cheap bankruptcy paralegalBankruptcy petition preparers are in high demand these days, as many people in Los Angeles find themselves in need of help with the overdue bills. But is it the right choice for you?

Enter the petition preparer, seemingly ready to do the job.

The U.S. Bankruptcy Code has a special set of rules for these people, one that governs what they can and cannot do – and provides for stiff penalties for breaking the rules.

What Is A Bankruptcy Petition Preparer?

People who need to file for bankruptcy are often in a vulnerable situation – no money, afraid, and not sure of how to get out of debt.

Under Section 110(a) of the U.S. Bankruptcy Code:

(1) “bankruptcy petition preparer” means a person, other than an attorney for the debtor or an employee of such employee under the direct supervision of such attorney, who prepares for compensation a document for filing; and

(2) “document for filing” means a petition or any other document prepared for filing by a debtor in a United States bankruptcy court or a United States district court in connection with a case under [the U.S. Bankruptcy Code].

Right off the bat, you’re excluding your lawyer and anyone who works for the lawyer. But you’re also taking out of the game any pro bono legal organization or someone who helps out someone else and does not receive any money for the service.

Section 110 is important because Congress realized that there was “widespread fraud and unauthorized practice of law” among non-attorneys who prepared bankruptcy petitions for consumers.

To remedy this problem, Congress enacted Section 110 of the Bankruptcy Code. Section 110 requires petition preparers to take certain specific actions, prevents other conduct and provides penalties when they break the law.

What Can A Petition Preparer Do?

The bankruptcy court in Los Angeles follows the general rule, established in the Florida case of In re Landry, 268 B.R. 301 (Bankr. M.D. Fla.2001) that:

A bankruptcy petition preparer can meet a prospective debtor, provide forms or questionnaires for the debtor to complete without any assistance from the bankruptcy petition preparer, transcribe the information supplied by the prospective debtor on the applicable bankruptcy forms without change, correction, or alteration, copy the pleadings, and gather all necessary related pleadings to file with the bankruptcy court. The bankruptcy petition preparer cannot improve upon the prospective debtor’s answers, cannot counsel the client on options, and cannot otherwise provide legal assistance to the prospective debtor, directly or indirectly. However, to the extent the bankruptcy petition preparer provides the limited secretarial-type services, the preparer is entitled to receive reasonable compensation.

What does this mean to you, someone who’s looking for help and has limited financial means?  You need to realize that a bankruptcy petition preparer can’t really do much for you.  They can type up documents but otherwise aren’t allowed to help you with the law, choosing exemptions or anything else.

Once you realize those limitations, somehow the money you pay to them doesn’t seem like much of a bargain, does it?

Image credit:  Mini D