What If I Forget A Creditor When I File For Bankruptcy?

As we have noted in previous posts, it is very important to try and list all of your creditors when you file for bankruptcy.  However, it often happens that some creditor is left off of the filing and this can be for various reasons.  With medical bills it happens because when you end up in the emergency room or the hospital, you can get 10 to 20 bills for each visit as each doctor bills you separately, and the hospital can even send you several bills for one stay.  It can be had to keep track of them all, and sometimes they don’t even send an initial bill and you hear about it only later when a collection agency calls you.

Also, if a lot of time has gone by, the debt can be sold from one creditor to another, sometimes more than once, and you may remember you owed Chase for a credit card, but you did not know that Chase sold the debt to a debt buyer you never heard of.

There is a provision in the Bankruptcy Code that says debts not listed may not be discharged.   However, there are some “ifs” to this rule.  If the person filing the petition had no way of knowing who the creditor was, the debt is still discharged.  This takes care of the case where the debt is sold from the bank to a debt buyer and you had no idea there was a new owner of the debt.  You are usually also protected in such a case because in the agreement whereby the debt was sold, the former owner is usually required to tell the new owner of any bankruptcy papers they receive.

Another of the “ifs” is that if the creditor does not get notice in time to file a proof of claim in a case, the debt is not discharged.  However, in 95 percent of cases, no proofs of claim are ever filed because the case are “no asset” cases, meaning there is not money to be distributed to the creditors.  Therefore, the creditor is not harmed because proofs of claim would never be filed in such cases.

The Bankruptcy Code does allow a case to be re-opened for the purpose of amending the schedules to add a creditor.  This is a somewhat cumbersome and expensive proposition, and because it really serves no purpose, the Courts have decided that where a debt is left off of a bankruptcy petition and there were not assets to distribute to creditors, in such a case, there is no need to re-open a case and file amended papers.  In such cases, the debt is considered discharged even though it was not listed.

Like anything else in the law, however, there are some exceptions.  One exception is where the person filing for bankruptcy knew about the debt and deliberately left the debt out.  In such a case, the debt would not be discharged.  This used to happen because the debtor wanted to preserve one credit card and would not list that card.  Then they would find out that the bank closed the account but still expected payment, and the debtor would now want to list the account.  I explain to my clients that the credit reporting agencies inform every bank of every filing and most creditors close all accounts automatically, so if you leave one off, it will be closed.

Another exception is where there were assets, and there were proofs of claim filed and there was a distribution to creditors.  In those cases, the automatic discharge of non-listed debts does not apply.

Finally, one exception is for debts that would not have been discharged in the first place, even if they were listed.  Debts that were incurred by false pretenses, fraud, stealing, embezzlement and so on, can be individually objected to and declared not to be discharged.  If it is a debt of this type, that could have been objected to, it will not be discharged, but the creditor will still have show in court that the debt is of this type.

While it is very important to do the best job possible of listing each and every debt when you file for bankruptcy, all is not lost if a debt is inadvertently left out of the filing.  It is something that can be remedied with a letter from your attorney when you find out about the debt.

 Allan Bloomfield practices bankruptcy law in Forest Hills, Queens. Contact Allan today for a free consultation.

About Allan Bloomfield

For over 30 years, my focus in practicing law has been to help people overcome what seems to them to be insurmountable financial difficulties. I have helped thousands of people file both Chapter 7 and Chapter 13 cases, and in most cases, they are able to keep all of their assets, including homes, cars, their retirement accounts and personal property.