized that they'd actually paid Heupel several hundred dollars upfront because, in some instances, he didn't file the cases for several months but still accepted monthly payments.
In Paysinger's case, it was three months, costing her $450.
"It's preying on people who are at a very low point," said another former Heupel client, Andy Nielsen. "Bankruptcy is not an easy thing to go through, and they are preying on that."
Heupel claims that clients were not hurt because they got the service he promised.
"You know mistakes happen sometimes but this is a mistake that falls on me", said Heupel, "it is not a mistake that falls on my clients...my clients have not been harmed."
That is not the way the U.S. Trustee sees it. The federal agency is suing Heupel to force him to not collect, or return hundreds of thousands of dollars to his clients.
Heupel has now stopped offering "no-money-down" contracts. He admits he is currently trying to negotiate a settlement with the U.S. Trustee. It is expected to take several more months before clients will know if, and how much, money might be returned to them.
This is the second time Kevin Heupel has been the subject of a CALL7 Investigation. Heupel resigned his position as a Colorado Department of Regulatory Agencies director after CALL 7 Investigator John Ferrugia found Heupel wrote and backed a rule that benefited his girlfriend’s business in 2006. The investigation into Heupel’s apparent conflict of interest included questions about business trips with his girlfriend.