There has been an increase in the number of complaints against non-lawyers preparing bankruptcy filings for a fee, according to a report the Administrative Office of the U.S. Courts released Monday.
Federal law allows bankruptcy filers to use an attorney or go it alone as pro se filers. Those who elect to file themselves can use the help of non-lawyer, bankruptcy petition preparers who often charge a fee to help prepare the filing.
The increase in the abuse is due in part to the mortgage crisis that has gripped much of the country, the AOC concluded.
"The increase in 'foreclosure rescue' and 'loan modification' services seems to be the source in the past three years," U.S. Bankruptcy Judge Maureen Tighe in the Central District of California said in the report. "The homeowners are desperate and take advice from the most questionable sources."
Between fiscal years 2005 through the 2011 fiscal year, complainants filed 2,529 formal actions against bankruptcy petition preparers. In 98.5 percent of the formal actions, the court granted some form of relief. Common infractions include the unauthorized practice of law or collecting more than the petition-preparation fee. In other instances preparers who have been barred from filing bankruptcy petitions prepare the paperwork but advise the pro se filer to sign the bankruptcy petition.