When you are filing for bankruptcy, it’s all too easy to forget to list a creditor or to discover, after the petition has been filed, a creditor that you did not even know existed. When debts are bought and sold by creditors and collection agencies faster than a credit report can often account for the exchanges, it’s a commonplace phenomenon for a filing debtor to receive, after filing the petition, a collection letter from one of the seemingly endless fly-by-night collection agencies for a debt that the debtor did not know had changed hands. (As a consumer bankruptcy attorney working in a specific geographic area, the Detroit area of southeast Michigan, I am often amazed at the sheer number of these companies that come and go like schools of fish … Outside of a few larger agencies, each petition I file brings a slew of collection agencies I have never seen before and will likely never see again!)
Other times, leaving a creditor off of a listing is just a matter of simple error. No big deal. It happens. I try to avoid such error with my clients by working with them to obtain their latest credit report prior to filing their petitions. Most of the time, this nets all of the creditors swimming around them, and it will usually ensure that at least the original debts owed by my clients are successfully listed in the petition, even if a debt happens to have been recently sold off to some random collection agency.
So long as the error or omission is caught early enough in the roughly 4 month bankruptcy process, it is a simple matter to add a missed or missing creditor to a filed petition. The court charges a $23 fee for such amendments, but it is worth the cost. Although, in a Chapter 7, a non-listed debt will still be discharged, if the creditor has a claim against the debtor for fraud, theft, some willful or malicious act against the filing debtor, or if the creditor would have received funds from the filing debtor’s bankruptcy estate if they had been listed, that debt may not be discharged.
Additionally, it goes without saying that all debts and creditors must be disclosed. When you file a bankruptcy petition, your signature on the petition in several places indicates that you have completely and accurately disclosed all of your assets and liabilities. At the 341 Meeting of Creditors, about halfway through the bankruptcy process, you likewise will swear under oath that you have completely disclosed all of your assets and liabilities. A missing creditor that you are aware of or should have been aware of means that this cannot be true.
It is, thus, very important to work closely—and patiently—with your attorney when filing bankruptcy to ensure that all of the necessary information (especially creditors!) gets included. If your attorney works as I and most other bankruptcy attorneys that I am acquainted with do, you will be required to fill out a lengthy questionnaire at the beginning of your bankruptcy process from which your attorney will create your bankruptcy petition. It is not fun to fill out these questionnaires, but it is extremely necessary. Bankruptcy, like every legal process, is only worth doing if it is done right. It is always worth taking the time and effort up front to ensure that your bankruptcy filing is completely accurate in every way.
If you are a Michigan resident and are considering filing for bankruptcy, please contact me at jhilla@aronofflinnell.com or (248) 977-4182 to schedule a free, initial consultation.
One of the concerns most frequently expressed to me in consultations with potential Chapter 7 and Chapter 13 bankruptcy clients in my southeast Michigan practice is whether their reputations will be ruined by the filing of a bankruptcy. It is almost universally believed, I gather from my clients, that a bankruptcy, once filed and once known of by the general public, will result in both a sullied business and personal reputation and also in a complete inability to get credit of any sort of years to come.
