Legal Definitions - bankruptcy petition preparer

A bankruptcy petition preparer is an individual who is not a licensed attorney but offers assistance to people filing for bankruptcy. Their role is strictly limited to helping debtors complete and prepare the necessary paperwork required by the bankruptcy court. They charge a fee for these services.

It's crucial to understand the limitations of a bankruptcy petition preparer:

• They are prohibited from providing any legal advice, such as recommending whether to file for bankruptcy, which type of bankruptcy to file, or how to handle specific debts.
• They cannot represent debtors in court proceedings.
• They cannot sign bankruptcy documents on behalf of the debtor.
• They cannot accept payments from creditors on behalf of the debtor.
• Their services are confined to the clerical task of typing and organizing the forms based on information provided by the debtor.
• They also cannot advertise in a way that implies they offer legal services.

If a bankruptcy petition preparer's negligence, fraudulent actions, or deceptive practices cause financial or legal harm to a debtor, the debtor has the right to seek compensation. This compensation can include actual damages incurred, a refund of the fees paid to the preparer, and even attorney's fees for pursuing the claim.

Here are some examples illustrating the role and limitations of a bankruptcy petition preparer:

• Example 1: Assisting with Complex Paperwork

  Maria lost her job and is overwhelmed by mounting credit card debt. She knows she needs to file for bankruptcy but finds the court forms complex and intimidating. She cannot afford a lawyer. She hires a bankruptcy petition preparer to help her accurately fill out the numerous forms, ensuring all required sections are completed based on the financial information she provides. The preparer does not advise her on whether bankruptcy is the best option or which chapter to file under, but simply types her information into the correct fields and organizes the documents for filing. This demonstrates the legitimate role of a preparer in providing clerical assistance.

• Example 2: Overstepping Legal Boundaries

  David is considering bankruptcy and sees an advertisement for "Affordable Bankruptcy Solutions – We Handle Everything!" He contacts the service, and the preparer tells him, "Based on your income, Chapter 7 is definitely the way to go. Don't worry about your car loan; we'll make sure that's discharged." This scenario illustrates a violation of the preparer's limitations. The preparer is acting beyond their legal scope by giving specific legal advice ("Chapter 7 is definitely the way to go") and making promises about debt discharge, which constitutes legal advice and representation, not just document preparation.

• Example 3: Negligence Leading to Financial Harm

  Sarah hires a bankruptcy petition preparer to help her file. She provides all her financial details, including a significant outstanding medical bill. The preparer, due to an oversight, fails to list this medical debt on the bankruptcy schedules. As a result, the medical debt is not discharged in her bankruptcy, and she remains liable for it, causing her significant financial hardship she thought she had resolved. This demonstrates how a preparer's negligence (failing to list a debt) can cause direct legal and economic injury to the debtor, making the preparer potentially liable for damages.