Reporting Bankruptcy Fraud or a Bad Petition Preparer

What does the law actually require a petition preparer to do?

Federal law defines a "bankruptcy petition preparer" as a person, other than an attorney for the debtor or an employee working under that attorney's direct supervision, who prepares a document for filing for compensation (11 U.S.C. § 110). A "document for filing" is a petition or any other document prepared for filing by a debtor in a United States bankruptcy court or district court in a case under title 11.

The duties are concrete. A preparer who prepares a document for filing must sign it and print the preparer's name and address on it. If the preparer is not an individual, an officer, principal, responsible person, or partner must sign and print that person's name and address. After the signature, the preparer must place an identifying number that identifies the individuals who prepared the document.

Before preparing any document or accepting any fees, the preparer must also give the debtor a written notice on an official form, which must tell the debtor in simple language that a preparer is not an attorney and may not practice law or give legal advice.

• Sign every document prepared for filing
• Print the preparer's name and address on the document
• Place an identifying number after the signature
• Give the debtor the official written notice before preparing anything or taking any fee
• Have the notice signed by the debtor and, under penalty of perjury, by the preparer, and filed with the document

What turns a bad experience into a reportable violation?

The details change the answer. A preparer who typed your forms accurately, signed them, disclosed the fee, and handed you copies did the job the law contemplates, even if the case went badly. What courts treat as a problem is different in kind.

Several bankruptcy courts describe the boundary the same way: the role of a non-attorney preparer is solely to type information on bankruptcy forms, and preparers are barred by law from providing legal advice — they cannot explain how to answer legal questions or assist in bankruptcy court (Bankr. N.D. Ind. official page — Filing Without an Attorney). The Eastern District of California lists examples of prohibited advice, including whether to file, which chapter to file under, how to answer a question on a form, which exemptions to claim, whether particular debts are dischargeable, and the tax consequences of the case.

Courts also note that preparers cannot sign a document on your behalf and cannot receive payment from you for court fees. Those two failures are common and easy to document.

• Refused to sign, or left the name, address, or identifying number off the document
• Never gave you the official notice, or took a fee before giving it
• Told you which chapter to file, what to claim exempt, or how to answer a schedule question
• Signed a document in your name
• Collected the court filing fee from you rather than letting you pay the court
• Charged a fee above the district's published maximum without justification

What does federal law say about penalties and injunctions?

Section 110 is titled a penalty provision for persons who negligently or fraudulently prepare bankruptcy petitions, and the disclosure duties it creates carry consequences. The District of Maryland states that penalties and fines may be imposed for failure to comply with the disclosure requirements, citing 11 U.S.C. § 110(i), and that if a preparer charges excess fees without justification, or otherwise violates bankruptcy laws, the court may issue an injunction directing them to stop working as a petition preparer.

Separate rules cover people who provide bankruptcy assistance commercially. A debt relief agency may not fail to perform a service it said it would provide, may not make or counsel an untrue or misleading statement in a filed document, and may not misrepresent the services it will provide or the benefits and risks of filing (11 U.S.C. § 526). A contract that does not comply with the material requirements of that section, § 527, or § 528 is void and unenforceable against the assisted person, who may recover fees paid, actual damages, and reasonable attorneys' fees and costs after notice and a hearing.

• A waiver of these protections is not enforceable against the debtor (11 U.S.C. § 526(b))
• The noncomplying contract is void as to the assisted person, but the assisted person may still enforce it
• Relief under § 526(c)(2) follows notice and a hearing, not an automatic refund

Who investigates bankruptcy fraud, and where do referrals come from?

Two tracks run at once. The Office of the U.S. Trustee is responsible for making sure that bankruptcy petition preparers are following the rules in the bankruptcy laws, and it has obtained judgments from the court prohibiting named individuals and entities from assisting others in filing cases (Bankr. E.D. Mich. official guidance — Notice about Prohibited Bankruptcy Petition Preparers). Districts publish those lists, and the Western District of Kentucky maintains its own roster of preparers barred from preparing petitions filed in that court, noting that barring a listed service also bars any individual associated with it.

The criminal track is separate. Under a local rule in the Western District of Louisiana, if a presiding judge determines that a case may contain a materially fraudulent statement in a bankruptcy schedule, the judge refers the case to individuals designated by the Attorney General, and the judge may first transmit the referral to the United States Trustee for further investigation and review (W.D. La. LBR 9074-1). That rule implements a statutory requirement that all bankruptcy courts establish referral procedures.

