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Bankruptcy May Be Your Option

What if I forget to list a creditor on my bankruptcy?

Whether you are filing for Chapter 13 or Chapter 7, your attorney will prepare several documents called Schedules; for your review and signature. These give the bankruptcy court a clear picture of your income, expenses, assets, and debts. The name, address, and other information for all of your creditors are listed here. This information is then used to give all of your creditors notice that you have filed for bankruptcy.

It is important that your creditors receive notice of your bankruptcy filing for several reasons. First, and perhaps most important, it lets the creditors know that they can no longer take any actions to collect your debts, including sending collection letters, filing lawsuits, or taking garnishments. It also gives them an opportunity to file a Proof of Claim with the court.

Even if there is money available for creditors, they cannot receive it if they do not file a Proof of Claim within the required timeframe. Finally, it gives the creditors an opportunity to object to the discharge of your debt if there is reason to do so because of one of exceptions to discharge.

Because it is important for all creditors to receive notice, attorneys and debtors should make every effort to include all creditors on the Schedules. However, sometimes a creditor is missed. Whether a debt is dischargeable even though a creditor did not receive proper notice depends on whether or not there are assets or money available to distribute to creditors who have filed a Proof of Claim.

In Chapter 13 cases, and Chapter 7 cases in which the debtor has more assets than exemptions, creditors who filed a Proof of Claim receive money on a pro rata basis according to the bankruptcy priority rules. If a creditor did not have an opportunity to participate because it did not receive notice, the debt to that creditor will not be discharged. However, in cases where there is no money available to pay creditors, unlisted creditors have not lost out on any opportunities. Therefore, case law provides that debts to creditors listed in such no asset cases are indeed dischargeable.

If you realize that you have inadvertently left a creditor off of your Schedules, it is important to tell your attorney right away so that it can be dealt with and any potential negative impact can be minimized.

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