With many Inland Empire residents hitting hard times, bankruptcy petition preparers have offered their services to help debtors file for bankruptcy. Hiring a bankruptcy attorney may be a much better decision in the long run.

Increased Use of Bankruptcy Petition Preparers

BankruptcyAs reported by the U.S. Courts, there has been an increased use of bankruptcy petition preparers in recent years, which the courts describe as a “concern.” The Bankruptcy Court for the Central District of California, which includes Riverside and San Bernardino counties, even keeps a list of bankruptcy petition preparers that have been enjoined (prohibited) from preparing bankruptcy petitions.

What is a Bankruptcy Petition Preparer?

A bankruptcy petition preparer (often known as a “BPP”) is as a person who is not an attorney or employed by an attorney who prepares a petition or any other document for filing by a debtor in a bankruptcy court or district court. 11 U.S.C. § 110(a).  The charge typically allowed for preparing a bankruptcy petition is no more than $200, which does not include the court filing fee.

A Bankruptcy Petition Preparer Cannot Provide Legal Advice

As the United States Trustee for the Central District of California explains, “a bankruptcy petition preparer may only type forms.” If they go further, they risk violation the prohibition on offering “legal advice,” which includes:

  1. whether to file a file a bankruptcy petition;
  2. whether filing under Chapter 7, 11, 12 or 13 is most appropriate;
  3. whether the debtor’s debts will be discharged in bankruptcy;
  4. whether a debtor will be able to retain their home, car, or other property after filing for bankruptcy;
  5. the tax consequences of filing for bankruptcy, including whether tax claims will be discharged;
  6. whether the debtor may or should promise to repay debts to a creditor or enter into an agreement to reaffirm a debt (e.g. a mortgage on a house or loan on a car);
  7. advice concerning how to characterize the nature of the debtor’s interests in property or the debtor’s debts; or
  8. advice concerning bankruptcy procedures and rights.

See 11 U.S.C. § 110(e)(2).

Why is the Government Concerned About Bankruptcy Petition Preparers?

The courts and the U.S. Trustee’s office are concerned that bankruptcy petition prepapers may not properly serve debtors who need their services. Notably, too many bankruptcy petition preparers provide legal advice by advising debtors which chapter of the bankruptcy code is best for them, the nature and extent of their property, which exemptions might apply and whether a bankruptcy will discharge their debts.  Even the use of “software that prepares bankruptcy petitions” by a bankruptcy petition prepaper is also the unauthorized practice of law.  In re Reynoso, 477 F.3d 1117 (9th Cir. 2007).

The bankruptcy trustees and U.S. Trustee’s office are skilled at detecting petitions that were prepared with the assistance of a bankruptcy petition preparer when they fail to list their name. When these petitions are detected, the remedies can be severe.

Advice to Debtors: Hire a Bankruptcy Attorney

More importantly, why would a debtor want to file a bankruptcy without obtaining proper legal advice from an individual who is legally allowed to provide such advice?

Debtors may believe they are saving money, but too often, this minor savings results in a a legal mess. For example, a debtor may realize after their petition is filed that bankruptcy was not the right solution to their problems because they have property that must be turned over to the bankruptcy trustee or that all of their debts may not be discharged. They may even find themselves accused of lying on their bankruptcy petition, which has serious consequences.

These are all issues that can be addressed before you file for bankruptcy by consulting with a bankruptcy attorney.

The information in this blog post (“post”) is provided for general informational purposes only, and may not reflect the current law in your jurisdiction. No information contained in this post should be construed as legal advice from Reid & Hellyer, APC or the individual author, nor is it intended to be a substitute for legal counsel on any subject matter. No reader of this post should act or refrain from acting on the basis of any information included in, or accessible through, this Post without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from a lawyer licensed in the recipient’s state, country or other appropriate licensing jurisdiction.