Where do state or local rules change the picture?

The federal duties in § 110 apply everywhere, but the numbers and the process are local. The District of Maryland sets a maximum preparer fee of $125.00 unless the preparer files additional documentation justifying excess fees, and requires disclosure of fees on official form B2800 plus delivery of official form B119 to the debtor, with both filed with the voluntary petition. The Eastern District of California issues guidelines treating $125.00, including expenses such as photocopies, postage, telephone charges, and courier services, as a rebuttable presumption the court may modify on motion. The Eastern District of Michigan states by court order that a preparer cannot charge more than $100 for their services.

Procedure is local too. In Alaska, a matter brought by a debtor, trustee, or creditor against a preparer under § 110(i) starts with a motion filed with the Clerk of the Bankruptcy Court, and the preparer must respond within twenty-eight days (AK LBR 9013-3). Check your own district before assuming a figure or a deadline, and see the state hub for your area.

What does a motion against a preparer look like in practice?

Alaska's local rule shows the shape of the process clearly. A matter brought by a debtor, trustee, or creditor against a bankruptcy petition preparer under § 110(i) is commenced by filing a motion with the Clerk of the Bankruptcy Court. The motion must specify three things: which provisions of § 110 are alleged to have been violated, the acts alleged to be fraudulent, unfair, or deceptive, and the damages claimed. It is treated as a contested matter governed by Rule 9014.

The preparer then has twenty-eight days after the motion is served and filed to serve and file a response, unless the court orders otherwise. The court must deny the motion if it finds that § 110(i) does not apply, or that there is an insufficient factual basis to support a finding that the preparer committed any act proscribed by § 110(i), and a denial on that basis is a final order.

That structure is why specifics matter more than outrage. Name the subsection, describe the act, state the loss.

• Identify the provisions of § 110 alleged to have been violated
• Describe the acts alleged to be fraudulent, unfair, or deceptive
• State the damages claimed
• Expect a response deadline for the preparer and a ruling on the factual basis

What documents and information should you gather first?

Start with the paperwork the law already requires the preparer to produce. The written notice under § 110(b)(2) has to be signed by you and, under penalty of perjury, by the preparer, and filed with any document for filing — so its absence is itself evidence. The District of Maryland notes that fee disclosure runs on official form B2800 and that the debtor must receive official form B119, the preparer's notice, declaration, and signature.

Collect what shows money changing hands and what was said. Courts note that preparers must furnish copies of what they prepare to you, and that they cannot receive payment from you for court fees, so receipts matter. Keep the advertising too: the Eastern District of Michigan's list identifies barred entities operating under trade names and known affiliates, which is often how the same operator resurfaces.

Your own filed documents are part of the record. Check whether the preparer's name, address, and identifying number actually appear where the statute requires them.

• The signed § 110(b)(2) written notice, or a note that you never received one
• Form B119 and the fee disclosure on Form B2800, if they exist
• Receipts, money orders, cash app records, or bank entries showing what you paid and when
• Advertisements, business cards, texts, and the exact business name and any trade names used
• Copies of everything the preparer prepared, and the versions actually filed
• Your notes on what you were told, especially anything that amounted to legal advice

What should you ask a lawyer about this?

Court guidance is unusually direct on when non-attorney help is a poor fit. The District of Colorado's warning lists situations in which a person considering bankruptcy may have problems and should consult an attorney, including tax debts, student loans, liens, property with equity, a business, a pension plan, wage garnishment, a prior bankruptcy filing, an eviction or foreclosure, questions about which debts will be discharged, and filing a Chapter 13 case. It states plainly that non-attorney preparers should not give legal advice and may not tell you how to address those situations.

Costs are also worth raising early. The Chapter 7 filing fee is $245 (28 U.S.C. § 1930(a)(1)(A), (f)(1)), with a $78 administrative fee and a $15 trustee surcharge; Chapter 13 carries a $235 filing fee (28 U.S.C. § 1930(a)(1)(B)) and the same $78 administrative fee. Courts also maintain reduced-fee and pro bono lists — Maryland keeps a list of attorneys who have agreed to consult with low income debtors for a reduced or deferred fee.

• Does what happened here fit a § 110 violation, a § 526 claim, or both?
• Should this be a motion in my existing case, or a complaint to the U.S. Trustee, or both?
• Can the fees I paid be recovered, and what does notice and a hearing involve?
• Does anything the preparer did put my discharge or my case at risk?
• Is there a reduced-fee or pro bono list in my district I can use?

