By Ryan C. Wood
When you are looking for help in filing for bankruptcy one important factor is cost. Obviously, if you need to file for bankruptcy you do not have a lot of extra money lying around. A lot of people opt to go with a bankruptcy petition preparer to help them file their bankruptcy case because they believe they are getting a “better deal” than if they were to retain the services of a bankruptcy attorney. A bankruptcy petition preparer is essentially anyone that prepares your paperwork to file bankruptcy that is not listed as your attorney on the petition. Here are some things you need to look out for when determining if your bankruptcy petition preparer is right for you:
A bankruptcy petition preparer is forbidden from providing you with legal advice. Under 11 U.S.C. §110, bankruptcy petition preparers cannot tell you whether you need to file for bankruptcy or what chapter of bankruptcy to file under. They cannot tell you whether what debts are dischargeable, whether you can keep your car or home or what the tax consequences may be. The bankruptcy petition preparer’s job is to help you prepare your documents based on the information you provide them. When you hire the services of a bankruptcy petition preparer you will be filing the bankruptcy petition “pro se” which means you are representing yourself in the case. If there are any issues based on the information contained in your paperwork you are on your own. That is why it is advisable to retain a bankruptcy lawyer.
Your bankruptcy petition preparer must provide you with notice that they are not attorneys and that they are not authorized to practice law or give you any legal advice. They have to sign and provide their name and address in a document to be filed along with the rest of your bankruptcy paperwork. If your bankruptcy petition preparer does not sign or is unwilling to sign your paperwork, that should be a huge red flag to you. If they are abiding by the laws they have no reason to hide their work from the courts.
In the Northern District of California bankruptcy petition preparers cannot charge more than $150 for their work. Other jurisdictions may have a different maximum amount the bankruptcy petition preparers may charge. It is a good idea to look up what that maximum limit is before you schedule an appointment to see a bankruptcy petition preparer. This fee covers all costs including but not limited to photocopying, messenger costs, postage, and phone calls. They cannot charge you for the filing fee because you need to pay the filing fee directly with the court, not the bankruptcy petition preparer. I was shocked to hear some of my clients paid $2,000 to $3,000 to a bankruptcy petition preparer to do their paperwork. That is more than what most attorneys would charge for a case! I have heard some of my clients say that they were prepared by an attorney rather than a paralegal and that is why the costs were so high. One critical thing to remember – if they did not file your case as your attorney, they are not considered your attorneys for your particular bankruptcy case and should not charge as such.
It is understandable that you would look for a lower cost alternative to attorneys to file your bankruptcy case. However, keep in mind that if you have significant assets that you need to protect a bankruptcy petition preparer may cost you more than it saves. If your documents are prepared incorrectly, you may be at risk for losing your home, car, or other valuable assets. Additionally, when you turn to an attorney after your case goes downhill it may end up costing you more in the end because it takes more time and money to correct something than it does to file the documents correctly in the first place.