Bankruptcy Petition Preparers

http://www.jsonline.com/watchdog/watchdogreports/bankruptcy-petition-preparers-running-afoul-of-law-b9967467z1-218451771.html

I had a chance to work on a couple of cases involving sanctions for bankruptcy petition preparers over last summer. Bankruptcy petition preparers are non lawyers who help people fill out the forms necessary to file for bankruptcy for a fee. I believe they are a relatively new phenomenon in the field of bankruptcy. They have caused a number of problems for consumers who file for bankruptcy including filling out the petition wrong or filing excessive fees.

Congress has dealt with the problems arising from the preparers by placing extensive requirements on them that are set out in the bankruptcy code. The code is pretty specific on requirements for the preparers and even lists out dollar amounts for fines that are charged if the preparer violates any of the requirements. The cases I worked on did not involve any huge mistakes by the preparers. I believe one of them involved sanctions for failing to provide a full social security on the petition. However, I have heard of much worst violations and according to this article they cause damage to the bankruptcy system.

Some things I did not know about the preparers is that many of the fines and refunds go unpaid. Also, a number of bankruptcy judges have referred preparers for criminal prosecution. Another interesting thing is that a number of online companies serve as bankruptcy petition preparers. If the company makes mistakes this complicates things for judges because there is no one to be held accountable for sanctions.

I think the crackdown on bankruptcy petition preparers is important to protecting the bankruptcy system. However, the preparers are a cheaper alternative to hiring a lawyer and the increased regulation likely makes it more costly. This probably decreases the number of bankruptcies filed which was likely the intended effect by congress anyways.