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Do Not Use A Bankruptcy Petition Preparer To File Bankruptcy

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Who are bankruptcy petition preparer’s? They are hired to prepare the documents necessary to file a bankruptcy petition. Bankruptcy petition preparers are prohibited from giving legal advice or practicing law in any way shape or form. I personally have not witnessed anything good coming from using a bankruptcy petition preparer. In theory the petition preparer just takes the documents from you and prepares a bankruptcy petition. The problem is they cannot discuss exemptions to protect your assets, timing of filing the case and pretty much everything you need to know to complete the process correctly and receive a discharge. Bankruptcy attorneys can provide legal advice to make sure your rights are protected properly. Most attorneys carry malpractice liability insurance also. So you can pay someone $150 who will undoubtedly screw up your bankruptcy case since they cannot do anything but put numbers and letters on paper, or you can pay an experienced attorney anywhere from $1,000 – $2,000 to make sure the process is completed properly. The extra cost is priceless. Just ask bankruptcy filer Edward P. Guidry. See below for what happened in Mr. Guidry’s case due to not using an experienced attorney.

Chapter 13 and Chapter 11 Bankruptcy Petition Preparers Are Not Really Possible Around Here

If you know of a case under Chapter 13 or Chapter 11 that was prepared by a bankruptcy petition preparer in which the case was filed, plan of reorganization approved/confirmed by the court, the plan was completed and the bankruptcy filer received a discharge of their debts please provide me with the bankruptcy case number. At least in the Northern District of California using a bankruptcy petition preparer and expecting to have any type of success in a Chapter 13 or Chapter 11 reorganization is not possible. While Chapter 13 reorganization is a streamlined process compared to a Chapter 11 bankruptcy reorganization, a bankruptcy petition preparer will not be able to guide you through the process. It is actually a legal impossibility in my opinion for a bankruptcy petition preparer to even draft a Chapter 13 or Chapter 11 plan of reorganization given they cannot provide legal advice. I suppose they can just put down numbers and information that the client tells them to. I do not know how that would ever work though. While the Chapter 13 Trustee assigned to the case has duty to all parties involved in the bankruptcy case it is not their job to guide someone through the process from day one. If you choose to file your own Chapter 13 or Chapter 11 reorganization case, please retain the services of an experienced bankruptcy lawyer.

Bankruptcy Petition Preparers Can Only Charge You $150

In the Northern District of California bankruptcy petition preparers can only charge $150 to prepare a bankruptcy petition. Many attorneys charge more than $150 to prepare a skeleton petition and the bankruptcy attorney does not sign the petition or represent the bankruptcy filer in the case. In my opinion attorneys violate Section 110 of the Bankruptcy Code if they do this and charge the bankruptcy filer more than $150. If an attorney takes money from a client to help them file bankruptcy you are either the attorney-of-record in the case or do not take the money. Let us think about this. Why would an attorney that files bankruptcy cases for a living not want to put their name on your petition and be your attorney? Is it because they charged more than $150 for drafting a skeleton bankruptcy petition? Is it because the filing of the case is in bad faith? An artist signs their work right? So can we safely assume that if an artist refuses or chooses not to sign their work that there is something wrong with the work, or they are not proud of the work, or they do not want anyone to know that the art is their work? You get the point. An attorney not signing documents they prepare and charge you for is a red flag. If you are going to file a bankruptcy case for the benefit of the automatic stay there is nothing wrong with that in and of itself. That is a benefit of seeking protection of the bankruptcy code.

Bankruptcy Petition Preparers Cannot Give Legal Advice

This is where I have a huge problem with even allowing bankruptcy petition preparers to exist at all. How can anyone prepare a bankruptcy petition under Chapter 7 or Chapter 13 of the bankruptcy code without asking certain LEGAL questions to the bankruptcy filer? They cannot provide any advice as to the benefits/detriments to filing bankruptcy, when to file, what chapter of the code to file under, what is necessary to complete the bankruptcy and obtain a discharge, advising regarding exemptions to protect assets, what the different types of debts are and how to treat or list them, discussing the effects of bankruptcy at all and more less all the other important issues that need to be addressed BEFORE filing for bankruptcy protection.

