‘Petition Mills’ Prey on Unsuspecting Immigrants : Debts: Phony Chapter 7 filings, which delay evictions, are clogging courts and damaging claimants’ credit.

The curse of bankruptcy administrators in Southern California are the “petition mills” that have flooded the courts with tens of thousands of phony Chapter 7 filings in recent years.

The mills--which have flourished in Los Angeles for about a decade--recently have extended their reach deep into Orange County among expanding immigrant populations. As many as 180 petition mills are operating in the Central District of California, including 25 in Orange County, authorities said.

Typically, the mills prey on unsuspecting renters who cannot speak English and are facing eviction. A Chapter 7 filing delays eviction a month or more until the case is dismissed. Dismissals are automatic when renters fail to file necessary financial statements or appear at their creditors’ meeting.

Even though the cases are routinely dismissed, they clog the court’s offices and can damage a person’s credit.

The petitions often include forged signatures and phony Social Security numbers. They are filed without the renter knowing what is happening or what the consequences will be.

Take Ismael Torres, 37, a Spanish-speaking immigrant who lives in an apartment in Costa Mesa with his wife and two young daughters.

Facing eviction, Torres contacted Agencia de Proteccion Al Inquilino in downtown Los Angeles after seeing its advertisement on late-night television.

Torres testified through an interpreter at his creditors’ meeting that he paid the agency $780 in three installments after talking to Hugo Dahdah, an agency employee who falsely claimed to be a lawyer. Dahdah said he could get Torres another month in the apartment, Torres said.

Only when Torres received a notice in the mail did he realize that a bankruptcy petition had been filed in his name, he testified. Torres said that his signature on the bankruptcy petition was forged and that the Social Security number was fake.

Judge John E. Ryan fined Agencia de Proteccion and Dahdah a total of $10,000 in November and enjoined them from filing any more bankruptcy petitions in the Central District. Neither Dahdah nor the company could not be reached for comment.

Bankruptcy authorities in Orange County are increasingly seeking civil penalties against the petition mills, which operate without being regulated by any government agency. Three other cases similar to Agencia de Proteccion’s are pending, said Arthur N. Marquis, head of the U.S. trustee’s office in Santa Ana.

The petition mills in Los Angeles are so numerous that authorities said they have been virtually powerless to stem the abuses. “You close one down and another 10 spring up,” said Marcy J. Tiffany, U.S. trustee for the region’s bankruptcy courts.

The most aggressive petition mills learn who is being evicted by checking public records in Municipal Court clerks’ offices. Then, according to Los Angeles Legal Aid attorney Roderick Field, they go to the residences to see if the renters want to file for bankruptcy.

“These people don’t even know they have been evicted, and these guys show up at their door,” Field said.

To curb the abuse, the Legislature recently approved a three-year pilot program in three urban California counties, including Los Angeles and Orange, to prevent the public from viewing eviction notices until several weeks after they are filed.