Frequently asked questions

Who is responsible for policing bankruptcy petition preparers?

The Office of the U.S. Trustee. The Eastern District of Michigan states that to protect individuals who file for bankruptcy, the Office of the U.S. Trustee is responsible for making sure that bankruptcy petition preparers, persons other than attorneys, are following the rules in the bankruptcy laws. That office has obtained judgments from the court prohibiting named individuals and entities from assisting others in filing cases.

Is a petition preparer allowed to tell me which chapter to file?

No. The Eastern District of California's guidelines list the chapter to file under as legal advice a preparer is prohibited from giving, along with whether to file at all, which exemptions to claim, whether particular debts are dischargeable, and the tax consequences of the case. Multiple courts describe the role as solely typing information the debtor provides.

The preparer would not put their name on my forms. Is that a violation?

It runs directly against the statute. Under 11 U.S.C. § 110(b)(1), a preparer who prepares a document for filing shall sign the document and print the preparer's name and address on it, and under § 110(c)(1) must place an identifying number after the signature. Courts note that penalties and fines may be imposed for failure to comply with these disclosure requirements.

Can I get my money back from a preparer who took my fee?

It depends on which provision applies. For a debt relief agency, 11 U.S.C. § 526(c)(2) provides liability to the assisted person for the amount of fees or charges received, plus actual damages and reasonable attorneys' fees and costs, after notice and a hearing, where the agency intentionally or negligently failed to comply. A § 110(i) motion must also state the damages claimed.

How does a bankruptcy judge send a case for criminal investigation?

By referral. Under W.D. La. LBR 9074-1, if a presiding judge determines that a case may contain a materially fraudulent statement in a bankruptcy schedule, the judge refers the case to individuals designated by the Attorney General, using a notification statement or the same information in writing. The judge may first send the referral to the United States Trustee for further investigation and review.

Is there a cap on what a petition preparer can charge me?

Districts publish their own figures rather than one national number. The District of Maryland sets a $125.00 maximum unless the preparer justifies excess fees on Form B2800, the Eastern District of California treats $125.00 including expenses as a rebuttable presumption, and the Eastern District of Michigan states by court order that a preparer cannot charge more than $100. Check your own district.

How do I find out if a preparer has already been barred?

Several courts publish lists. The Western District of Kentucky maintains a roster of preparers barred from preparing petitions filed in that court, and notes that barring a listed service also bars any individual associated with it. The Eastern District of Michigan publishes a similar notice of individuals and entities prohibited by court judgment, including known affiliates and trade names.

Does using a bad preparer put my bankruptcy case itself at risk?

It can. The Eastern District of Michigan notes that if you use a petition preparer you are required to disclose their name and information to the court, and that failing to do so may carry profound consequences, including denial of a discharge. Court filing packets also warn that a judge can deny a discharge for dishonest conduct such as falsifying records.

Sources

• 11 U.S.C. § 110 — Penalty for persons who negligently or fraudulently prepare bankruptcy petitions · official source
• 11 U.S.C. § 526 — Restrictions on debt relief agencies · official source
• 11 U.S.C. § 527 — Disclosures · official source
• 11 U.S.C. § 342 — Notice · official source
• W.D. La. LBR 9074-1 — Criminal Referrals
• AK LBR 9013-3 — Motions Under 11 U.S.C. § 110(i)
• Bankr. D. Md. official page — Bankruptcy Petition Preparers
• Bankr. E.D. Mich. official guidance — Notice about Prohibited Bankruptcy Petition Preparers
• Bankr. E.D. Mich. official guidance — Information about Bankruptcy Petition Preparers
• CAEB official material — Guidelines Pertaining to Bankruptcy Petition Preparers in Eastern District of California Cases
• Bankr. W.D. Ky. official guidance — Bankruptcy Petition Preparers
• Bankr. N.D. Ind. official page — Filing Without an Attorney
• Bankr. N.D. Ind. official page — How to Put a Bankruptcy Together
• COB official material — Risks of paying a non-attorney
• Bankr. D. Md. official page — Legal Assistance
• Bankr. E.D. La. official guidance — Chapter 7 Form Packet
• Bankr. E.D. La. official guidance — Chapter 13 Form Packet
• Bankruptcy Court Miscellaneous Fee Schedule, Item 8
• Bankruptcy Court Miscellaneous Fee Schedule, Item 9
• 28 U.S.C. § 1930(a)(1)(A), (f)(1)
• 28 U.S.C. § 1930(a)(1)(B)

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