Should I Use a Bankruptcy Petition Preparer?
Republished with Permission © 2011 Nolo.
As bankruptcy filings increase nationwide, more and more people are seeking help from bankruptcy petition preparers, also called “typing services” or “paralegals.” These are non-lawyer typing services that charge a fee to generate your bankruptcy forms, under your strict direction and control.
It is important to remember that bankruptcy petition preparers are not lawyers and cannot provide any legal advice regarding your bankruptcy. But, if you don’t have access to a typewriter or computer, a good bankruptcy petition preparer can produce the forms you need for a reasonable fee.
Before you hire a bankruptcy petition preparer, learn what they can and cannot do, what legal requirements apply to their businesses, and where to get more bankruptcy information and legal help.
What Is a Bankruptcy Petition Preparer?
A bankruptcy petition preparer is any person or business, other than a lawyer or someone who works for a lawyer, that charges a fee to prepare bankruptcy documents. Under your direction and control, the bankruptcy petition preparer generates bankruptcy forms for you to file either by typing them or inputting information into a bankruptcy software program.
Because bankruptcy petition preparers are not attorneys, they cannot provide legal advice or represent you in bankruptcy court. This means that the bankruptcy petition preparer cannot:
- tell you which type of bankruptcy to file
- tell you not to list certain debts
- tell you not to list certain assets, or
- tell you what property to exempt.
In essence, you must understand what debts your bankruptcy will discharge, what will happen to your property in the bankruptcy, and what laws should be used to exempt your property from being taken for the benefit of your creditors.
In addition, you must file the bankruptcy papers yourself and represent yourself in court. In other words, you are responsible for your case. You act as your own attorney and use the bankruptcy petition preparer as a typing service that transposes the information you give them onto the official forms.
Why Use a Bankruptcy Petition Preparer?
The bankruptcy petition preparer can’t tell you anything about the law or the bankruptcy process, so why use one?
If you don’t have ready access to a typewriter or computer, then you may want to pay someone to prepare the forms for you. A good bankruptcy petition preparer will have up-to-date bankruptcy computer software that will generate the documents quickly and relatively easily. And most bankruptcy petition preparers charge low fees, especially compared to lawyers.
Before you hire a bankruptcy petition preparer, learn about bankruptcy law and the options for completing your bankruptcy paperwork (see “Ways to Get Bankruptcy Help,” below).
Requirements for Bankruptcy Petition Preparers
Anyone can be a bankruptcy petition preparer. There are no educational, age, or experience requirements. Nor are bankruptcy petition preparers required to take a test or pass a background check.
Nevertheless, bankruptcy law does require bankruptcy petition preparers to follow certain business practices. Among other things, bankruptcy petition preparers must:
- provide a written contract defining their services and fees
- provide written disclosures summarizing the different kinds of bankruptcy and the associated procedures
- identify themselves (in their marketing materials) as debt relief agencies providing services under the federal bankruptcy code
- not charge an unreasonable fee (fees generally range from $100 to $200)
- not collect or handle the bankruptcy filing fees or other court fees (you must do that yourself)
- file a fee disclosure statement with the court (stating how much they have charged you for services)
- include their name and social security or tax identification number on the documents they prepare, and
- not use, or advertise with, the word “legal” or any similar term.
These restrictions apply only to bankruptcy petition preparers, who, by definition, charge a fee. People who help others for free are not subject to these rules.
Ways to Get Bankruptcy Help
There are several ways to learn about bankruptcy and generate bankruptcy forms.
Do It Yourself
Bankruptcy books and websites abound, providing both basic and detailed information on filing for bankruptcy. After reading the information, many people find that they are able to understand the basics of bankruptcy law and prepare the forms on their own.
Arming yourself with information will never be a waste. If you plan to use a bankruptcy petition preparer, you’ll have to read about and understand the whole process anyway. And even if you use a lawyer, it is still wise to understand the basics yourself.
Some good sources of self-help information are:
Self-help bankruptcy books. A good start is How to File for Chapter 7 Bankruptcy, by Stephen Elias, Albin Renauer, and Robin Leonard (Nolo) or Chapter 13 Bankruptcy: Repay Your Debts, by Stephen Elias and Robin Leonard (Nolo).
