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Failing to list a creditor in a Chapter 7 bankruptcy – City of Whittier
05 November 2013

Failing to list a creditor in a Chapter 7 bankruptcy

It is the debtors’ duty to list all creditors at the time of filing. Most debtors who file Chapter 7 bankruptcy correctly list all creditors. Some debtors do not. For those that do not list all their creditors, the creditors not listed will not receive notice of the bankruptcy and discharge to follow. Thus, the unlisted (aka “unscheduled”) creditors will continue to pursue the debtors in collection procedures during or after the bankruptcy and the debt may not be considered discharged.

A debtor’s failure to list all creditors can be very costly and damaging to the debtor. Depending on whether the case is considered an “asset: case or a “no-asset” case, two possible outcomes can occur:

  1. Asset cases- Occurs when the assigned trustee determines assets exist and thus such proceeds from the sale of these assets is used to repay scheduled creditors (all or in part).
  2. No asset cases- this is where the trustee locates no assets to sell and distribute the proceeds to repay scheduled creditors.

By placing yourself in the shoes of a creditor, you can better understand the difference and the importance of receiving notification of a debtor’s bankruptcy filing. Asset cases: creditors want to be listed since they would receive a portion of the proceeds of the sale of the assets. Non-asset cases, creditors would not loose any potential proceeds since no assets exist in the first place.

First: Determine whether you (debtor) case is an asset or no-asset case. This will most likely require the assistance of an experienced bankruptcy attorney. Once this is determined, a debtor’s failure to list a/some creditors is a significant mistake can be assessed.

Filing for bankruptcy is a complex legal process full of deadlines and irreversible decisions. Fully understanding the complexities of each bankruptcy case and proper planning is a must and should be performed by an experienced bankruptcy attorney. Debtors looking to file bankruptcy should contact Nassar law (Brea, CA; serving the City of Whittier) and speak to Whittier’s experienced bankruptcy attorney, Gregory E. Nassar, Esq.

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