Forgotten Creditors Unlikely to Get Paid in Bankruptcy Process

When filing for bankruptcy, a debtor may forget to list a creditor. This is not an ideal situation for the debtor, as they may still owe that debt after discharge.

When a debtor is filing for bankruptcy protection, they must fill out numerous documents that tell the court the names of all the creditors involved in their case, what real and personal property they own, and who their unsecured and secured creditors are and how much they are owed. The list must be complete, but occasionally a creditor is inadvertently left off the list. It is best to immediately consult with your Iowa bankruptcy lawyer to find out what to do when you discover that your creditor list is incomplete.

If the debtor has filed a Chapter 7 bankruptcy, he or she is required to submit Schedules A through J to the bankruptcy court as part of their bankruptcy petition. Schedule A lists the debtor’s real property. Schedule B lists all personal property the debtor owns and Schedule C lists property exemptions.  Schedule D lists secured debts (such as mortgages or car loans), Schedule E lists unsecured priority debts (such as child support or past-due tax obligations), and Schedule F lists unsecured nonpriority debts (such as credit cards and medical bills).  In schedules D through F, debtors must list all of their creditors, and provide the following information as it pertains to each debt he or she has with each creditor: the account number used with each particular creditor; the creditor’s name and mailing address, and the amount owed to the creditor.  The bankruptcy Trustee uses Schedules D through F to ensure all creditors are recognized and paid. The remaining Schedules are G through J. If the debtor has executory contracts and/or unexpired leases, they are listed on Schedule G. If the debtor has any co-debtors, then on Schedule H the debtor must provide the name and address of each co-debtor as well as identify the shared creditor. Finally, the debtor’s monthly expenses and income are set forth on Schedules I and J.

As you can see, with all the lists, rules, and various requirements for filing for bankruptcy protection, it is possible to accidentally omit a creditor. If your case is being handled by a competent Iowa bankruptcy lawyer, he or she will attempt to ensure that your Schedules are complete and accurate by asking questions designed to help you search your memory for forgotten debts.

Once the Chapter 7 bankruptcy has been filed, it is the Trustee’s responsibility to identify and liquidate the debtor’s non-exempt property, and then notify the list of creditors set forth in your Schedules of any possible distributions. If the debtor forgets to list one of his or her creditors, then that forgotten creditor will not have the opportunity to receive a portion of any potential distribution in the case. The most important thing to note is that if the debtor forgot to list a creditor in his or her bankruptcy, and the debtor receives a discharge of his or her debts, the debt to the forgotten creditor is arguably still owed.

Kevin Ahrenholz is an Iowa bankruptcy lawyer and Iowa bankruptcy attorney. To contact him, visit https://www.iowachapter7.com or call 1.877.888.1766.