Self-help websites. Try Nolo’s Bankruptcy Resource Center, which includes an online means test calculator, created by the author of Nolo’s book How to File for Chapter 7 Bankruptcy, Albin Renauer, J.D. Once you enter your zip code, the calculator uses the applicable income and expense standards for your state, county, and region to determine your eligibility.
Government websites. You can find the official bankruptcy forms in fill-in-the-blank PDF format at www.uscourts.gov.
Get Help From a Lawyer
Depending on your comfort level with the law and the complexity of your financial situation, you may want to get help from a lawyer. There are several ways to use a lawyer in bankruptcy.
Legal orientation. You might be able to find a lawyer to give you an orientation (for free or a small charge) about your main choices — typically, what type of bankruptcy to file, what exemptions to choose for your property, and what to do with property you are making payments on (such as a car or home).
Legal consultations. Some lawyers offer more in-depth consultations for a fee. You can get advice specific to your situation, and then prepare and file the documents on your own.
Legal representation. You can retain a lawyer to represent you from start to finish in the bankruptcy case. Obviously, this is the most expensive route.
How to Choose a Bankruptcy Petition Preparer
If you decide to hire a bankruptcy petition preparer to input your information onto the bankruptcy forms, be choosy. Here are some tips.
Stay local — don’t use Internet services. Avoid bankruptcy petition preparers that operate on the Internet. You can’t be sure that the paperwork Internet services prepare will meet the requirements of your local court, and you may end up having to hire a lawyer to untangle the mess.
Get recommendations. Ask family members, friends, or even lawyers if they recommend a local bankruptcy petition preparer.
Make sure the preparer meets legal requirements. Don’t use a bankruptcy petition preparer that violates any of the requirements discussed above. For example, don’t use one that attempts to give you legal advice, uses the word “legal” in their advertising or business name, doesn’t use a contract for services, or asks you to give them the court filing fees. If the preparer plays loose with the law in these respects, you shouldn’t use him or her to type your forms.
Check their fees. Check with your local bankruptcy court for fee restrictions on bankruptcy petition preparers. If your court doesn’t limit bankruptcy petition preparer fees, make sure the fee is reasonable in your area (shop around). A reasonable fee is usually between $100 and $200.
Read everything. Read the contract for services before you agree to pay the bankruptcy petition preparer. And then, when the documents are done, read everything carefully. Remember, you are responsible for what is included on the forms.
The Bottom Line
Hiring a bankruptcy petition preparer can be an inexpensive way to get your bankruptcy documents done if you don’t have access to a typewriter or computer, or simply want someone to do the data input for you. But remember what the preparer is — a typing service. It’s your job to know the law and decide what information goes on the forms.
For clear and user-friendly information, advice, and forms for the entire bankruptcy process, get How to File for Chapter 7 Bankruptcy, by Stephen Elias, Albin Renauer, and Robin Leonard (Nolo) or Chapter 13 Bankruptcy: Repay Your Debts, by Stephen Elias and Robin Leonard (Nolo).
Republished with Permission © 2011 Nolo.
A means test calculator can determine whether you qualify for Chapter 7 bankruptcy — try one online.
The “means test” is a formula designed to keep filers with higher incomes from filing for Chapter 7 bankruptcy. Only bankruptcy filers with primarily consumer debts, not business debts, need to take the means test. High income filers who fail the means test may use Chapter 13 bankruptcy to repay a portion of their debts, but may not use Chapter 7 bankruptcy to wipe out their debts altogether.
However, having to take the Chapter 7 means test doesn’t mean that you must be penniless in order to use Chapter 7 bankruptcy. You can earn significant monthly income and still qualify for Chapter 7 bankruptcy if you have a lot of expenses, such as a high mortgage payment. This article shows you simple ways to determine whether you can pass the means test — and, therefore, use Chapter 7 — if you were to file for bankruptcy.
How Does the Chapter 7 Means Test Work?
