What Happens If You Forget To List A Debt In A Chapter 7 Bankruptcy?
When you file for bankruptcy, you are supposed to list every creditor — that is, everybody that you owe money to. Part of the reason to do this is so creditors know that you are filing for bankruptcy and that they have the right to assert any claims in the bankruptcy court.
It is imperative that you list all of your creditors. You should take the time to figure out who you owe money to, and give that list to your bankruptcy attorney, who will in turn submit it to the court.
But often, creditors can and are missed. That is, they are not included on the list of creditors that is given to the bankruptcy court. The bankruptcy case proceeds, a discharge is entered, and only long after the case is closed does the debtor realize—“oops, I forgot to list XYZ creditor.”
What happens in that case? Is the omitted creditor’s debt still discharged? Or did the debt survive the bankruptcy, since the creditor was never told of the case or given the chance to be represented at the bankruptcy?
First, don’t take a creditor’s word that it “never knew about the bankruptcy.” In many cases, creditors are notified, but a bankruptcy doesn’t make it into the system the collectors used, or the collector simply doesn’t know about it.
But assuming that, in fact, a creditor was omitted, a number of things can happen.
The case is still “open,” but there are no assets for creditors – In this situation, a simple amendment can be filed at any time before the discharge is entered. You have no non-exempt assets anyway, so the omitted creditor would get nothing even if listed from the start. And, as you are adding the creditor while the case is still pending, the creditor is not seriously prejudiced.
The case is still “open” but you have assets that are taken by the Court to give to creditors – This can create a problem. If the trustee has already distributed your assets to creditors, the omitted creditor may have a claim that their debt should survive the bankruptcy.
The case is closed (discharge entered) but there were no assets taken – Again, in this case, the creditor’s claim is still considered discharged, as the creditor would have gotten nothing even if properly noticed from the beginning of the case. Usually, if you send the omitted creditor copies of your discharge, and documentation that no assets were taken from you to give to creditors, the creditor should not take issue with you.
If you have nondischargeable debts and assets to distribute, you may have a problem if a nondischargeable debt was not listed. The debt would survive anyway, as it is not dischargeable, but the assets taken from you, did not go to the nondischargeable debt. You now owe 100% of that debt—even though you lost property in the bankruptcy.