If You Forget to List a Creditor in Chapter 7 Bankruptcy

Under the right circumstances, missing a creditor in a San Leandro bankruptcy case is not a problem.

In Chapter 7, Forgetting a Creditor Is Not the End of World.

Under the right circumstances, missing a creditor in a San Leandro bankruptcy case is not a problem.
Forgetting to list a creditor in bankruptcy is usually not as a serious as the detonation of an atomic bomb–usually.

Every once in a while, I get a frantic phone call from a former client who has just realized that she forgot to list a particular creditor when we filed a chapter 7 bankruptcy case several years before. “Is it too late to add the creditor?” she’ll ask.

There are two parts to the answer–at least in most chapter 7 bankruptcy cases filed in the Oakland bankruptcy court. The first is that, no, you can’t add the creditor; the second is that even though you can’t add the creditor, it most likely doesn’t matter and the debt has still been wiped out.

How can this be, you ask. It’s one of the wonders of the bankruptcy law as they have been interpreted by the Ninth Circuit, the court of appeals that interprets law for the West Coast states including California.

The simple version is that bankruptcy is intended to help people start over financially. The order at the end of the case called a discharge order indicates that all debts owed to creditors that can be wiped out have been wiped out. It doesn’t say anything about whether the creditors received any kind of notice of the bankruptcy because a discharge doesn’t necessarily require that the creditors receive notice.

Notice to the creditors is necessary for two big reasons. First, so the creditor can have time to object to its claim being wiped out through discharge. Second, so the creditor can have time to file a proof of claim in the case and get paid if there’s any money available to be paid out to creditors. When there is money to be paid out, there will be a deadline for creditors to make their claims. If they miss the deadline, they don’t get paid.

No Deadline in Bankruptcy Case Means No Deadline to Miss

For most regular people in most regular bankruptcy cases in the Oakland and San Leandro area, however, there are simply no assets to be paid out to creditors. What this means is that there is never a deadline for creditors to file their claims. If there’s no deadline to miss, they don’t get hurt if they don’t know about the deadline. That’s the second issue I mentioned above.

If They Can’t Object for Fraud They Likely Can’t Object

On the first issue, creditors are supposed to be notified of a bankruptcy case so they have time to object. The thing about objecting is that they can only object for certain specific reasons. One of the biggest is if they feel the debtor incurred the debt fraudulently. (For instance, they lied on their credit applications and said they were brain surgeons making $500,000 a year–and they really weren’t.) Obviously, most debt is not fraudulent debt so most creditors would have no reason and therefore no ability to object. Again, without a reason to object for fraud, the creditor really hasn’t been harmed by not being told about the bankruptcy case.

Now, lest anyone should get any funny ideas, you need to keep in mind that you are required by bankruptcy law to list all of your creditors in your bankruptcy case. You don’t get to pick and choose. You list all of them and then you sign at the bottom under penalty of perjury that you have listed all of them.

I would not want to be a debtor standing in front of a bankruptcy judge in Oakland (the location of the court for San Leandro and San Lorenzo bankruptcy cases) and explaining why I intentionally didn’t list a creditor. I really would not want to do that. This little tidbit is only for honest debtors who honestly forgot to list a creditor.

Lie in Bankruptcy Case and Go to Prison

Dishonest debtors who deliberately leave out creditors when they file their bankruptcy cases may find themselves wearing bright orange jumpsuits, eating three square meals a day on a tiny tray and learning to get along with a burly roommate named Bubba. None of my clients have been to prison yet and I intend to keep it that way. We disclose all creditors in bankruptcy cases filed by my office!

Always talk to an experienced bankruptcy attorney before you do anything in preparation for a bankruptcy case. I am confident that you won’t regret it.

Author: James Pixton

James Pixton is a bankruptcy attorney in Alameda, California. He saves clients' home from foreclosure. He helps them wipe out tax debts, credit card bills and catastrophic medical bills through Chapter 7. He is an expert at eliminating second mortgages and lines of credit on underwater homes. When he isn't helping clients, he can be found playing water polo with his kids. Speaking of which, he is the father of four gregarious children, two of whom are also very serious water polo players. The other two are prolific readers and writers.