The means test was designed to limit the use of Chapter 7 bankruptcy to those who truly can’t pay their debts. It does this by deducting specific monthly expenses from your “current monthly income” (your average income over the six calendar months before you file for bankruptcy) to arrive at your monthly “disposable income.” The higher your disposable income, the more likely you won’t be allowed to use Chapter 7 bankruptcy.
To take the means test, you must first determine whether your income is more or less than the median income in your state. If you earn more than the median, you must figure out whether you would have enough left over, after subtracting certain expenses, to repay some of your debt.
Is Your Income More Than the Median?
The first step is simple: If your current monthly income is less than the median income for a household of your size in for your state, you pass. Period. You’re done. You do not need to complete the rest of the means test. You can file for Chapter 7.
Do You Have Enough Disposable Income to Repay Some Debts?
For those whose household income exceeds the state median, the means test computations get significantly more complex. You must determine whether you have enough income left over (called “disposable income”), after paying your “allowed” monthly expenses, to pay off at least a portion of your unsecured debts (such as credit card bills). If your disposable income adds up to more than a certain amount, you fail the means test and cannot file for Chapter 7 bankruptcy.
Median income levels vary by state and household size, and each county and metropolitan region has different allowed amounts for categories of expenses: basic necessities, housing, and transportation. But don’t worry: You can get through the math with the help of an online calculator.
Use a Chapter 7 Means Test Online Calculator
If you’re looking for an easy way to determine your eligibility under the Chapter 7 means test, use our online means test calculator, created by the author of Nolo’s book How to File for Chapter 7 Bankruptcy, Albin Renauer, J.D. Once you enter your zip code, the calculator uses the applicable income and expense standards for your state, county, and region to determine your eligibility.
You’ll have to supply some income and expense information, but the calculator will save you the trouble of looking up income and expense figures for your area and doing the math. And, if you decide to file for Chapter7 bankruptcy, you can use these figures on your official paperwork (the calculator closely follows the format of the means test form, Official Form 22A, that you must complete when you file for bankruptcy).
If You Pass the Chapter 7 Means Test
Just because you qualify under the means test does not necessarily mean you should file for Chapter 7 bankruptcy — merely that you can. Any decision to file for Chapter 7 bankruptcy should be made only after considering alternatives and other factors discussed in other articles on this website or in Nolo’s The New Bankruptcy: Will It Work for You?, by Attorney Stephen Elias.
Once you’ve made your decision to go ahead and file for Chapter 7 bankruptcy, Nolo’s book How to File for Chapter 7 Bankruptcy, by Stephen Elias, Albin Renauer, and Robin Leonard, can walk you step by step through the filing process.
If You Don’t Pass the Chapter 7 Means Test
If you don’t pass the means test, you are limited to using Chapter 13 bankruptcy, which requires you to make monthly payments over a five-year period according to a strict budget monitored by the court. Most people who file for bankruptcy prefer Chapter 7, which requires no repayment. However, Chapter 13 bankruptcy is still the best way to handle specific types of problems, like curing a default on a mortgage. (See Reasons to Use Chapter 13 Bankruptcy Instead of Chapter 7 Bankruptcy.)
For help filing a Chapter 13 bankruptcy, see Nolo’s Chapter 13 Bankruptcy: Repay Your Debts, by Stephen Elias and Robin Leonard.
Republished with Permission © 2011 Nolo.
For certain personal injury claims — such as those for severe injuries, malpractice, or toxic exposure — you’ll want to consult a lawyer.
Sometimes, the skills of an experienced personal injury lawyer — or at least the threat to an insurance company that such a lawyer may present — are worth the money you must pay that lawyer to represent you. You may need a lawyer because of complex legal rules involved in your particular claim, or because the severity of your injuries might cause your compensation to vary greatly from the norm — or simply because an insurance company refuses to settle a matter in good faith. The following types of injuries and accidents almost certainly require a lawyer’s help.
Long-Term or Permanently Disabling Injuries
Some accidents result in injuries that significantly affect your physical capabilities or appearance for a long time — over a year — or even permanently. Figuring out how much such a serious injury is worth can be a difficult business. You’ll probably require some assistance from an experienced lawyer to get the most out of your claim.
