Bankruptcy Petition Preparers – The Unforeseen Costs

Written by guest Blogger Frank P. Pipitone.  Mr. Pipitone is a Long Island Bankruptcy Lawyer. He is the managing attorney at Pipitone Law located in Garden City, New York. 

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With the economy in shambles and people still struggling, many unscrupulous organizations are stepping to the plate to take a swing at consumers. While bankruptcy filing numbers are down across the country, bankruptcy is still a viable option for people to rehabilitate their finances.

Non-attorney petition preparers market to those individuals who are most in need by promising to prepare their bankruptcy petitions without the “high cost” associated with hiring an attorney. These petition preparation services are not corrupt per se, but it is important to understand the implications and limitations.

Bankruptcy petition preparers may be a low cost option, however, one must account for the ultimate cost of a failed bankruptcy filing.

What is a Petition Preparer?

As defined in the Bankruptcy code, a petition preparer is:

“…a person, other than an attorney for the debtor or an employee of such an attorney under the direct supervision of such attorney who prepares for compensation…”

Additional requirements and definitions are laid out in 11 U.S.C. §110.

Petition preparers are not attorneys and they are not authorized to practice law. This is important to understand. If you hire a petition preparer, you will not receive any legal advice.

Legal advice includes, but is not limited to: information on whether it is advisable to file bankruptcy, the potential outcome of a bankruptcy case, what exemptions should be claimed and the dischargeability of certain debts.

A petition preparer is a data entry service and nothing more. You hire them as a typist to transcribe your information directly into the bankruptcy petition. Sounds like you can take care of that yourself!

Bankruptcy Screams for Representation

Attorneys, trustees and judges look suspiciously at petition preparers. The United States Department of Justice warns about petition preparers and the Bankruptcy Code has clearly defined rules for them. There is a good reason for this.

If you are filing for bankruptcy, you should have representation. It is not required, but it is strongly advisable.

There is just no such thing as an “easy” bankruptcy case. There are pitfalls and landmines strewn about the bankruptcy path.

Only an attorney can discuss asset protection in bankruptcy. An attorney can advise you on property exemptions, dischargeability of your debts and the ramifications of the means test.

More importantly, an experienced bankruptcy attorney can educate you on the bankruptcy process and give you the tools to succeed post discharge.

Buyer Beware

With petition preparers, you get what you pay for. In this case, you get a data entry specialist with limited knowledge of a complex area of law. You get a typist who will transcribe your information for you. You will not get advice, guidance or education.

While tempting, you may pay for this low cost option with confiscated assets, increased debt, a failed bankruptcy filing or worse.

Image courtesy of rahego.