Using Non-Lawyers (Bankrupty Petition Preparers) to help you
See this article on Should I use a Petition Preparer.
Credit Counseling & Debtor Education
Before you file for bankruptcy, you must get credit counseling,
and get a certificate proving that you have done so. You MUST
use one of the approved
counseling agencies for your court district.
There are many shady credit counseling agencies that advertise
heavily on TV and other media. They call themselves non-profit,
are really just fronts for profit making businesses and are designed
to funnel people into dead-end payment plans that do little for the
consumer. Indeed 40% of the industry has been targeted by the IRS
to remove their non-profit status [NPR
has published a
"Consumer Alert" pamphlet for debtor thinking about bankruptcy
warning about shady credit counselors and
how to protect yourself from falling victim to one. You can download
the pamphlet here.
Again, be sure to use only a credit counselor that is on the
approved list of counselors for your court district.
Even assuming you're using a legitimate credit counselor, a recent GAO report to Congress stated that:
"The value of the credit counseling requirement is not clear. The counseling was intended to help consumers make informed choices about bankruptcy and its alternatives. Yet anecdotal evidence suggests that by the time most clients receive the counseling, their financial situations are dire, leaving them with no viable alternative to bankruptcy. As a result, the requirement may often serve more as an administrative obstacle than as a timely presentation of meaningful options."
- source: Government Accounting Office testimony before the House Subcommittee on Commercial and Administrative Law, May 1, 2007
Form Preparation Services (BPPs)
Bankruptcy Petition Preparers are non-lawyers paid
by consumers to prepare bankruptcy documents, for filing in court.
Anyone can be a BPP, provided they comply with the
BPP practice contained in the bankruptcy code.
Customers who use a BPP are representing themselves
in the bankruptcy court. This means they are responsible for making
the choices required of them in their case. They must also provide
the BPP with complete and accurate information to be entered in the
Because BPPs are not lawyers, their customers must
obtain necessary legal information and advice from an independent
source such as a self-help
law book or a lawyer.
Think of it this way, A BPP's customers are their own
lawyers and the BPP is their legal secretary. The customers have
to be sufficiently informed to tell the BPP what to do.
What BPPs Can't Do
Lawyers have jealously guarded their turf when it comes to bankruptcy.
Lawyers already lost this battle in the area of tax preparation.
Today, non-lawyer tax preparers openly advertise the good advice
they can give you in addition to completing your forms. BPPs can
do no such thing when it comes to bankruptcy forms.
Under the new bankruptcy law, BPPs
must give debtors a form that lists all the things BPPs can't
do (form B19), and all the topics they can't discuss -- basically
anything that might be characterized as legal advice. Thus, the
sort of tips that tax preparers commonly give to people when
preparing their taxes, BPPs can't give when bankruptcy forms.
|What BPPs can't do
(language of Form
is covered in HFB Book.
|I am forbidden
to offer you any legal advice, including advice
about any of the following:
to File For Chapter 7 Bankruptcy (HFB book) will not
give you specific advice, either, but it does discuss important
facts to consider in making these decisions:
|• whether to file a petition under the Bankruptcy Code
(11 U.S.C. § 101 et seq.);
||Whether you should file for bankruptcy
|• whether commencing a case under chapter 7, 11, 12,
or 13 is appropriate;
||What kind of bankruptcy you should file for
|• whether your debts will be eliminated or discharged
in a case under the Bankruptcy Code;
||Which debts are non-dischargeable, secured, etc.
||Ch's. 9, 5
|• whether you will be able to retain your home, car,
or other property after commencing a case
under the Bankruptcy Code;
|Whether you'll lose your house, car, or other property
||Chs. 3, 4, 5
|• concerning the tax consequences of a case brought
under the Bankruptcy Code;
|• concerning the dischargeability of tax claims;
||Whether or not your tax debts will be wiped out
|• whether you may or should promise to repay debts to
a creditor or enter into a reaffirmation
agreement with a creditor to reaffirm a debt;
|Which secured loans are worth hanging onto, versus
other options (e.g. surrendering property)
|• concerning how to characterize the nature of your
interests in property or your debts; or
||Whether property is exempt
into which exemption category a particular item fits
|Ch. 3, 4
|• concerning bankruptcy procedures and rights.
||What happens in bankruptcy; what are your rights
Online Bankruptcy Filing Advertised to Consumers
There are several software products designed for lawyers that will prepare full sets of bankruptcy forms, but these programs assume you already know bankruptcy law and are designed for filing multiple bankruptcies. In short, they're not appropriate for first-time bankruptcy filers.
There are also a few packages purportedly offered for consumers. Proceed with caution. Some of these packages are little more than PDF versions of the forms, which are are available free from the courts themselves.
If you are not a lawyer, the only value of these products would depend on the quality of the instructions they provide. You'll need instructions on how to complete each form, as well as a good understanding of how each form fits into the larger process of filing for bankruptcy.
So-Called "Full Service" Companies - Proceed with Caution
Some companies tout themselves as "full service" to
distinguish themselves from companies that only offer forms preparation. But they do not appear to be lawyers, so, by law, all they can do is forms preparation. Therefore it is unclear what "full service" actually includes, or what it CAN include under the strict guidelines preventing non-lawyers from providing bankruptcy advice.
Note that similar services to these have been found by courts to be BPPs and therefore subject to BPP fee limits and service limitations. To the extent that these services charge more than such limits, and the "advice" they give (by deciding where your information should go on the bankruptcy forms), may exceed what is allowed in your court district.
"Software" for consumers -- or is it?
Legal ($49). This "software" is actually
a zip file of MS Word and PDF forms that you can use or fill
in. The merchant's website does not say whether local forms are
included and whether or not forms do any calculations. This does
not appear to really be "software" but rather a package
of MS Word and PDF forms. (Note: before you pay for PDF bankruptcy forms, remember that PDF, fill-in bankruptcy forms are downloadable for free
from the government, your local bankruptcy court website, and here .) So what you're really
paying for is the instructions that come with
Step-by-Step Guidebooks to the Bankruptcy Process
How to File for Chapter 7 Bankruptcy
spending hundreds of dollars on bankruptcy services, take the time to
learn about what's involved in filing for bankruptcy, and determine exactly the kind of help you need. Nolo's
How to File for Chapter 7 Bankruptcy (17th ed., 2011) walks you through
the law and procedures of filing for bankruptcy, explains what bankruptcy
can -- and can't -- do for you, and tells you how to get the most from
your bankruptcy lawyer if you decide to hire one.