The amount of your accident compensation is mostly determined by how severe your injuries were. And the severity of your injuries is measured by the amount of your medical bills, the type of injuries you have, and the length of time it takes for you to recover. As the amount of your potential compensation increases, the range within which that compensation may fall becomes wider. In such cases, it may be worth the expense to have a lawyer handle your claim and make sure you receive compensation at the highest end of the range.
If you have suffered an injury or illness due to careless, unprofessional, or incompetent treatment at the hands of a doctor, nurse, hospital, clinic, laboratory, or other medical provider, both the medical questions and the legal rules involved are complex. They almost certainly require that you hire a lawyer experienced in medical malpractice cases.
In the increasingly chemical world, we sometimes become ill because of exposure to contaminants in the air, soil, or water, in products, or in food. Claims based on such exposure are difficult to prove, however, and often require complex scientific data. And because the chemical and other industries have erected a huge wall to protect themselves from legal exposure while they continue to expose us to potentially harmful chemicals, the required evidence is very hard to come by. Get expert help.
When an Insurance Company Refuses to Pay
In some instances, regardless of the nature of your injury or the amount of your medical bills and lost income, you will want to hire a lawyer because an insurance company or government agency simply refuses to make any fair settlement offer at all. In these cases, something — what the lawyer can get minus the fee charged to get it — is better than nothing.
Finding a Good Personal Injury Lawyer
One good way to find a lawyer is to ask friends, acquaintances, or other lawyers for referrals — and then interview the candidates. In addition, Nolo provides a personalized lawyer directory with information about each lawyer’s experience, education, and fees, and perhaps most importantly, the lawyer’s general philosophy of practicing law. By using Nolo’s directory you can narrow down candidates before calling them for a phone or face-to-face interview.
Republished with Permission © 2011 Nolo.
Establish who’s at fault in a car, motorcycle, or bicycle accident or crash.
As with other types of accidents, figuring out who is at fault in a traffic accident is a matter of deciding who was careless — or “negligent,” in legalese.
In many cases common sense will tell you that a driver, cyclist, or pedestrian acted carelessly, but you may not know what laws or rules that person violated. Your argument to an insurance company that another person was at fault for an accident can be strengthened if you find some “official” support for your conclusion. Here are a number of places to look for such support.
If the police came to the scene of your accident, particularly if they knew that someone was injured, they probably made a written accident report. Ask the traffic division of the police department how to get a copy.
Sometimes a police report plainly states an officer’s opinion that someone violated a specific traffic law and that the violation caused the accident. It may even state that the officer issued a citation. Other times, the report merely mentions negligent behavior, without plainly stating that the violation caused the accident.
Regardless of how specific it is, any mention in a police report of a traffic law violation or careless driving by another person can serve as great support in showing that the other person was at fault.
State Traffic Laws
Another place to look for support for your argument that the other driver was at fault is in the state laws that govern driving. These rules of the road are contained in each state’s statutes and are usually known as the vehicle code.
A simplified version of these laws (sometimes called “The Rules of the Road”) is often available at a local department of motor vehicles office. The complete vehicle code is usually available at many public libraries, and all law libraries. You can also browse your state’s statutes online using Nolo’s help with legal research page.
In the index to the vehicle code, look for listings that may apply to your accident. For example, there may be listings for “speed limits,” “right of way,” or “roadway markings.” If you visit a law library, the librarian may be willing to help you with your search, so don’t be afraid to ask. If you find a rule that might apply to your accident, copy not only its exact wording but also the statute number, so that you can refer to it accurately when you negotiate your claim with the insurance company.
If you’re involved in certain kinds of accidents, the other driver is at fault 99% of the time, and insurance companies hardly bother to argue about it.
If someone hits you from behind, it is virtually never your fault, regardless of why you stopped. A basic rule of the road requires a vehicle to be able to stop safely if traffic is stopped ahead of it. If it cannot stop safely, the driver is not driving as safely as the person in front.
The other sure-fire part of the rear-end accident claim is that the damage proves how it happened: If one car’s front end is damaged and the other’s rear end is, there can’t be much argument about who struck whom. Of course, the driver of the car that hit you may have a claim against someone who caused you to stop suddenly, or against a third car that pushed his car into yours, but that doesn’t change his or her responsibility for injuries to you and damage to your car.
