Are Unlisted Debts Discharged in a No-Asset Chapter 7 Bankruptcy Case?

You must list all debts on your Chapter 7 bankruptcy schedules without exception—even if you think they won't get wiped out by your discharge. If you leave off a debt, you risk remaining responsible for it.

What Happens If You Forget to List a Creditor in Chapter 7?

It depends. Nothing will likely happen if you don't have any assets to distribute to creditors. However, if funds are available or fraud is at play, you'll likely remain responsible for paying the debt.

Asset and No-Asset Cases in Chapter 7

When money is available for creditors in bankruptcy, the matter is considered an asset case. Any debt you fail to list in an asset case won't be discharged. So how do you tell if your case is an asset or no asset case?

If you can't protect all of your property with bankruptcy exemptions, the bankruptcy trustee appointed to the case will sell the nonexempt property for the benefit of creditors. This would be an asset case because funds would be available for creditors.

However, if you have no money to repay creditors because you can protect all property, yours is a no-asset Chapter 7 bankruptcy.

When a Creditor Is Not Listed in a Chapter 7 "No-Asset Case"

While you should do your best to include all debts in your bankruptcy, it's not uncommon for debtors to accidentally omit a creditor. If you do so in a no-asset Chapter 7 case, and the creditor doesn't suffer as a result (isn't "prejudiced by the omission"), most courts take a "no harm, no foul" approach and will still consider the debt discharged.

The reasoning behind the "no harm, no foul" approach is that if it was an innocent mistake and the creditor wouldn't have received anything anyway, discharging the omitted debt wouldn't change the outcome for that creditor.

When determining whether an unlisted debt should be discharged, courts might consider factors such as:

• the reasons you failed to list the debt
• whether including the debt in your discharge will disrupt the bankruptcy, and
• whether any creditors will be prejudiced if the debt is discharged.

Keep in mind that not all jurisdictions follow this basic rule. If you can't remember all of your creditors, consider meeting with a local bankruptcy attorney who can tell you what to expect in your area.

When a Creditor Alleges Fraud

If the omitted creditor alleges that you fraudulently failed to list its debt or that the debt is otherwise nondischargeable (for example, if you initially obtained the debt through fraud), you will likely have to litigate the issue in bankruptcy court if you want the debt discharged.

In that case, you might have to show that you made an innocent mistake, that there was no fraud involved, and that the debt is dischargeable.

Including All Debts on the Bankruptcy Forms

Your creditors need to receive notice of your bankruptcy, so the best way to ensure your discharge is to include all your debts when filling out your bankruptcy forms.

Before filing your case, gather all your bills and get a copy of your credit report. Then verify your obligations. Also, list debts that won't appear on your credit report, such as a loan from family or friends or an obligation you personally guaranteed.

If you accidentally omitted a creditor and your bankruptcy is not yet closed, you can amend your schedules to list the omitted debt. The sooner you remedy the problem, the more likely it will be perceived as unintentional.