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US Trustee Program: beware of online bankruptcy preparation scams

When people with debt problems reach the conclusion it’s time to file for bankruptcy, many find it hard to justify the expense of hiring a bankruptcy lawyer. Even though bankruptcy services are generally quite affordable, taking on any new expense can feel like a mistake.

The truth is, you could be making a much bigger mistake by trying to file bankruptcy on your own, or with minimal legal help. Those unfamiliar with the complexities of bankruptcy law can easily miss crucial exemptions that are meant to protect you, meaning you could end up losing property you were entitled to keep.

Far more dangerous, however, is working with an unknown online bankruptcy preparer, according to the U.S. Trustee Program, the section of the Department of Justice responsible for monitoring bankruptcy administration.

After a single mother nearly lost her chance to discharge some $100,000 in debt when an online scammer improperly filed her petition, one reporter decided to find out how big a problem fraudulent Internet bankruptcy preparation services might be. Unfortunately, it’s a huge, nationwide problem, say the U.S. Trustees.

The scammer in that case was called USA Bankruptcy Associates. That company and its owner have been permanently barred by court order from preparing bankruptcy petitions anywhere in the U.S. The owner has been running online bankruptcy preparation services since at least 1999 -- services a California bankruptcy judge called “fraudulent, unfair and deceptive.” He has been found in violation of at least seven Bankruptcy Code sections and has been sanctioned in dozens of bankruptcy cases. He owes tens of thousands of dollars in court-ordered penalties, and criminal complaints have been filed. The U.S. Marshals Service has a standing order to arrest him.

He is still operating -- even running usbankruptcyreviews.com, a website purporting to offer independent reviews of the very companies he runs. Unfortunately, he and his websites are operated out of Canada, Israel and England, putting them beyond the reach of U.S. law.

He’s not the only scammer out there; you can find more examples at the source below. The worst part is that these innocent victims are desperate people trying to save their homes or achieve some financial stability -- yet bankruptcy courts often have no choice but to throw out their cases.

If you’re considering bankruptcy, don’t lose property you’re entitled to keep, and don’t fall for scams. Don’t skimp on legal advice.

Source: The Virginian-Pilot, "Banned bankruptcy preparer stays ahead of law," Tim McGlone, Dec. 15, 2013

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