Dangers of Bankruptcy Petition Preparer Services in New Jersey

Every bankruptcy case is unique, but perhaps the one universal theme involved in filing for bankruptcy in New Jersey is that the process is stressful. If you are considering a bankruptcy filing, you are likely already familiar with the stress and frustration caused by potentially losing your home and other assets, as well as future scars on your credit report.

This leads many petitioners to look for low-cost assistance in a variety of places, including through bankruptcy petition preparer services.

While help in preparing your petition can be necessary, it is important to first understand the dangers of bankruptcy petition preparer services in New Jersey before engaging this type of service. Speak with a knowledgeable bankruptcy lawyer that could help ensure that you understand the danger of preparer services.

What is a Bankruptcy Petition Preparer Service?

As the name suggests, a bankruptcy petition preparer service is one that helps a debtor prepare the bankruptcy petition. Bankruptcy petition preparers essentially provide administrative services, including using their bankruptcy preparation software to complete the forms required for filing.

Bankruptcy petition preparer services are contract-based organizations, so the terms of the arrangement must be spelled out in a written contract that clearly identifies the services to be provided and the relevant fees. These services specifically cannot:

  • Collect any court fees or bankruptcy filing fees,
  • Advertise that they provide legal services, or
  • Charge fees that are deemed to be unreasonable.

While bankruptcy petition preparer services typically charge very low fees—usually between $100 and $100–when compared to the fees that an attorney may charge, it is important to understand the dangers of bankruptcy petition preparer services in New Jersey before deciding to engage their help.

Potential Risks of Using This Service in New Jersey

Importantly, a bankruptcy petition preparer is not a bankruptcy attorney, and cannot be an attorney. One of the dangers of bankruptcy petition preparer services in New Jersey is that bankruptcy petitioners often confuse these businesses with attorneys who can provide legal advice with respect to the complicated questions that can arise during the bankruptcy process.

Because the bankruptcy petition preparer cannot provide legal advice, the debtor must independently determine the best course of action to take when filing the bankruptcy petition, including:

  • Whether to file for bankruptcy under Chapter 7 or Chapter 13
  • Whether a business or personal bankruptcy would be most advantageous
  • Whether certain assets qualify for state or federal exemptions
  • Whether to choose to apply the federal exemption rules versus the state exemption rules
  • Whether certain assets or liabilities must be listed on the petition

If the individual who is filing for bankruptcy does not understand these issues and the consequences of their choices with respect to those issues, the bankruptcy petition preparer cannot provide guidance.

Individuals who are considering filing for bankruptcy in New Jersey should also be aware that bankruptcy petition preparer service employees are not required to satisfy any educational requirements, nor are they required to pass a background check.

As a result, some of these services may employ individuals who are not aware of the requirements that apply with respect to bankruptcy petition preparer services and may even inadvertently provide legal advice that is inaccurate.

How a Bankruptcy Attorney in New Jersey Could Help

If you are considering hiring a bankruptcy petition preparer service, first contact a bankruptcy attorney to discuss your options. A skilled attorney can provide an in-depth explanation of the dangers of bankruptcy petition preparer services in New Jersey before you expend the funds to engage their services.