Will My Debt Get Discharged If I Forget To List it in My Chapter 7 Bankruptcy?

If you forget to list a debt in a Chapter 7 bankruptcy case, the Chapter 7 discharge might eliminate it. Most courts, but not all, will discharge an unlisted debt if your creditors didn't receive any money in your case. However, in all jurisdictions, a defrauded creditor can ask the court to reopen your bankruptcy and hold you liable for an unlisted debt.

Why You Must List All Debts in Chapter 7 Bankruptcy

It's common to want to pick and choose the debts you include in a Chapter 7 case, but it's not allowed. You must transparently list everything you owe, including obligations to your grandmother, best friend, ex-spouse, or business partner. The rule prevents filers from unfairly choosing which creditors to pay and hiding fraud to prevent the court from declaring that a debt is "nondischargeable" or a debt the filer can't eliminate and must repay after bankruptcy.

What Happens If You Forget to List a Creditor in Chapter 7?

The bankruptcy court might not "discharge" or eliminate the debt at the end of your Chapter 7 bankruptcy case. Whether the court discharges the debt will depend on several factors, including whether the Chapter 7 trustee distributed money to creditors in your case. (11 U.S.C. § 524(f).)

When You Can Discharge a Forgotten Debt in Chapter 7

Let's assume that you forget to list a creditor. However, nothing else about your case was unusual. You kept all property in what's known as a "no asset" bankruptcy case, so the Chapter 7 trustee didn't distribute any money to creditors.

Because no creditors received money, the unlisted creditor wouldn't have received anything even if you had remembered to list the debt. Because of this, most courts— but not all—would view the error as a "no harm, no foul" situation and discharge the debt.

When the Court Won't Discharge an Unlisted Chapter 7 Debt

Most courts won't discharge unlisted debts in "asset cases" when money is available for creditors. Some courts go even further and never discharge unlisted debts.

When the Case Is an Asset Case

A Chapter 7 asset case occurs when the filer can't protect all property using bankruptcy exemptions. If your case is an asset case, the trustee will instruct the creditors listed in the paperwork to fill out "proof of claim" paperwork to receive payment. An unlisted creditor loses the right to receive a portion of available funds.

For instance, suppose your state doesn't allow you to "exempt" or protect a rowboat worth $5,000. But you decide that losing the boat in Chapter 7 bankruptcy is worth discharging $35,000 in credit card debt. However, after your Chapter 7 case closes, you realize you forgot to list a debt. The discharge likely won't extend to the omitted debt because the unlisted creditor missed out on a share of the bankruptcy funds from the rowboat sale.

Keep in mind that this is a simplified explanation. You might be able to argue that none of the creditors in the particular class received payment because the trustee didn't have enough funds to fully pay higher priority debts, like tax and support obligation arrearages.

When the Bankruptcy Involves a Fraud Allegation

If you fail to list a debt and the creditor alleges fraud, the court will likely let the creditor reopen the matter and argue that you should repay the debt because of your fraudulent misrepresentations. This would likely be the outcome in both asset and no-asset cases because whether or not funds were distributed would have no impact on a bankruptcy court's decision to disallow a particular debt's discharge because of wrongdoing.

For instance, suppose you didn't list a creditor you defrauded by overstating your income when taking out a loan, and the creditor learns about your Chapter 7 bankruptcy. The bankruptcy court would likely allow the creditor to file an "adversary proceeding" or bankruptcy trial and declare the debt nondischargeable if the creditor proved fraud.

What to Expect in a Few Courts

A handful of courts won't discharge unlisted debts, even in no-asset cases. That is unless the unlisted creditor knew about or received notice of your bankruptcy case and had time to file a "proof of claim" asking for payment from the bankruptcy proceeds. However, this article assumes that didn't occur.

What to Do After Forgetting to List a Creditor in Chapter 7 Bankruptcy

Here are some options to consider:

• Amend the petition. If your case is open, fix the problem by filing an amendment to the bankruptcy schedule and adding the unlisted creditor. You'll also need to provide notice of the bankruptcy case to the newly added creditor.
• File a motion to reopen your case. If your case is closed, consider filing a motion asking the court to reopen it so you can add the unlisted creditor. The court might agree to let you do so and discharge the debt.

Can I Add a Creditor After Receiving a Debt Discharge?

You can, but you'll likely need to file a motion to reopen your case, and before you do, you'll want to know the effect it will have on your bankruptcy matter. Consider meeting with a local bankruptcy lawyer who can explain your court's policies and procedures. Learn about your options if you can't afford a bankruptcy lawyer.

Navigating Your Bankruptcy Case

Bankruptcy is essentially a qualification process. The laws provide instructions for completing a 50- to 60-page bankruptcy petition, and because the rules apply to every case, you can't skip a step. We want to help.

Below you'll find resources we think you'll enjoy or go to TheBankruptcySite for more easy-to-understand articles.

We wholeheartedly encourage research and learning, but online articles can't address all bankruptcy issues or the facts of your case. The best way to protect your assets in bankruptcy is by hiring a local bankruptcy lawyer.