You forgot to list a creditor in your Chapter 7 case. Now what?

When you are undergoing Chapter 7 bankruptcy, you are often burdened with several financial responsibilities. It is important to have an attorney by your side so you do not inadvertently miss any obligations. Nevertheless, stuff happens. If you do happen to make an innocent, good-faith mistake, you may still be protected from court sanctions in certain situations.

The Chapter 7 bankruptcy process mandates that filers list the names, addresses and account numbers of all creditors. This is intended for notice and potential repayment purposes. Because specific debts are discharged within the Chapter 7 process, it is extremely important for the court to have a comprehensive record of payment responsibilities. Under New Jersey law, a reckless omission could prevent debt discharge of money owed to the neglected creditor.

Nevertheless, if you realize that you have not listed one of your creditors in your paperwork, the first and most important step is to contact a lawyer. A lawyer can help you sort through the error.

Judd v. Wolfe

In most New Jersey Chapter 7 cases, there is little effect if a filer fails to list a creditor, as most filings are non-asset cases. In a bankruptcy case, a trustee of the court makes an inquiry into money and property that is available for distribution to creditors from your estate. If there is no property available (not including what is exempted by law), you have a non-asset case. This means that you are unable to allocate any assets to your creditors for repayment purposes.

New Jersey law has evolved out of a bankruptcy case, Judd v. Wolfe. According to Judd, in a no-asset Chapter 7 case, debt to an omitted creditor is deemed discharged, and the debtor is not obligated to notify the creditor. The logic is that because there are no eligible funds available for distribution, amending or reopening the bankruptcy case is essentially worthless. This would not change the fact that the creditor is incapable of receiving anything. After all, the estate is empty.

However, in a no-asset case, an attorney can nevertheless help you send a letter to the omitted creditor and inform them of your filing. Sending a copy of your discharge order will prevent the creditor from attempting to collect on the debt.

In the event that you do have assets, your lawyer can amend or reopen your bankruptcy petition. Because assets are available in an asset case, the omitted creditor may have recovery rights.

What is most important is that you relay your situation to your attorney. Every case is different, and you do not want to compromise your bankruptcy filing. A trusted and experienced bankruptcy law attorney can assist you through the process.