Clients frequently call me sometime after they file for bankruptcy concerned that they left off a bill or two. Bankruptcy is an incredibly paper intensive proceeding. When you first plan to become a client you are instructed on what to bring to my office to prepare your case. How is it possible to leave a bill off? Here are a few suggestions:
- You didn’t want to list the creditor. Why?
- Close friend
- Family member
- You had planned to pay the bill anyway
- Someone you don’t want to know you filed bankruptcy
- Credit card you tried to keep
- You didn’t take your time gathering papers, just brought what was easy to find
- You didn’t bring your attorney anything at all
- You trusted the credit report to list all your bills.
- It’s been so long since you paid a bill; no one sends them anymore
Many times something or someone pops out of the woodwork.
What happens to bills left off?
Chapter 13 cases are much different than chapter 7 cases. In a chapter 13, for a creditor to be included in the discharge they must be included in the petition. Why? Each creditor must have an opportunity to participate in the money distribution by the chapter 13 trustee. If you do not include a particular creditor, whatever the reason, they are prejudiced by this failure. If they are not included they will not be discharged
Remember the word prejudice. It will come up again.
Chapter 7 cases are where this issue normally arises. There are two kinds of chapter 7 cases:
- Asset cases, and get ready for this,
- No asset cases
Quick geography lesson. The Northern District of Ohio in Cleveland is in the jurisdiction of the Sixth Circuit Court of Appeals.
For all chapter 7 bankruptcy cases in the Sixth Circuit if a debt is inadvertently left off in a “no asset” bankruptcy case, it is still discharged. If it is an “asset case” creditors are prejudiced by being left off and as a result are not discharged. An asset case is one in which the trustee recovers non-exempt assets for distribution to creditors. If a creditor is not able to participate in this distribution the Sixth Circuit says they are prejudiced.
You can add a bill or creditor if left off your bankruptcy
- Chapter 13 case: amend schedules and the plan as needed to include them. Also add them to the creditor matrix at the bankruptcy court. Be certain to serve (mail a copy) each creditor added. Hearing necessary for amended plan;
- Chapter 7 Asset Case: amend schedules, add to matrix, and serve them. Re-open case if necessary;
- Chapter 7 No Asset Case: you really don’t NEED to do anything. If they are a utility company they normally want to see their name actually listed in the schedules. Best practice would be to include everyone.
Bottom line is that in a no asset Chapter 7 case a creditor can be discharged without ever having received any notice from the bankruptcy court. Creditors often don’t believe this, but it is true. This applies for all of you in the Sixth Circuit. Other Circuits may be different.
Picture from iStockPhoto.com.