Judges who preside over bankruptcy cases have started to use harsh measures against fraudulent bankruptcy petition preparers in the last few months. One petition preparer was recently convicted of defrauding clients and received a sentence of 27 months in prison for the crimes committed. Some of the offenses that may be committed by bankruptcy petition preparers can include overcharging clients or using excessive fees, failed to perform all of the services that were paid for, and even intentionally causing errors in the paperwork so the client must pay for another petition to be prepared. When a bankruptcy petition preparer is is ordered to return fees or other amounts to clients this does not happen in every case. Some petition preparers simply do not make the ordered refunds, and there is no oversight of this industry at either a state or federal government level.
When a bankruptcy attorney is hired this professional will fill out all of the required forms and submit all of the required documentation. In addition a bankruptcy lawyer can offer legal advice on every aspect of bankruptcy and they are very familiar with the bankruptcy laws and process. When you use a bankruptcy petition preparation firm the individual filling out the petition can not provide any legal assistance or advice. These companies simply fill in the blanks on the petition form using the information that you provide. This can lead to a lost of assets that may be protected, either because the petition was not properly completed or because the wrong exemptions and other choices are made.
Bankruptcy judges and trustees are fed up with poorly prepared bankruptcy petitions that can cost consumers dearly. According to one trustee, Virginia George, “What’s occurring is a serious miscarriage of justice when it comes to the majority of bankruptcy petition preparers. They’re the bane of my existence.” There have been bankruptcy cases where consumers have lost vehicles and other property because exemptions were not properly listed, even though the client informed the bankruptcy petition preparation of the exemptions. The occurrence of serious errors like those listed have increased substantially and this has lead many bankruptcy judges and trustees to call for regulation of the bankruptcy petition preparation industry and prison sentences for those who commit fraud.
The effect on debtors when a bankruptcy petition preparer charges an excessive amount or makes errors in the petition can vary from mild to very serious. Even if the bankruptcy petition is corrected the original erroneous petition could prevent an automatic stay from being issued by the bankruptcy court after the corrected forms are on file. Sometimes the error may be so bad that the case will be thrown out and refiling is not an option. Rather than use a bankruptcy petition preparation service it is better to seek the advice of an experienced bankruptcy attorney instead. This legal professional can advise you on the best choices and methods available to get the desired outcome and results, without any errors or excessive fees.