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

Question

I forgot to list a debt in my Chapter 7 bankruptcy case. Will my Chapter 7 discharge wipe it out or will I still owe it after my case ends?

Answer

It depends. 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 case 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 so the court doesn't declare a debt "nondischargeable" (must be paid after bankruptcy).

Even so, some courts will discharge an unlisted debt.

When a Court Will Discharge an Unlisted Chapter 7 Debt

Let's assume that you forget to list a creditor. But your case is like most, and you get to keep all of your property. You have a "no asset" bankruptcy case, so the Chapter 7 trustee appointed to oversee your bankruptcy won't have any money to give to creditors.

Most courts would view your error as a "no harm, no foul" situation and would discharge the debt. Why? Because the unlisted creditor wouldn't have received anything even if you had remembered to list the debt.

But exceptions exist.

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

Not everyone can protect all of their belongings in Chapter 7. Sometimes the trustee sells some of your property in an asset case.

For instance, suppose your state doesn't allow you to exempt (protect) a rowboat worth $5,000, but you decide to let it go so you can discharge $35,000 in credit card debt. After your case closes, you realize you forgot to list a debt. The discharge won't extend to the omitted debt because the unlisted creditor missed out on a share of the bankruptcy funds from the rowboat sale.

Also, a few 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 to be paid out of the bankruptcy proceeds.

And finally, you should be aware that problems can arise in any case involving alleged fraud, regardless of whether the matter is an asset- or no-asset case.

For instance, suppose you fail to list a creditor you defrauded by overstating your income when taking out a loan, and the creditor learns about your Chapter 7 bankruptcy. The court will likely let the creditor reopen the matter and argue that you should repay the debt because of your fraudulent misrepresentations.

What to Do After Forgetting to List a Chapter 7 Debt

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.
• 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.

Navigating Your Bankruptcy Case

Bankruptcy is an unusual area of law because it's essentially a qualification process. The laws provide instructions for completing a 50- to 60-page bankruptcy petition, and because all rules apply in every case, you can't skip a step.

The forms and resources below will help you find more information. Also, you can use this list of Chapter 7 and 13 bankruptcy forms to see where this topic falls. And this handy bankruptcy document checklist will help you gather the things you'll need to complete the petition.

Need More Info?

We want to help you find the answers you need. Go to TheBankruptcySite for more easy-to-understand bankruptcy articles, or consider buying a self-help book like How to File for Chapter 7 Bankruptcy by Attorney Cara O'Neill.

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 consulting with a local bankruptcy lawyer.