Do I Need to List Every Debt in my Chapter 7 or Chapter 13 Bankruptcy? (Revisited)

I’ve written before on the subject of whether all debts must be listed in a Chapter 7 or a Chapter 13 bankruptcy petition as an answer to the very commonly asked question, “Can I leave my favorite credit card out of the bankruptcy?”

The answer to that question is an easy, “No, you cannot leave a debt out of the bankruptcy; the US Bankruptcy Code requires that all assets and all liabilities (debts) must be listed in either a Chapter 7 or Chapter 13 petition—and treated in a Chapter 13 payment plan one way or another.

However, there are additional reasons why you would want every debt listed, even if you otherwise desired to leave it out of the bankruptcy:

In some cases, the debt might not be discharged if not listed: In a typical “no-asset” Chapter 7 bankruptcy (“no-asset” meaning that the Trustee is not able to liquidate any of the filing person’s personal property), an unsecured debt is, under the rules established by some well-settled case-law at this point, discharged whether it has been listed or not. However, not only does this not apply to a Chapter 13 bankruptcy, in which all debts must be listed and treated in order to be discharged, but, even in Chapter 7 bankruptcies, it is not always possible to know ahead of filing the bankruptcy whether it is a “no-asset” Chapter 7 or an “asset” Chapter 7 in which the Trustee is able to liquidate some property or retrieve some funds prepaid to creditors. In an “asset” Chapter 7, all creditors have a right to receive a notice that funds are available to help pay the filing person’s debt down; no notice = no discharge.

Creditors won’t know to stop harassing you if they aren’t mailed a notice of the filing by the Bankruptcy Court: One of the greatest benefits of the filing of a Chapter 7 or Chapter 13 bankruptcy petition is the protection of the “automatic stay against collections,” a master Federal injunction that clicks into place upon the filing of a petition forbidding any creditor from doing anything that constitutes collection of a debt. For many, the day after a petition is filed is the first day the telephone has stayed quiet in the evening for months. Don’t deny yourself well-deserved peace and quiet: list the debt!

You may lose out on the right to reclaim funds garnished by creditors prior to filing or on the right to pursue claims against creditors in Bankruptcy Court for collections and automatic stay abuses: The US Bankruptcy Court is the best forum available in the American court system for asserting your rights as a consumer against creditors. With a bankruptcy filing, you can have funds garnished from your bank account, tax return, or paycheck by creditors returned after filing under some circumstances, and you can pursue claims against creditors for various violations of law with regard to their collection practices in the Bankruptcy Court—for no extra filing-fee. If you don’t list the debt and the garnished funds, you won’t get it back. If you don’t list the claim, you will lose it even in a state court lawsuit later on.

There are other reasons as well, not the least is the penalty of perjury if you are willfully not disclosing a debt (even to your great grandmother living in a cottage on the outskirts of Flint, Michigan), but taking full advantage of the protections and advantages of the bankruptcy process requires full disclosure. Providing that disclosure gives you the best shot not only at a full, complete fresh start after your bankruptcy but also the possibility of maximizing your advantage over your creditors in some unique and interesting ways.

If you are a southeast Michigan resident considering bankruptcy, please feel free to contact me at (866) 674-2317 or to schedule a free, initial consultation.

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