Petition mill
Encyclopedia
A petition mill is a fraud
in which the perpetrator poses as a financial advisor, sometimes as a credit counselor
or paralegal
, filing hastily-prepared bankruptcy
documents in the name of victims who come to the advisor as clients. The bankruptcy filing is often both incomplete and inappropriate for the victim's condition; and, often, the victim does not even realize that a bankruptcy has been filed.
Victims are people in financial trouble who believe they are becoming clients of a professional operation. The fraudster promises to make the foreclosure
s, eviction
s, repossession
s, high interest rates on loan
s, and other debt problems go away. The victim pays a large initial fee for the fraudster's services, and the fraudster usually has the victim sign blank documents. Sometimes the victim is also told to make their usual payments directly to the fraudulent advisor instead of the real creditors, or to transfer their real estate to the fraudster. The payments are stolen by the fraudster instead of being used to pay victims' debts, and real estate is often deed
ed in fractional shares to other victims unknowingly under bankruptcy, complicating ownership to make foreclosures even more difficult by having multiple (fraudulent) bankruptcies involved in the property.
In other petition mill schemes, the fraudster simply creates summary bankruptcy filings for the victim. The victim is then told to file pro se in court and deny that anyone helped prepare the documents.
According to the United States Trustee Manual, volume 5, chapter 5, the following are warning signs of a petition mill scheme:
Fraud
In criminal law, a fraud is an intentional deception made for personal gain or to damage another individual; the related adjective is fraudulent. The specific legal definition varies by legal jurisdiction. Fraud is a crime, and also a civil law violation...
in which the perpetrator poses as a financial advisor, sometimes as a credit counselor
Credit counseling
Credit counseling is a process that involves offering education to consumers about how to avoid incurring debts that cannot be repaid through establishing an effective Debt Management Plan and Budget...
or paralegal
Paralegal
Paralegal is used in most jurisdictions to describe a paraprofessional who assists qualified lawyers in their legal work. This is true in the United States and many other countries. However, in Ontario, Canada, paralegals are licensed by the Law Society of Upper Canada, giving paralegals an...
, filing hastily-prepared bankruptcy
Bankruptcy
Bankruptcy is a legal status of an insolvent person or an organisation, that is, one that cannot repay the debts owed to creditors. In most jurisdictions bankruptcy is imposed by a court order, often initiated by the debtor....
documents in the name of victims who come to the advisor as clients. The bankruptcy filing is often both incomplete and inappropriate for the victim's condition; and, often, the victim does not even realize that a bankruptcy has been filed.
Victims are people in financial trouble who believe they are becoming clients of a professional operation. The fraudster promises to make the foreclosure
Foreclosure
Foreclosure is the legal process by which a mortgage lender , or other lien holder, obtains a termination of a mortgage borrower 's equitable right of redemption, either by court order or by operation of law...
s, eviction
Eviction
How you doing???? Eviction is the removal of a tenant from rental property by the landlord. Depending on the laws of the jurisdiction, eviction may also be known as unlawful detainer, summary possession, summary dispossess, forcible detainer, ejectment, and repossession, among other terms...
s, repossession
Repossession
Repossession is generally used to refer to a financial institution taking back an object that was either used as collateral or rented or leased in a transaction. Repossession is a "self-help" type of action in which the party having right of ownership of the property in question takes the property...
s, high interest rates on loan
Loan
A loan is a type of debt. Like all debt instruments, a loan entails the redistribution of financial assets over time, between the lender and the borrower....
s, and other debt problems go away. The victim pays a large initial fee for the fraudster's services, and the fraudster usually has the victim sign blank documents. Sometimes the victim is also told to make their usual payments directly to the fraudulent advisor instead of the real creditors, or to transfer their real estate to the fraudster. The payments are stolen by the fraudster instead of being used to pay victims' debts, and real estate is often deed
Deed
A deed is any legal instrument in writing which passes, or affirms or confirms something which passes, an interest, right, or property and that is signed, attested, delivered, and in some jurisdictions sealed...
ed in fractional shares to other victims unknowingly under bankruptcy, complicating ownership to make foreclosures even more difficult by having multiple (fraudulent) bankruptcies involved in the property.
In other petition mill schemes, the fraudster simply creates summary bankruptcy filings for the victim. The victim is then told to file pro se in court and deny that anyone helped prepare the documents.
According to the United States Trustee Manual, volume 5, chapter 5, the following are warning signs of a petition mill scheme:
- Pro se bankruptcy petition where the debtor says no one assisted him/her, but the debtor is clearly unfamiliar with the bankruptcy system
- Pro se petition filed despite the debtor denying filing bankruptcy
- Debtor failing to attend the section 341 meeting, where creditors and the United States Trustee first meet with the debtor
- "Face sheet" (suspiciously small) filing with a single creditor listed, usually the mortgagee or the landlordLandlordA landlord is the owner of a house, apartment, condominium, or real estate which is rented or leased to an individual or business, who is called a tenant . When a juristic person is in this position, the term landlord is used. Other terms include lessor and owner...
- Debtor facing eviction, foreclosure, or repossession notice
- Pattern of pro se debtors with identical paperwork form, style, and general content
- Pattern of complaints from mortgagees or landlords
- Debtors or others being solicited by petition mills that stress stopping evictions, etc.
- Complaints by debtor that he/she has been making rent/mortgage/car payments to a third party (instead of to the original creditors)
- Advertising in budget papers and using flyers to advertise bankruptcy and divorce assistance at a low, fixed fee
- Implications that attorneys are supervising or approving the service
- Requests for payment of filing fee in installments
- Assets or liabilities not scheduled (filed in proper format)
- Failure to properly fill out or file schedules
- Use of chapter 7Chapter 7, Title 11, United States CodeChapter 7 of the Title 11 of the United States Code governs the process of liquidation under the bankruptcy laws of the United States...
(complete liquidation) when chapter 13 (reorganization) is clearly feasible