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Unauthorized Practice of Law: document preparers and disbarred lawyers.
As a professor of law I teach young lawyers the basics of bankruptcy. Most of them believe they can start their own firm by doing bankruptcy because “it is just filling forms”. By the time they are through with my class they realize that bankruptcy law is extremely complex and they cannot advise a client about their rights without a good mentor. Most understand that they should not experiment on their clients. Be careful about the beginning bankruptcy attorney who pretends they know all the answers. I have practiced in bankruptcy law since 1985 – I still learn something new every single week.”
In the area of Bankruptcy law, Congress has attempted to protect the debtor from this type of abuse. They have passed a law (11 U.S.C. Section 110) which limits the amount an unlicensed person can charge for preparing bankruptcy documents (in Arizona is it usually limited to $200.00). The law also requires that the person preparing the documents disclose their name and other information. They cannot collect the filing fees from the Debtor. There are fines and penalties of $500 for each failure up to $2,000, plus more. In addition, as of July 1, 2004 the Bankruptcy Court General Order 89 requires all document preparers comply with the Arizona Supreme Court Rule and be licensed as a document preparers.
11 U.S.C. Section 110 prohibits these document preparers from “giving legal advice”. According to Judge Sarah Curley, Arizona bankruptcy just, just deciding what type of bankruptcy to file is “legal advice”. Explaining the terms: secured creditors, unsecured creditors, executory contracts, lease assumptions, etc are all deemed to be legal advice. Using these services would be akin to asking your next door neighbor to diagnosis your cancer and recommend the proper medical treatment. There is a reason that your doctor and lawyer spent years in school and continue to take education classes in their areas of practice.
There are serious problems that arise from filing the wrong type of bankruptcy, filing at the wrong time, failing to properly plan for your bankruptcy, or failing to disclose assets and liabilities. These problems include losing your home or car, losing the ability to file any bankruptcy, being sued despite your bankruptcy and/or spending time in jail for bankruptcy fraud. Is this all worth the small, if any, additional financial outlay you would have made if you used a qualified, licensed attorney who is experienced in bankruptcy law? Your choice – your life. See choosing a lawyer.
Taub v. Weber (9th Cir. 2004) BK PETITION PREPARER WAS PRACTICING LAW WITHOUT LICENSE
Taub and the Greenwaldts disagreed about how to treat a 401(k) retirement account on the bankruptcy forms. Schedule B, an official form included with the Greenwaldts’ Chapter 7 filing, required listing the “market value” of the debtors’ personal property. The heading on the form read: “CURRENT MARKET VALUE OF DEBTOR’S INTEREST IN PROPERTY, WITHOUT DEDUCTING ANY SECURED CLAIM OR EXEMPTION.” In their draft documents, the Greenwaldts indicated that the retirement account held approximately $80,000. The Greenwaldts also noted that they had borrowed $39,000 against the account. The Greenwaldts thus filled out draft bankruptcy forms listing what they believed was the net value of the account-$41,000. Taub, however, prepared the forms with a market value listing of $80,000. As the bankruptcy court explained: “The discrepancy was pointed out, but Taub gave no explanation. [The] Greenwaldts asked him to change the entry but he refused. They eventually relented, assuming that he knew what he was doing.”
The Court held, [A]ll personal contact between defendants and their customers in the nature of consultation, explanation, recommendation or advice or other assistance in selecting particular forms, in filling out any part of the forms, or suggesting or advising how the forms should be used in solving the particular customer’s marital problems does constitute the practice of law.