Requirement to List All Creditors When Filing for Bankruptcy

Commonly when a debtor considers filing for bankruptcy he/she thinks that if he/she could get rid of a particular debt, or group of debts, that the rest of the payments would be reasonably affordable. From this thought, debtors often want to list, or “file bankruptcy on some debts”. Commonly debtors want to exclude items that they wish to keep, such as a car or particular store credit card.

The bankruptcy code simply does not allow this type of preferential treatment. Any amount owed, no matter how insignificant or affordable it may seem, must be listed on the bankruptcy petition. A debtor is required to list the debt regardless of whether the debt is dischargeable. Further, the debtor is required to list the debt regardless of who the money is owed to. For example, if a debtor owes his/her family member money is must be listed, and the debt is legally discharged in a Chapter 7 Bankruptcy.

Unfortunately, there may be some adverse effects from listing debts. Certain utilities may charge deposits to turn service back on in a debtor’s name that has filed for bankruptcy. Credit card companies may cancel a card held in a debtor’s name that has filed for bankruptcy.

The bankruptcy code does allow preferential treatment to vehicles and mortgages, in that the debtor may opt to continue payments and keep the vehicle or house. Some creditors with security agreements on purchased items (i.e. Best Buy has a security interest in the credit agreement that the balance on the card is secured by the collateral purchased) may offer debtors the opportunity to reaffirm the debt to keep the collateral.

When given this advice some debtors want to pay off certain balances on credit cards, etc. to avoid the requirement of listing the debt on the schedules. The Bankruptcy Code discusses preferential treatment in a number of sections. Any payment of over $600 in the year leading up to bankruptcy must be disclosed on the bankruptcy petition. The trustee, at his/her discretion, may reverse any such payment. Basically, this means that the trustee will demand the money back from the creditor and take the money and distribute amongst all creditors. It is also important to note that a payment of any amount to a friend or family member must be disclosed on the petition. Failure to comply with requirements can have a number of consequences, including revocation of a discharge and criminal proceedings for fraud.

If you have questions about this, or would like to schedule a free consultation, contact a St. Louis Bankruptcy Attorney Today.