Corporations and partnerships must have an attorney to file a bankruptcy case. Individuals, however, may file their own bankruptcy proceeding without an attorney. Since most individuals do not possess the knowledge or the software needed to adequately prepare their own bankruptcy forms they routinely use the services of non-attorney bankruptcy preparers.
Section 110 of the U.S. Bankruptcy Code regulates the services of non-attorney bankruptcy preparers and provides penalties for non-attorneys that violate the regulations. Section 110 defines a "bankruptcy petition preparer" as a person other than an attorney or an employee of an attorney, who prepares, for compensation, a document for filing by a debtor in the United States Bankruptcy Court.
Bankruptcy petition preparers must comply with the following regulations:
-- A bankruptcy petition preparer must sign the bankruptcy document and print on the document the preparer’s name, address and social security number.
-- A bankruptcy petition preparer shall, not later than the time at which a document for filing is presented for the debtor’s signature, furnish to the debtor a copy of the document.
-- A bankruptcy petition preparer shall not execute any document on behalf of a debtor.
-- A bankruptcy petition preparer may not offer a potential bankruptcy debtor any legal advice, including advising the debtor whether to file a bankruptcy petition; whether commencing a case under chapter 7, 11, 12, or 13 is appropriate; whether the debtor’s debts will be discharged in a bankruptcy case; whether the debtor will be able to retain the debtor’s home, car, or other property after commencing a bankruptcy case;
concerning the tax consequences of a bankruptcy case or the dischargeability of tax claims; whether the debtor may or should promise to repay debts to a creditor or enter into a reaffirmation agreement with a creditor to reaffirm a debt; concerning how to characterize the nature of the debtor’s interests in property or the debtor’s debts; or concerning bankruptcy procedures and rights.
-- A bankruptcy petition preparer shall not use the word “legal” or any similar term in any advertisements, or advertise under any category that includes the word “legal” or any similar term.
-- A bankruptcy petition preparer shall not collect or receive any payment from the debtor or on behalf of the debtor for court filing fees in connection with the petition.
-- A declaration under penalty of perjury by the bankruptcy petition preparer shall be filed together with the petition disclosing any fee received from or on behalf of the debtor within 12 months immediately prior to the filing of the case, and any unpaid fee charged to the debtor.
Non-attorney bankruptcy preparers are allowed to "prepare" Official Bankruptcy Forms for debtors. However, they are not allowed to provide legal advice or counsel regarding bankruptcy.
Published supreme court opinions hold that non-attorneys have a Constitutional right to provide clients with specific and detailed written information and instructions regarding bankruptcy law and procedure (such as information generally contained in "self-help" legal guides) but cannot provide any specific advice, explanation or instruction in direct response to a client's or potential client's written or oral inquiry. Florida Bar vs. Brumbaugh, 355 So.2d 1186 (1978); State Bar of Michigan vs. Cramer, 399 Mich 116, 249 NW2d 1 (1976); Johnson vs. Avery, 393 US 490, fn 11, 89 S.Ct. 747, 21 L.Ed.2d 718 (1969).
Many non-attorney bankruptcy preparers routinely cross the line between being a "form preparer" and providing legal advice. Only licensed attorneys can provide legal advice and counsel regarding bankruptcy. Non-attorney bankruptcy preparers must be careful that they only "prepare" bankruptcy forms for debtors, rather than engage in the unlicensed practice of law.