Can I Use a Bankruptcy Petition Preparer to File My Bankruptcy?

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If you choose to file bankruptcy without an attorney (i.e. pro se), petition preparers will offer to complete your bankruptcy petition and schedules for you. The first thing you need to understand is that petition preparers are not lawyers and are not allowed to give legal advice. They’re basically paid typists; they can take the information you give and put it in the right places on the schedules. That’s it. They can’t advise you on the legal ramifications of filing, they can’t answer your questions about which assets, debts, or other information you must disclose on your paperwork, they can’t tell you if an asset is exempt, they can’t tell you if filing bankruptcy is the best debt-relief solution for you, and they can’t represent you if something goes wrong with your filing. In other words, if you’re going to file pro se, you might as well do it all yourself rather than hire someone to just type the info for you. Check out this document from the U.S. Department of Justice regarding Bankruptcy Petition Preparers.

I recently saw a few ads online for businesses that advertise $80 – $150 bankruptcy filings. All you need to do is complete a short online interview and these people will put your petition and schedules together for you. It sounded great! But keep in mind that all they will do for that money is type up the information you provide. They will not offer legal advice or representation and are not allowed to tell you if the information you provided was sufficient.

So I read through their sites to see what services they provide. Unfortunately, the sites were full of misinformation. Here is just a sample of the incorrect information I found in their FAQ sections:

“All that you need to do is to sign your name and file with the bankruptcy court. You do not need to know bankruptcy law or spend weeks researching.”

Untrue. Because these agencies cannot give legal advice, you need to know what you are signing and filing with the Court. A bankruptcy attorney will explain every piece of paper you sign and advise you every step along the way. These agencies are saying, ‘just sign here and trust us.” Unless they are willing to go to federal prison in your place, you should be wary of signing something under penalty of perjury that you do not understand.

“This is the easiest part of the process since it lasts only about 30 to 60 seconds and since there are usually no creditors there. It is just a mere formality.”

This refers to the 341 meeting. True, it’s generally nothing to be afraid of. But I’ve never seen a 341 meeting last less than five minutes. And it is MUCH more than a formality. You are sworn in and must answer all the questions truthfully under penalty of perjury. Lie about anything, and the consequences are severe. While you need not lose sleep over your 341 meeting, treating it as a “mere formality” is dangerous.

(Writing about exemption law) “This is the compelling reason why you should have your bankruptcy prepared for you by professionals rather than trying to do it yourself with forms, kits or software.”

True, exemption law can be tricky and only an attorney can give you legal advice about which exemptions are available to you. But petition preparers are not legally permitted to advise you. By hiring one of these agencies, you are paying for a professional typist, not professional legal advice.

“Fortunately for you, the means test is only a paper tiger. It may look fearsome but the truth is that all of our customers pass it.”

If this is true (highly unlikely), it’s merely a coincidence. Debtors don’t pass through the means test because of some legal trickery that is only understood by these agencies. A good attorney may be able to find additional deductions to help, but a petition preparer doesn’t give legal advice. So how can they guarantee that you’ll pass through the means test?

The various sites look to be designed by the same person, so it’s possible they’re all owned by the same company. They all mentioned that they don’t advertise and their sites may be hard to find. If you were offering a valuable service at a fair price, wouldn’t you want your marks victims potential customers to know about it?

In short (yeah, I know. Too late.), either file your bankruptcy by yourself or with the help of a licensed bankruptcy attorney. Don’t pay someone just to type the papers and show you where to sign them. These agencies take your money but add no value to your case. If they manage to mess up your case, it will cost you more to hire an attorney to fix it than it would have cost to do it right in the first place.

Image credit: Kurt and Becky/Flickr

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2 Comments

  1. I agree that filing bankruptcy using a petition preparation service is worse than filing on your own. There is an illusion that you are getting some level of expertise when in fact you are not.

    I have seen first hand the dangers of filing bankruptcy without an attorney. I wrote an article about it here.

    I felt terrible that this woman had done here homework and did not completely understand the exemption laws. I wonder if she was incorrectly and illegally advised by a petition preparer.

    • I’ll bet she was. That’s a terrible story, but it happens every day across the country. The people who hire petition preparers are being penny wise and pound foolish.

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