We all make mistakes, but some are more costly than others. So how costly is it if you forget to list a debt in your bankruptcy paperwork? There's no need to panic; forgetting to list a debt isn't the end of the world. However, depending on what kind of bankruptcy you file, it can cause some problems in your bankruptcy. Here's a quick rundown of the different scenarios in which you might forget to include a debt and what the consequences might be if you're not able to fix the problem.
Let's look at Chapter 7 first. If you're like 96% of people who file for bankruptcy under Chapter 7, your case is a no-asset case. This means that you don't have any non-exempt assets that will be liquidated to pay off creditors. Basically, your creditors aren't going to get any money anyway, so it doesn't really matter to them, practically speaking, if you list the debt or not. Thus, most courts will simply say that the debt was discharged, too, along with all the others, although you forgot to list it. However, this is no reason to give your attorney incomplete information. If you're going to file for bankruptcy protection, it pays to do it right, so don't count on a flexible rule like this one to clean up after you.
One important benefit of getting everything right is that you'll have a straightforward set of paperwork to deal with the credit bureaus and new creditors in the future. If you forget to list a debt, it won't appear in your bankruptcy schedules, which is what you will need to send to the credit bureaus once you're ready to re-establish your credit.Â Having to iron out the issue in post-bankruptcy will only case you unnecessary trouble, not to mention potential lawyer's fees. Another reason to to get the list right is to allow you to take advantage of the 60 day bar rule, should it apply to your case.
What if you are in that rare 4% of Chapter 7 filers with asset cases? This one is a little trickier. In order to have the debt discharged, you will have to prove that the creditor knew or should have known that you were filing for bankruptcy, and that he had adequate notice to prepareÂ a proof of claim for his share of the liquidated assets. Creditors usually have 90 days after the 341 meeting of the creditors to file a proof of claim. As you can see, this is a bit more involved than a no-asset case, so you want to be especially careful to track down all your debts and list them; otherwise you might get stuck with a debt even though your bankruptcy filing went smoothly otherwise.
As for Chapter 13 cases, if you don't correctly list the debt, it won't get discharged. For this reason, it is extremely important that you provide your attorney with a complete and accurate list of all of your debts, even those you don't agree that you owe. If it's not listed, it doesn't get discharged, and the creditor can come after you to collect on the debt even after you have completed your Chapter 13 plan.
It pays to be careful with your bankruptcy filing and to work with an expert who can help you catch mistakes. Make sure to work with an experienced bankruptcy attorney who will help you make bankruptcy the smartest financial decision of your life.
The Law Offices of John T. Orcutt have helped thousands of families with bankruptcy relief. Call 1-888-234-4181 for your free initial debt consultation.