By Kitty J. Lin
It may happen from time to time. You do not realize you owe a debt to someone and therefore it they are not listed in the bankruptcy petition. Not many people have perfect memories. What happens frequently in the bankruptcy world is that our clients would come to us panicking because they realized they forgot to include a creditor in the filed bankruptcy petition. Does this affect the discharge of the debt owed to the forgotten creditor? Pursuant to 11 U.S.C. §523(a)(3), debts that are not listed in your petition will not be discharged if it deprives your creditor from filing a timely claim or it deprives your creditor the opportunity to timely file a nondischargeability complaint in your case (for example, a fraud action). However, that is not the end of the story. In the Ninth Circuit, the answer generally depends on what type of bankruptcy case you are filing. You should consult with your bankruptcy lawyer regarding any omitted creditors from your petition as soon as you realize you left someone out.
Chapter 7 Bankruptcy
If you have filed for Chapter 7 bankruptcy protection the question you should ask is whether or not your bankruptcy estate has unexempt assets available to distribute to your creditors. If you can exempt all your assets then there will be no assets available to distribute to your creditors. This is considered a “no asset” case. Pursuant to In re Beezeley, 994 F.2d 1433 (1993), the Ninth Circuit Court of Appeals indicated that if the case is a no asset no bar date Chapter 7 case, your creditors would not be prejudiced if you omitted them in your petition and you received a discharge of your debts. You would not need to re-open the case to add the creditor by amending your schedules. If the debt was dischargeable it would still be discharged regardless of whether they received notice since they would not receive any distribution of your assets (because there are no assets to be distributed). If the debt was nondischargeable because it was an intentional act or based on fraud or other basis for nondischargeability the debt would remain nondischargeable whether the creditor was added to the schedules or not. The creditor would still be free to file an adversary complaint to determine dischargeability just as if they received timely notice. Basically, it would be pointless to re-open a case just to add an omitted creditor if your case is a no asset no bar date Chapter 7 case.
If your Chapter 7 case is an asset case, meaning you have assets available to distribute to your creditors, then omitting that creditor from your bankruptcy case would result in that debt being nondischargeable since that creditor did not have an opportunity to file a proof of claim to get their share of your assets. The most important thing is notice. If the omitted creditor did not receive notice from you or the bankruptcy court, but the creditor still had actual knowledge of your bankruptcy case, they will be considered to have notice.
Chapter 13 Bankruptcy
If you have filed a Chapter 13 bankruptcy case debts owed to an omitted creditor would not be discharged as well if the creditor did not have notice and therefore was not able to file a timely proof of claim. If the creditor did not have the opportunity to file the proof of claim they will not be paid in your Chapter 13 case and are therefore prejudiced. They will be able to continue to collect on the debt that you omitted from your Chapter 13 case after the discharge of the other debts scheduled in your bankruptcy case.
In conclusion, if you have a no asset, no bar date Chapter 7 case, you should absolutely provide all of your creditors to your bankruptcy lawyers and list all of your creditors, but you generally should not worry too much about having forgotten to list a creditor. Again, our memories are not perfect and someone out there may think you owe them money that you have no idea why they think that or even who they are. If you have an asset Chapter 7 case or a Chapter 13 case, it is advisable you go through your list of creditors very carefully to ensure that all your creditors are listed so you can receive a discharge of those debts in your bankruptcy case.