Usually, people filing bankruptcy want to make sure they can include certain types of debt. Debts that can’t be discharged in a Chapter 7 case or included in a Chapter 13 repayment plan can limit the effectiveness of a bankruptcy filing. And, of course, everyone wants to be in a stronger financial position after bankruptcy, with as little debt as possible.
Still, people considering bankruptcy sometimes ask whether they’re required to list all of their debts in the bankruptcy filing. Some reasons a bankruptcy petitioner might not want to list debt include:
- The debt is to a relative or friend, and the bankruptcy petitioner wants to pay it
- A friend or relative cosigned on the debt, and the bankruptcy filer wants to protect that person from liability by continuing to make payments
- The debt is to someone the bankruptcy petitioner doesn’t want to know he or she is filing bankruptcy, such as an employer or business contact
While these concerns are understandable, you don’t get to pick and choose which debts to list in a bankruptcy case. While the bankruptcy process was created to help people struggling with debt regain control of their finances and become active participants in the economy, it also has protections built in for creditors. One function of the bankruptcy trustee is to ensure that creditors are treated fairly in bankruptcy. That means you don’t have the option of wiping out your debt to some creditors while choosing to remain obligated to other unsecured creditors.
It’s important to keep in mind exactly what we mean by the phrase “listing the debt.” I have potential clients all the time tell me they “don’t want to list the car” or some other secured debt they are paying because they want to keep it. That is a separate issue called “reaffirming a debt.” Even debts you want to keep and pay like vehicles and houses must still be listed in the bankruptcy forms. The Court must still be informed that the debt exists in the first place before you even get to the issue of reaffirming or not.
The information a bankruptcy petitioner must provide to the court is extensive. Much of that information is included in schedules that are filed with the bankruptcy petition. These include:
- Schedule A/B: A listing of property
- Schedule C: Property you’re claiming is exempt
- Schedule D: Claims of secured creditors
- Schedule E/F: Claims of unsecured creditors
- Schedule G: Executory contracts and unexpired leases
- Schedule H: Codebtors
You’ll also include schedules detailing your income and expenses.
Note that all secured and unsecured debt must be listed, even if you intend to pay a particular debt or you have a codebtor who will continue to make payment. Similarly, any residential leases and service contracts in progress must be listed, even if you plan to continue to honor those agreements. To clear up any uncertainty about the possibility of omitting debts, the official instructions for Schedule E/F include all of the following statements:
- Do not leave out any unsecured creditors
- List all unsecured creditors in each part of the form in alphabetical order as much as possible.
- Even if you plan to pay a creditor, you must list that creditor.
- When listing creditors who have unsecured claims, be sure to include all of them.
They’re serious about inclusion. In fact, you must list creditor claims even if you disagree with the amount of the claim or don’t believe you owe the debt at all–the form provides an opportunity to mark the claim as “disputed.”
Paying Discharged Debt after Bankruptcy
Of course, the purpose of a Chapter 7 bankruptcy case is to discharge debt and free yourself from the legal obligation to pay. But, many people who ask about leaving certain debts out of the bankruptcy filing have specific reasons for wanting to treat those debts differently. You can’t leave anyone out. But, a bankruptcy discharge only relieves you of the obligation to pay–it doesn’t prohibit you from paying voluntarily.
So, if you’ve received a Chapter 7 bankruptcy discharge but are concerned that filing bankruptcy on your debt to Uncle Pete down in Mobile is going to strain family relationships, you’re free to pay Pete after your bankruptcy is final. And, if your mom cosigned for the car you surrendered in bankruptcy and you’re worried about the finance company pursuing her for the shortfall after the car is sold, you can pay the finance company or your mom.
Most debts that people want to pay after bankruptcy involve friends, family members, employers, and others the bankruptcy petitioner has a more significant relationship with than the typical creditor. But, everyone has different reasons for wanting to pay certain debts after bankruptcy. Perhaps you’ve been seeing the same Birmingham family doctor since childhood and don’t want to sour the long-term relationship, for yourself or your family.
If the debt you want to pay is to a traditional creditor, you’re still free to make those payments. Be aware, though, that the creditor may treat those payments differently than you’re used to. For instance, when a debt has been discharged in bankruptcy, most creditors won’t send monthly statements, even if you request them. In addition to the logistic issues that may be associated with resuming billing on an account that has been zeroed out post-bankruptcy, creditors may rightly be concerned that issuing bills after bankruptcy could subject them to sanctions for violating the bankruptcy discharge order. Similarly, you can expect that most discharged debt you pay voluntarily won’t be reported to credit reporting agencies. In some cases, the creditor will even decline payment.
In Bankruptcy, Disclose, Disclose, Disclose
Knowingly leaving anything out of your bankruptcy petition could put your whole bankruptcy case at risk. In some situations, the consequences could be even more serious–your bankruptcy forms are submitted under oath, meaning that any misrepresentations could be treated as a crime.
Listing all of your outstanding debts may be uncomfortable if you owe family members, employers, and others who are close to you. But, discharge of your legal obligations won’t prevent you from voluntarily making things right if you choose to do so.
To learn more about your bankruptcy options, schedule a free consultation with one of our experienced debt relief attorneys right now. Just call 877-581-3396 or fill out the contact form on this page.
Nick Gajewski is an Associate Attorney at the Bond & Botes Law Offices in Florence and Haleyville, Alabama. He holds a Bachelor of Arts from the University of Alabama, and a Juris Doctorate from the University of Alabama School of Law. Nick joined the team of Bond & Botes bankruptcy lawyers back in 2014 and has been helping clients navigate financial issues since. Read his full bio here.