The defining feature of a bankruptcy filing — regardless of the chapter under which is filed — is one word: structure. And obviously, ensuring that all of the rules and processes are meticulously followed is essential (and there are many, many such rules and processes).
Yet, with this being said, mistakes can and do happen — such as forgetting to list a creditor in a chapter 7 bankruptcy filing. There are several reasons why this may happen, but often the most common cause is when a debtor is simply overwhelmed by the sheer number of bills and creditors. For example, some people with serious heath conditions may get a dozen medical bills for a single hospital visit, since each doctor — and even the hospital itself — can bill separately.
When Unlisted Debts are Discharged
To start with, the Bankruptcy Code notes that unlisted debts may not be discharged. And creditors who contact debtors after a filing — such as in the example above — rely on this provision to demand a remedy. However, it is NOT a black-and-white situation and debtors should be pushed or intimidated into believing otherwise.
There are some notable — and certainly sensible — exceptions that protect debtors who make this error. These exceptions include:
- If the debtor simply had no idea who the creditor was. For example, some creditors such as banks often sell debt to a third party, but the debtor is not informed.
- If the bankruptcy filing was (like around 95% of them) considered a “no asset” case, which means that creditors received no monies — as there were no assets to liquidate. In such cases, the debt is typically considered discharged, even though it was not originally listed.
When Unlisted Debts are Not Discharged
There are also scenarios when an unlisted debt is not discharged, and debtors are held responsible and liable for the omission. These scenarios include:
- When it is determined that a debtor deliberately failed to include a creditor (e.g. not listing a credit card in order to keep using it). This is NEVER a smart move. We are well into the 21st century, and the information superhighway is more like instant teleporting. With credit bureaus and banks all connected, it is virtually impossible to “hide” a legitimate debt (i.e. one not obtained by fraud, theft, etc.).
- If the bankruptcy filing involved assets (as opposed to the much more common “no asset” type), and monies were paid to listed creditors. In such cases, legitimate debtors certainly have the right to be included.
- If the court determines that the unlisted debt in question was obtained by false pretenses (e.g. fraud, theft, etc.), and therefore would not have been discharged even if they were properly listed at the time of filing.
If you are concerned that you may have potentially — or you knot that you have certainly — forgotten to list a creditor at the time of your bankruptcy filing, then contact the Law Office of Charles H. Huber today for a confidential consultation.
It is also vital that you contact us if you have knowingly left a creditor off you list, either by your own counsel, or by following the advice of someone else. While this is obviously not a good situation, it can and almost certainly will get much worse unless you take immediate action to protect yourself and your interests. Time is of the essence!