Making Sense of Bankruptcy: Should You Use a Petition Preparer to File Bankruptcy?
July 24, 2015
You’d never have a medical transcriptionist do surgery on you. You need the surgeon’s professional judgment and skill. Same with bankruptcy.
Here’s the sentence that we’re explaining today:
A bankruptcy petition preparer is hired to do nothing but type your bankruptcy document, a route you may be tempted to go down 1) if you think you don’t need a lawyer, and 2) if you think you can’t possibly afford a lawyer anyway; but you do need one and likely you and your lawyer can figure out a reasonable way for you to pay for legal representation.
The VERY Limited Role of a “Petition Preparer”
A “bankruptcy petition preparer” under the U.S. Bankruptcy Code (See Section 110(a)(1)) is someone who gets paid for preparing the petition and other documents that are filed in a bankruptcy case. A petition preparer is “not an attorney for the debtor.” And he or she is not someone who is employed by an attorney and works “under the direct supervision of such attorney.”
Petition preparers can legally do absolutely nothing more than type documents. That is an extremely limited role. It’s a role that petition preparers have often had trouble staying within. Indeed over the last several decades bankruptcy courts across the country have had serious trouble with petition preparers who provide gross misinformation to debtors, misrepresent their legal role, and even defraud debtors out of their money.
As an indication of the kinds of misinformation that petition preparers have often provided, the Bankruptcy Code lists the following kinds of information or advice that petition preparers are explicitly not allowed to provide:
whether or not it is in a debtor’s best interest to file bankruptcy
whether to file under Chapter 7, 11, 12, or 13, what it takes to qualify for each, what their advantages and disadvantages are in general or as applied to the particular debtor
whether or not any particular debts of the debtor will be discharged (legally written off) in a bankruptcy case
whether or not the debtor will be able to keep his or her home, vehicle, or other property after filing a particular kind of bankruptcy case
what would be the tax consequences of filing bankruptcy
whether or not a tax debt can be discharged and how it can be otherwise handled within the different bankruptcy options
whether the debtor is allowed to and/or should promise to repay debts to a creditor, or whether he or she should enter into a reaffirmation agreement with a creditor to reaffirm a debt
how to characterize the nature of the debtor’s interests in property
how to characterize the nature of the debtor’s debts
what bankruptcy procedures apply to debtor’s case
what are debtor’s rights as to his or her creditors, the bankruptcy trustee, the U.S. Trustee, and all the other potential players
Lack of Perceived Need
Given the very little that petition preparers can do, they are in fact both unhelpful and unnecessary. But they can be superficially attractive for two reasons, the first being a perception that you don’t need an attorney. If you’ve decided that you need to file bankruptcy, and after looking online or elsewhere at the options have decided which Chapter is best for you, you may well believe you don’t need an attorney but just need someone to type up your bankruptcy petition.
But no matter your circumstances a typist is not what you need. Filing a bankruptcy is a serious matter, a big decision, with many other important related decisions to be made, even in seemingly straightforward cases. As we said above, a petition preparer is neither qualified nor legally allowed to advise you on any of these decisions.
You need someone who is. Someone whose job is to look out for you and your interests, answer all your questions, guide you to good decision big and small, and use the law to provide the best possible solutions for you.
You also need someone in your corner to deal with the unexpected, and to use the sometimes logic-defying, impossible to comprehend aspects of the law that can trip and trap you. It is simply too dangerous to try to cross that minefield without an experienced attorney to guide and represent you.
The Seemingly Right Price
The second reason using a petition preparer can be superficially attractive is cost. If you are thinking about filing bankruptcy you are likely strapped for cash. You may well have no idea how you could possibly pay for an attorney. Since petition preparers generally charge much less than attorneys, this could understandably drive the whole decision.
But petition preparers charge much less because they do so little. They are essentially data entry clerks. They take information that you provide and simply put them onto bankruptcy forms. They are only allowed to charge a reasonable price only for this very limited role, so the price is relatively low.
Attorneys charge a reasonable price for their infinitely broader role. (Trust us—in most part of the country there are too many attorneys and so the competition brings down the price.)
See our last blog post about how to pay for legal representation in bankruptcy. In a nutshell, you have to first acknowledge that you have a very serious financial situation, which you need help to fix, help which most other people do find a way to pay for, with most bankruptcy attorney’s free initial consultation meeting being a crucial first step in finding out both your legal options and how to pay for them. Focus on finding an attorney you find worthy of your trust, and then the rest can fall into place.