Bankruptcy petition preparers are non-attorneys who offer to organize and "prepare" your bankruptcy petition for very low fees. I say "prepare" because they often leave much to desire. These services may be provided locally, or exclusively through the internet. Despite the draw of potentially low fees and costs, these services should be avoided at all costs, and the reasons are numerous.
Bankruptcy petition preparers often advertise to help you prepare and file a Chapter 7 bankruptcy for as low as several hundred dollars. For individuals in financial distress, this can sound enticing. However, given the work they actually do (and more importantly, what they DON'T do) it is not even worth it. Bankruptcy is a complicated area of law that even most experienced general attorneys do not attempt to file.
These preparers are not attorneys, therefore they cannot file your case and paperwork, give you legal advice, or represent you in your hearings and meeting of creditors. These are major problems. They will only give some general advice about filing your petition and schedules, so this will leave you trying to determine how to actually file your case. You will still be required to pay all filing fees, arrange to take all of the classes, and make sure all deadlines are met. These non-attorneys will not help with any of these issues.
If your petition is filed incorrectly, all of your debts may not be discharged, and you may remain liable for some debts. If deadlines are missed, your case will need to be refiled. If your schedules are not complete, the Trustee or a creditor may object to your case. And if there is a lien or lawsuit against you, they will not file any motions to stop them. Once the bankruptcy petition preparer has taken your information and payment, their "help" will cease. People in this situation often end up hiring an attorney just to deal with these problems.
And the fact that you will give them your information to be "organized" is the greatest danger of all. A bankruptcy petition involves large amounts of sensitive information, including Social Security numbers, bank statements and account numbers, retirement information, and other important data. Many of these preparer companies are not even located in the United States. Could you even imagine taking the risk of sending your Social Security number to a call center overseas? It is as dangerous as it sounds. But, this is exactly what you will be doing. There are no amounts of low fees to make this worthwhile.
Bankruptcy attorneys are legally and ethically obligated to protect your personal and financial information. Protecting this data is an important part of my job. Not sending your personal information overseas to a faceless "preparer" should be your primary concern! You personal and financial information is just too important.
The Bankruptcy Code and the Bankruptcy Court have taken steps to regulate and control these petition preparers. They are required to disclose that they are not attorneys. They must detail the limits of their services. However, since anyone can be a bankruptcy petition preparer, and they are not overseen or regulated by state legal bar associations, it is likely they will often fall short of these requirements. Once you have paid your money, and given over your personal information to these preparers, there really isn't anything the court can do to protect you. The damage is already done.
If you have engaged with a bankruptcy petition preparer, but wish to discuss your case and get actual legal advice, contact us. I will be happy to discuss your situation and help you find a solution to your financial problems.