Keep in mind, however, that even if you have been rear-ended, in a few circumstances your own carelessness may reduce your compensation under the rule of “comparative negligence.” A common example is when one or both of your brake or tail lights were out, especially if the accident happened at night. Another example is if you had mechanical problems but failed to do all you could to move the vehicle off the road.
A car making a left turn is almost always liable for a collision with a car coming straight in the other direction. Exceptions to this near-automatic rule are rare and difficult to prove, but they can occur if:
- The car going straight was going well over the speed limit.
- The car going straight went through a red light.
- The left-turning car began its turn when it was safe, but something unexpected made it slow down or stop. This is an extremely difficult exception to use because a basic rule of the road says a car making a left turn must wait until it can safely complete the turn before moving in front of oncoming traffic.
As with a rear-end collision, the location of the damage on the cars sometimes makes it difficult for the driver to argue that the accident happened in some way other than during a left turn.
Republished with Permission © 2011 Nolo.
Here’s how insurance companies determine the value of your personal injury claim.
Figuring out how much your accident injuries are worth is a critical aspect of any personal injury claim, and it’s the part of a claim that is most difficult to determine; the amount varies depending on your very particular circumstances. Here is an overview of how insurance companies determine the value of a claim.
What an Insurance Company Must Compensate
To determine what your claim is worth, you must first know the types of damages for which you may be compensated. Usually, a person who is liable for an accident — and therefore his or her liability insurance company — must pay an injured person for:
- medical care and related expenses
- income lost because of the accident, because of time spent unable to work or undergoing treatment for injuries
- permanent physical disability or disfigurement
- loss of family, social, and educational experiences, including missed school or training, vacation or recreation, or a special event
- emotional damages, such as stress, embarrassment, depression, or strains on family relationships — for example, the inability to take care of children, anxiety over the effects of an accident on an unborn child, or interference with sexual relations, and
- damaged property.
The Insurance Company’s Damages Formula
When determining compensation, it is usually simple to add up the money spent and money lost, but there is no precise way to put a dollar figure on pain and suffering or on missed experiences and lost opportunities. That’s where an insurance company’s damages formula comes in.
At the beginning of claim negotiations, an insurance adjuster adds up the total medical expenses related to the injury. These expenses are referred to as “medical special damages” or simply “specials.” That’s the base figure the adjuster uses to figure out how much to pay the injured person for pain, suffering, and other nonmonetary losses, which are called “general” damages.
When the injuries are relatively minor, the adjuster multiplies the amount of special damages by 1.5 or 2. When the injuries are particularly painful, serious, or long-lasting, the adjuster multiplies the amount of special damages by up to 5. (The multiplier may be as great as 10 in extreme cases. For information on exactly how an adjuster determines the multiplier, see How to Win Your Personal Injury Claim, by attorney Joseph L. Matthews (Nolo).)
The adjuster then adds on any income lost as a result of the injuries.
That’s all there is to the formula. However, this figure — medical specials multiplied by a number between 1.5 and 5, then added to lost income — is not a final compensation amount but only the number from which negotiations begin.
Percentage of Fault
The extent each person is at fault is the most important factor affecting how much the insurance company is likely to pay. The damages formula gives you a range of how much your injuries might be worth, but only after you figure in the question of fault do you know the actual compensation value of your claim — that is, how much an insurance company will pay you.
Determining fault for an accident is not an exact science, but in most claims both you and the insurance adjuster will at least have a good idea whether the insured person was entirely at fault, or if you were a little at fault, or if you were a lot at fault. Whatever that rough percentage of your comparative fault might be — 10%, 50%, 75% — is the amount by which the damages formula total will be reduced to arrive at a final figure.
For an extensive discussion of determining the value of your claim — along with many examples — see How to Win Your Personal Injury Claim, by attorney Joseph L. Matthews (Nolo).
Bankruptcy FAQ (Chapter 7 and Chapter 13)
Republished with Permission © 2011 Nolo.
