This is a question I’m frequently asked, usually in the context of a prospective client seeking a way to save fees and costs in a bankruptcy filing.

First, it is not a requirement that a debtor in bankruptcy be represented by a licensed attorney. A debtor may represents him or herself, or may be represented by counsel.  However, in between those two alternatives is a third.  A debtor may retain the services of a “Bankruptcy Petition Preparer” pursuant to the provisions of Local Rule 9029-1.

A Bankruptcy Petition Preparer (which we’ll abbreviate to “BPP”) is a non-lawyer who is allowed to assist a debtor with the preparation of the documents necessary to the filing of a bankruptcy case.  Fees are limited to $150, and BPP are severely limited in what they can and cannot do.  Most specifically, the cannot give legal advice.  Below is an excerpt from the Northern California’s Local Guidelines listing very specifically what they are not allowed to do:

The bankruptcy petition preparer is not an attorney and is not authorized to practice law. Specifically, the bankruptcy petition preparer may not instruct or advise the debtor(s):

• Whether to file a bankruptcy petition

• Under which chapter of the Bankruptcy Code to file the voluntary petition;

• How to respond to the bankruptcy forms required in connection with the filing of the bankruptcy case;

• What exemptions should be claimed;

• Whether any particular debts are dischargeable or nondischargeable;

• The effect of a bankruptcy filing upon a foreclosure and whether the debtor(s) may keep a home.

• Whether the debtor(s) may avoid or eliminate any liens or recover any assets in connection with the bankruptcy case;

• Whether the debtor(s) may redeem property;

• Whether the debtor(s) may or should reaffirm any debts;

• Whether the debtor(s) is entitled to a discharge under the Bankruptcy Code, and what defenses the debtor may have to an objection to discharge; and

• Concerning the tax consequences of any aspect of the bankruptcy case.

So what can they really do? Type. That’s it. Do not make the mistake of thinking that just because a BPP knows which papers to prepare and file, that they know anything about bankruptcy, provide legal advice, or protect you. They cannot appear for you in Court or at the 341 Meeting of Creditors. They cannot respond to requests for information from trustees, or draft motions.

I advise against using these folks, mostly because they promote a false sense of comfort.They’re not lawyers and they really can’t do much for you. In other words, for $150, you get what you pay for.

But if you are going to use a BPP, make sure that that you avoid unrealistic expectations and realize that they are not lawyers.  The best way to educate yourself is to make sure they give you–and that you read–the Notice to Debtors About Bankruptcy Petition Preparers, and that you have reviewed the Northern California Bankruptcy Petition Preparer Guidelines.

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