Help! I Forgot to List a Creditor on My Bankruptcy Application!

By law, your bankruptcy application must be correction and complete, and if you omit information, even by mistake, it can lead to your request being denied. Not only might you ruin your chances for a successful bankruptcy, you could find yourself in serious legal trouble. Despite the dire warnings, there are instances in which information is mistakenly left out of a bankruptcy application. What should you do if you discover your application was incomplete?

The simplest answer is to correct the problem as soon as possible. Contact your bankruptcy attorney immediately – he or she might be able to help you fix the problem. Ideally, working with a bankruptcy attorney will ensure there are no mistakes on your application, but there are instances in which someone filing forgets to mention a debt or does not believe he or she is responsible for a debt. If this occurs, your attorney will do whatever possible to correct the problem.

How Bankruptcy Type Affects Your Situation

How a mistake on your application is handled depends on the type of bankruptcy you are requesting. In Chapter 7 bankruptcies, if a creditor is omitted from an application, it doesn’t necessarily mean that the creditor’s claim survives. Ideally, you need to include every creditor because an omission now introduces some uncertainty into your closed case. The good news is that if you had a ‘no asset’ chapter 7 and no creditors received any payments, then the debt could be considered as included. The issue will be whether that creditor suffered any prejudice by being included in the discharge. What if, for example, the creditor could have asserted a claim of fraud to make the debt non-dischargeable?

By not including that creditor in the bankruptcy and them not receiving notice, you now have a potential surviving debt. That is why it is best to make sure everyone is included.

Another wrinkle could be that your case was not a “no-asset” case. What if there was some equity in a vehicle and a small payment of a few thousand dollars was made to the trustee? Not listing that creditor results in a prejudice to their claim. They could have received something, possibly pennies on the dollar. The result of omitting them means their claim will survive.

Imagine if it’s a $20,000 debt that survives and all you paid in your bankruptcy was $1,500? Now that whole $20,000 survives because there was some payout to a creditor. This just underlines the fact that while an omitted creditor might be included in the discharge it should not be an assumption and very careful review of the creditor list should be made.

Creditors can also expect to receive payment in a Chapter 13 bankruptcy, but that repayment comes from cash, not the liquidation of assets. Like omissions from a Chapter 7 with assets, you remain responsible for paying a debt in full if it is not part of your Chapter 13 bankruptcy repayment plan.

What Should You Do If You Forget a Creditor?

First, contact your attorney with the information as soon as possible. It is possible to amend your application, but there is limited time to do so. Ideally, you will realize your mistake before the 341 meeting of creditors occurs (approximately one month after you file). Aside from a possible fee for the amendment, there should be no other consequence.

The best way to avoid mistakes when you file for bankruptcy is to work with an experienced attorney. He or she will complete a thorough review of your financial situation, reducing the chances anything will be left off your application. To learn more about filing for bankruptcy or correcting a mistake made when you file, contact the law office of Frank J. LaPerch, PC at 845.942.5500.