By Jeff Curl

Occasionally I get the call from a client that forgot to list a creditor in his or her bankruptcy. They received the discharge, but want to know if they are now responsible for the omitted debt. This raises a few issues.

Was the Debt Dischargeable?

It first depends upon the type of debt. Debts in bankruptcy are either dischargeable (you can get rid of it) or nondischargeable (you’re stuck with it). Typical dischargeable debts include medical bills and credit cards. Typical nondischargeable debts include student loans, child support and recent taxes. If the debt omitted was something you could not discharge in the first place like student loans, you are stuck with it no matter what.

Was it a Chapter 7 “No Asset” Case?

But what if it was dischargeable? What if you forgot about the $8,000 credit card you have not used for a year or two? If you filed a Chapter 7 case, but were not able to exempt and keep all of your assets, the debt would survive. Luckily, the majority of those cases are “no-asset” cases. This means you were able to exempt and keep all of your assets; the trustee took nothing from you to pay your creditors.

If your debt was dischargeable in the first place, and if your case was the typical Chapter 7 “no-asset” case, those of us in the Ninth Circuit, including California, are in luck. Here’s some bankruptcy nerd talk: under the Ninth Circuit case of In re Beezley (recently followed by the Bankruptcy Appellate Panel in In re Heilman), the forgotten creditor has no claim against you. Your debt is discharged. It was a no harm, no foul situation because the debt was dischargeable and the creditor would not have received anything even if it was listed.

Take Immediate Action

If the omission of a creditor is discovered while the case is open, the petition should be amended immediately to add the creditor, and that creditor should be given notice as well. This is true even if you filed a Chapter 7 no asset case.

Tagged as: creditors, debt, dischargeable, nondischargeable