Suppose I forget to list some of my debts when I file for bankruptcy, or there’s a debt I don’t know about when I file: Do I still have to pay those creditors?

The quick answer is that even if you overlook listing a creditor in your bankruptcy papers, you may be protected by your bankruptcy discharge from having any responsibility for paying that debt. Basically, it depends upon whether or not you have to pay any money in to the Trustee, or surrender any property for the Bankruptcy Trustee to sell and distribute among your creditors.

Our goal before we file your case is to identify all creditors who can make a claim for money against you before we complete the initial papers (called “schedules” in bankruptcy talk) for filing. We are going to make a considerable effort to locate and identify any and all outstanding debts you may have. I like to get all the billing statements you have and at least two credit reports. If any creditor has sued you in court, I will need that information. If the debt is old, it may have been sold or handed over to a collection agency. I will include the new owner and/or the collection agency as well in our schedules. Also, if you know the name of a creditor who does not show up on bills or credit reports, I will take whatever information you can give me to identify them. [An example of this might be if you’ve been in an auto accident where you could be liable for someone else’s property damage or injury.] Therefore, when you sign the schedules right before I file your case, we have identified all your creditors as best we can.

Our goal before we file your case is to identify all creditors who can make a claim for money against you before we complete the initial papers (called “schedules” in bankruptcy talk) for filing. We are going to make a considerable effort to locate and identify any and all outstanding debts you may have. I like to get all the billing statements you have and at least two credit reports. If any creditor has sued you in court, I will need that information. If the debt is old, it may have been sold or handed over to a collection agency. I will include the new owner and/or the collection agency as well in our schedules. Also, if you know the name of a creditor who does not show up on bills or credit reports, I will take whatever information you can give me to identify them. [An example of this might be if you’ve been in an auto accident where you could be liable for someone else’s property damage or injury.] Therefore, when you sign the schedules right before I file your case, we have identified all your creditors as best we can.

Many times, clients realize there’s another creditor out there not too long after we file. Usually, you receive a billing statement or letter or phone call from a long-ago creditor that brings it to your attention. When this happens, we have the option of adding that creditor to our schedules. There is a modest additional court cost for doing so, and I would have to charge you a modest fee for my time involved, but if the debt is a fairly significant amount, we can do it. This is especially true in Chapter 13 cases, where the creditors are going to receive a portion of their balances due over the course of the Plan. In a 13, any debt we don’t include would “survive your discharge”, meaning that you would remain responsible for that entire debt when the rest of your debts that did receive some money under your bankruptcy Plan have their balances officially wiped out.

Things work differently if you file under Chapter 7. In most Chapter 7 cases, the debtor does not have to pay any money or surrender any asset for the Trustee to sell. The creditors get nothing. In that situation, any creditor we failed to list has not been harmed by being overlooked — nobody got any money. Therefore, that debt is discharged when the bankruptcy is over just the same as the creditors we did list in the schedules. I would still want you to let me know about these unnamed creditors anyway, as I will send them a letter informing them of your bankruptcy so that they don’t try to collect from you in the future.

On the other hand, if the Chapter 7 Trustee is going to be making a distribution to your creditors, then we want to make sure we have listed them all. An example of this situation would arise where you are entitled to an income tax refund of several thousand dollars, which is more than the exemption laws allow you to keep. You would pay the excess into the Trustee, and he would distribute it equally to your various creditors who file proof that their claims are valid. Obviously, if we haven’t listed a creditor, then the Trustee doesn’t know about them, and they miss their chance to participate in the distribution. That’s the reason for this rule.

This is complicated, but makes sense when you spend some time thinking it through. To get as complete a list as possible of those companies and people to whom you owe money, it’s helpful to both you and me for you to go about getting me the information in as organized and thorough manner as you can. I also get a lot of information from the credit reports, which will tell me if the debt has been sent to collection or sold. The only problem with credit reports is that we can’t count on every creditor reporting the debt to the credit reporting agencies (TransUnion, Experian, Equifax). That’s the reason I request you provide me with all the bills you can locate. With this information, we can then easily work through any surprise creditors who suddenly emerge!

About Barbara Horwitz

Barbara Horwitz is an experienced bankruptcy attorney helping people get past financial difficulties. She believes in creating a relationship with clients and is dedicated to making the bankruptcy process as easy and stress-free for clients. Barbara Horwitz's Google+ Profile

Speak Your Mind

*