It is common for debtors with numerous creditors to forget to list a creditor on a bankruptcy petition. This could happen with an old account that has remained open but unused for several years or a forgotten joint account from a former spouse. Just because a debt was not listed on the petition does not mean the debt cannot be discharged. Pursuant to 11 U.S.C. § 523(a)(3), unlisted debts are discharged unless the debt falls into one of the following categories: (1) funds obtained by fraud; (2) funds obtained by fraud while the debtor is acting in a fiduciary capacity; or (3) debt caused by the debtor’s willful or malicious actions which cause injury to a creditor. 11 U.S.C. § 523(a).

If a debt is discovered after a bankruptcy petition has been filed, the critical question is whether the estate includes any nonexempt assets. If there are no assets in the case for a trustee to administer, listing another debt would be a waste of time. However, if there are assets to be liquidated, the debtor must make an accurate assessment of whether the creditor would be prejudiced by not being included in the bankruptcy petition. If the estate includes nonexempt assets, the next question is the timing of the discovery. If the debt is discovered after the time for filing a timely proof of claim the creditor cannot seek to recover any portion of the debt from the trustee and the unlisted debt will not be discharged. If the creditor is placed on notice of the bankruptcy filing with sufficient time to file a proof of claim, but after the 90-day deadline to commence an adversary action to contest whether the debt is dischargeable, the debtor may be able to use the discharge as a defense in a state court proceeding. In that event, the debtor may be able to limit the creditor’s claim to the types of debt listed above which cannot be discharged. If all else fails, a debtor can petition the court to reopen the bankruptcy case pursuant to 11 U.S.C. § 350.

The moral of the story is that it is important to carefully review your debts and credit report before filing for bankruptcy protection. Identifying all debts on the initial bankruptcy petition will avoid the unnecessary hassle of filing amendments and delaying the bankruptcy process.

- Richard V. Stokan, Jr.