The Problems and Pitfalls of Using an Online Service (Bankruptcy Petition Preparer) To Help File Bankruptcy

Pitfalls of Online Bankruptcy Filings

Pitfalls of Online Bankruptcy FilingsThere are many websites that claim that for a very low fee they can help you file bankruptcy. Chances are they are not lawyers and do not represent you in any legal capacity. They will take your information and input that information into bankruptcy documents, sending you the documents back so that you may file them with the proper bankruptcy court. Such companies and individuals are called bankruptcy petition preparers. They are required to tell you that they are not lawyers, and they are not allowed to give legal advice. The Department of Justice even makes mention of bankruptcy petition preparers on their FAQ page here. If you choose to use one of these companies, you should receive a written contract explaining their services and the cost prior to paying them any money. Failure of the bankruptcy petition preparer to do so is in violation of federal law (see 11 U.S.C. 527(b)).
Legally, there are a number of things these services cannot do for you.  Bankruptcy petition preparers cannot advise whether you should file a Chapter 7 bankruptcy or a Chapter 13 bankruptcy. They also cannot advise what deductions are allowable in completing the Means Test, what exemptions to use or what property you can/should exempt. They also cannot tell you how to list your property or how to list your debts.
You may be asking yourself at this point, what CAN bankruptcy petition preparers do? They can take the information you provide them and type that information into the documents that are required as a part of a bankruptcy filing. The bankruptcy petition preparer MUST sign any document they prepare and include their address and social security number. The bankruptcy petition preparer also MUST file a document with the court (within 10 days of the filing of your bankruptcy case) disclosing what fee they charged to prepare your bankruptcy documents.
A bankruptcy petition preparer who advises you about how to complete the forms may be engaging in the unauthorized practice of law. If this advice is incorrect or your own interpretation of the bankruptcy laws is incorrect you could end up losing assets, not having all of your debts discharged, not receiving any discharge at all or even having to pay money to the Trustee or your creditors.
Should you choose to engage a bankruptcy petition preparer, do some research on how long they have been in business and read their customer reviews. Make sure they adhere to the rules and requirements imposed upon bankruptcy petition preparers. Finally, remember that if something is wrong in your bankruptcy the bankruptcy petition preparer does not represent you in the bankruptcy, and you must face the consequences of any errors or omission on your own (or with an attorney you hire after-the-fact, which can be more expensive than hiring a lawyer to file the bankruptcy in the first place).
Here is an article further detailing the issue of using bankruptcy petition prepares from the United States Courts’ Website.
Here is a set of guidelines and rules regarding bankruptcy petition preparers provided by the Department of Justice.
The information contained in this blog is for general information and educational purposes and is not legal advice. Reading these posts does not create an attorney/client relationship.