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Can Unlisted Debts Still be Discharged in my Chapter 7 Bankruptcy?

When you file for Chapter 7 bankruptcy, it is your responsibility as the Debtor to list all of your debts to the best of your knowledge. A credit report will be obtained prior to the filing of your case that will assist in identifying your debts; however, since not all creditors report to the bureaus a debt may inadvertently be omitted. Will this debt still be discharged? The answer depends on a few factors.

First, if you have nonexempt assets and your creditors will receive a distribution in your Chapter 7 bankruptcy, any unlisted debt will typically not be discharged. In this instance, the creditor would be harmed by the fact that it was not listed. This type of case is called an asset Chapter 7.

In a no-asset Chapter 7 case (where there are no nonexempt assets to pay creditors), the issue of whether an unlisted debt will be discharged depends on a few factors:
The rules in your specific jurisdiction:

  • Whether the creditor otherwise knew about the bankruptcy filing;
  • Whether you inadvertently or fraudulently omitted the debt;
  • Whether the omission harmed or prejudiced the creditor.

Therefore, if you inadvertently omit a creditor in a no-asset Chapter 7 case and that creditor is not prejudiced by the omission, most Courts take a “no harm, no foul” approach and still consider the debt discharged.

The reasoning behind this “no harm, no foul” approach is sound. Essentially the Court has concluded that if the omission was an innocent mistake and the creditor would not have received anything in the bankruptcy even if the debt had been listed, discharging the omitted debt doesn’t cause any harm or prejudice to that creditor.

Obviously, there are a few caveats to the “no harm, no foul” approach. If the creditor that was omitted alleges that you fraudulently failed to list its debt or misrepresented the debt in any way (for example, if you initially obtained the debt through some type of fraud), you will typically have to litigate the issue in bankruptcy court to determine the dischargeability of said debt.

As the debtor, you should review your debts carefully to make sure everyone that you owe is included in your bankruptcy. If you find that you omitted a creditor and your bankruptcy is not yet closed, you can easily amend your schedules to add the omitted creditor. Speak with your attorney immediately should you find that a creditor was not included in your bankruptcy filing.

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