Horror Story Resulting From Use of Bankruptcy Petition Preparer

I personally have met with at least 50 people who should not have used a bankruptcy petition preparer. The main problems are usually related to listing assets properly and protection them, and the Chapter 7 statement of monthly disposable income. If you own a home you cannot mess around with filing a Chapter 7 bankruptcy case on your own or with a petition preparer. In the current market of rising home prices that is a good way to have your house sold through the bankruptcy estate for the benefit of those you owe money to. In 2005 Congress amended the Bankruptcy Code and created the Chapter 7 Statement of Monthly Disposable Income (“Means Test”). If your six-month average gross income is over the median income for the number of people in your household you do not automatically qualify to pass the means test. You have to know what allowable expenses can be included in the Means Test to try and pass the Means Test and file a Chapter 7 case.

What to Look Out for When Hiring a Bankruptcy Petition Preparer

By Ryan C. Wood

When you are looking for help in filing for bankruptcy one important factor is cost. Obviously, if you need to file for bankruptcy you do not have a lot of extra money lying around. A lot of people opt to go with a bankruptcy petition preparer to help them file their bankruptcy case because they believe they are getting a “better deal” than if they were to retain the services of a bankruptcy attorney. A bankruptcy petition preparer is essentially anyone that prepares your paperwork to file bankruptcy that is not listed as your attorney on the petition. Here are some things you need to look out for when determining if your bankruptcy petition preparer is right for you:

Legal Advice

A bankruptcy petition preparer is forbidden from providing you with legal advice. Under 11 U.S.C. §110, bankruptcy petition preparers cannot tell you whether you need to file for bankruptcy or what chapter of bankruptcy to file under. They cannot tell you whether what debts are dischargeable, whether you can keep your car or home or what the tax consequences may be. The bankruptcy petition preparer’s job is to help you prepare your documents based on the information you provide them. When you hire the services of a bankruptcy petition preparer you will be filing the bankruptcy petition “pro se” which means you are representing yourself in the case. If there are any issues based on the information contained in your paperwork you are on your own. That is why it is advisable to retain a bankruptcy lawyer.

Required Notice

Your bankruptcy petition preparer must provide you with notice that they are not attorneys and that they are not authorized to practice law or give you any legal advice. They have to sign and provide their name and address in a document to be filed along with the rest of your bankruptcy paperwork. If your bankruptcy petition preparer does not sign or is unwilling to sign your paperwork, that should be a huge red flag to you. If they are abiding by the laws they have no reason to hide their work from the courts.

Cost

In the Northern District of California bankruptcy petition preparers cannot charge more than $150 for their work. Other jurisdictions may have a different maximum amount the bankruptcy petition preparers may charge. It is a good idea to look up what that maximum limit is before you schedule an appointment to see a bankruptcy petition preparer. This fee covers all costs including but not limited to photocopying, messenger costs, postage, and phone calls. They cannot charge you for the filing fee because you need to pay the filing fee directly with the court, not the bankruptcy petition preparer. I was shocked to hear some of my clients paid $2,000 to $3,000 to a bankruptcy petition preparer to do their paperwork. That is more than what most attorneys would charge for a case! I have heard some of my clients say that they were prepared by an attorney rather than a paralegal and that is why the costs were so high. One critical thing to remember – if they did not file your case as your attorney, they are not considered your attorneys for your particular bankruptcy case and should not charge as such.

It is understandable that you would look for a lower cost alternative to attorneys to file your bankruptcy case. However, keep in mind that if you have significant assets that you need to protect a bankruptcy petition preparer may cost you more than it saves. If your documents are prepared incorrectly, you may be at risk for losing your home, car, or other valuable assets. Additionally, when you turn to an attorney after your case goes downhill it may end up costing you more in the end because it takes more time and money to correct something than it does to file the documents correctly in the first place.