Chapter 7 bankruptcy and Chapter 13 bankruptcy: what you need to know.
Bankruptcy is a federal court process designed to help consumers and businesses eliminate their debts or repay them under the protection of the bankruptcy court. Bankruptcies can generally be described as “liquidation” (Chapter 7) or “reorganization” (Chapter 13). Under a Chapter 7 bankruptcy, you ask the bankruptcy court to wipe out (discharge) the debts you owe. Under a Chapter 13 bankruptcy, you file a plan with the bankruptcy court proposing how you will repay your creditors. You must repay some debts in full; others may be repaid only partially or not at all, depending on what you can afford.
When you file either kind of bankruptcy, a court order called an “automatic stay” goes into effect. The automatic stay prohibits most creditors from taking any action to collect the debts you owe them unless the bankruptcy court lifts the stay and lets the creditor proceed with collections.
Certain debts cannot be discharged in bankruptcy; you will continue to owe them just as if you had never filed for bankruptcy. These debts include back child support, alimony, and certain kinds of tax debts. Student loans will not be discharged unless you can show that repaying the debt would be an undue burden, which is a very tough standard to meet. And other types of debts might not be discharged if a creditor convinces the court that the debt should survive your bankruptcy.
In Chapter 7 bankruptcy, you ask the bankruptcy court to discharge most of the debts you owe. In exchange for this discharge, the bankruptcy trustee can take any property you own that is not exempt from collection (see below), sell it, and distribute the proceeds to your creditors.
In Chapter 13 bankruptcy, you file a repayment plan with the bankruptcy court to pay back all or a portion of your debts over time. The amount you’ll have to repay depends on how much you earn, the amount and types of debt you owe, and how much property you own.
You lose no property in Chapter 13 bankruptcy, because you fund your repayment plan through your income. In Chapter 7 bankruptcy, you select property you are eligible to keep from a list of state exemptions. Although state exemption laws differ, states typically allow you to keep these types of property in a Chapter 7 bankruptcy:
- Equity in your home, called a homestead exemption. Under the Bankruptcy Code, you can exempt up to $20,200 of equity. Some states have no homestead exemption; others allow debtors to protect all or most of the equity in their home.
- Insurance. You usually get to keep the cash value of your policies.
- Retirement plans. Most retirement benefits are protected in bankruptcy.
- Personal property. You’ll be able to keep most household goods, furniture, furnishings, clothing (other than furs), appliances, books and musical instruments. You may be able to keep jewelry only worth up to $1,000 or so. Most states let you keep a vehicle as long as your equity doesn’t exceed several thousand dollars. And many states give you a “wild card” amount of money — often $1,000 or more — that you can apply toward any property.
- Public benefits. All public benefits, such as welfare, Social Security, and unemployment insurance, are fully protected.
- Tools used on your job. You’ll probably be able to keep up to a few thousand dollars worth of the tools used in your trade or profession.
If you meet the eligibility requirements for both types of bankruptcy, then you can choose the type of bankruptcy that makes the most sense for your situation. However, you may not have a choice.
Under the new bankruptcy law, filers whose incomes are higher than the median income for a family of their size in their state may not be allowed to file for Chapter 7 bankruptcy if their disposable income, after subtracting certain allowed expenses and required debt payments, would allow them to pay back some portion of the unsecured debt over a five-year repayment period.
Also, if you have secured debts of more than $1,010,650 and unsecured debts of more than $336,900, for example, then you cannot use Chapter 13 bankruptcy.
Most people who file for bankruptcy choose to use Chapter 7, if they meet the eligibility requirements; Chapter 7 is a popular choice because, unlike Chapter 13, it doesn’t require filers to pay back any portion of their debts.
However, Chapter 13 might be a better choice, depending on your situation. For example, if you are behind on your mortgage and want to keep your house, you can include your missed payments in your Chapter 13 plan and repay them over time. In Chapter 7, you would have to make up the whole past due amount right away — and you might lose your house, if your equity exceeds the exemption amount available to you. For more on situations when Chapter 13 makes sense, see Reasons to Use Chapter 13 Bankruptcy Instead of Chapter 7 Bankruptcy.