What If You Forget a Creditor?

Usually by the time a person visits a bankruptcy attorney he has been struggling with overwhelming debt for months if not years. Often the person’s creditors have not been paid for a considerable time. It is not surprising that occasionally a person will forget to list a creditor in the bankruptcy paperwork.

If an omitted creditor is discovered during the bankruptcy case, the law requires the debtor to file amended schedules and identify the creditor. The debtor has an obligation to ensure all creditors are identified and receive notice of the bankruptcy case. Intentionally failing to list a creditor can cause that debt to be declared non-dischargeable and survive the bankruptcy. In extreme cases the bankruptcy court may deny a discharge altogether.

Sometimes even the most diligent debtor will forget a creditor. Things get trickier if the omission is discovered after the bankruptcy case has closed. How the debtor proceeds will depend on the court and the circumstances. In many cases an omitted creditor is considered discharged as a matter of law. If an unsecured creditor did not receive notice of the bankruptcy, but none of the debtor’s assets were distributed to creditors, many bankruptcy courts say the omission did not have any practical effect. In these cases it didn’t matter that the creditor did not receive notice, the debt is discharged anyway.

Conversely, if an omitted creditor loses the opportunity to receive money through the bankruptcy, the omission matters a great deal. Under these circumstances the failure to include the creditor means the debt cannot be discharged and the debtor is stuck with paying the debt.

If you discover an omitted creditor during or after your bankruptcy case, inform your attorney immediately. You and your attorney can discuss the proper procedure for dealing with an omitted creditor.