Bankruptcy judges have begun to crackdown on bankruptcy petition preparers who have defrauded clients, one such conviction ended with a 27 month prison term. Judges point to cases where preparers pocketed fees but failed to do the work, messed up filings or simply overcharged clients. They have also repeatedly ordered preparers to return fees to clients - though the refunds often are never made. State and federal regulatory oversight of the business is non-existent.
Bankruptcy petition preparers, unlike bankruptcy attorneys, are barred from giving advice and can only fill in the forms with information given to them by debtors. However, many petitions are incorrectly completed leaving bankruptcy debtors vulnerable to losing assets. One such case involved a bankruptcy debtor who lost her car because the bankruptcy petition preparer failed to list the car as an exempt asset. The increase in these types of errors has some bankruptcy judges up in arms and ready to throw the worst offenders in prison.
"What's occurring is a serious miscarriage of justice when it comes to the majority of bankruptcy petition preparers," said Virginia George, a bankruptcy trustee. "They're the bane of my existence."
And for many bankruptcy debtors who are sometimes overcharged for the services of bankruptcy petition preparers, the injustice often extends to their ability to come back and refile with a corrected bankruptcy petition. Depending on what type of error the petition preparer made, the bankruptcy debtor may not have access to the automatic stay even if they file a correct bankruptcy petition at a later date. If you have been the victim of an error riddled bankruptcy filing completed by a bankruptcy preparer contact a bankruptcy attorney to learn about your options.