Recovery Agent Fees for Unclaimed Bankruptcy Funds

Attorney Answer

Do not pay anyone $6,000 to hand you your own money. Funds left unclaimed in a bankruptcy case are normally sitting in the bankruptcy court's registry, and you claim them from the court yourself, for free.

Your wife is right to be alarmed.

Here is the business model you have walked into. When a bankruptcy case distributes money to creditors and employees and some of it goes unclaimed, it is deposited with the court that handled the case. Case dockets are public. "Recovery agents" search those dockets, find names, and contact people to offer — for a substantial percentage — to obtain money the person could obtain by filing a form. The court does not charge you a fee to be paid your own money.

What she did, as you describe it, is not just distasteful. Idaho Code § 48-603, the Idaho Consumer Protection Act's unfair-methods-and-practices section, makes it unlawful to represent that a person has a sponsorship, approval, status, affiliation, connection, qualifications or license that he does not have (item 5), and reaches conduct that is otherwise misleading, false, or deceptive to the consumer (item 17). Presenting herself as a lawyer's secretary who had to "check with her boss" — while she was in fact the principal, setting her own fee — fits item (5) closely.

Idaho Code § 3-420 makes it an offense for a person not admitted and licensed to practice law in Idaho to practice, assume to act, or hold himself out to the public as qualified to practice law, punishable by a fine up to $500, up to six months' imprisonment, or both. One caution: she may be operating from another state, and Idaho's statute may not reach conduct that occurred entirely elsewhere.

Idaho also has a provision on when an agreement to locate property is void, Idaho Code § 14-5-1301 — but it governs property held by Idaho's unclaimed property administrator. Your money is neither Idaho's nor in the state's hands, so do not build your plan on it.

What you can do

1. Today, send written notice canceling the agreement — by e-mail and certified mail — stating that you revoke any authorization, that no one is permitted to file anything on your behalf, and that you authorize no payment. Keep copies of both. 2. Send nothing further: no money, no Social Security number, no bank account information, no signed W-9 or power of attorney. If you already provided banking details, call your bank now about protecting the account. 3. Identify the case yourself. Search the employer's name on PACER, or call the clerk of the bankruptcy court for the district where the company filed and ask whether unclaimed funds are held in your name. 4. Ask that clerk's office for its unclaimed-funds application packet and file it yourself. Clerk staff can explain the form and the required proof of identity; they cannot give legal advice. 5. If she has already filed anything with the court using your signature, tell the clerk in writing immediately. 6. File complaints: the Consumer Protection Division of the Idaho Attorney General's office under § 48-603, and the state bar of whatever state she claimed her "boss" practiced in. 7. Keep every document, e-mail, envelope and phone number. If she later demands payment, that record is your defense.