1.1. All Creditor Names & Addresses Must Be Listed. The creditor’s name and address is the most important information on the bankruptcy schedules. A Debtor must list the proper name and address of every creditor. If the creditor’s name is improperly spelled or the address is incorrect, and the creditor never receives notice of the bankruptcy filing, the debt may not be discharged in bankruptcy. Index
1.2. Debt Amounts Not Important. The debtor should make a good faith effort to list the approximate amount owed to all creditors. However, the debtor does not need to determine or list the exact amount of the debt. If the creditor’s name and address is correctly listed so that he receives notice of the bankruptcy filing, the debt will be discharged regardless of whether he incorrectly lists the debt amount. Index
2. Actual Knowledge Exception. If the creditor obtains actual knowledge of the bankruptcy filing in time to file a discharge contest, the debt will be discharged even if the debtor fails to list the creditor on the bankruptcy schedules. Index
Example. Debtor owes $100,000 to ABC Bank. He does not list ABC Bank anywhere on the bankruptcy schedules. ABC Bank never receives any formal written notice of the bankruptcy from either Debtor or the bankruptcy court. About 60 days before Debtor receives a bankruptcy discharge, Jane Doe, a Vice President at ABC Bank, telephones Debtor and demands payment. Debtor informs Jane that he filed for bankruptcy. He gives her the case number, the bankruptcy court location, and the name and phone number of his bankruptcy attorney. Jane writes a memo to the loan file reciting that Debtor filed for bankruptcy, and records the case number, court location and other information given by Debtor. The debt owed to ABC Bank will be discharged because ABC Bank had actual knowledge of the bankruptcy filing in plenty of time to file a discharge contest.
3. No-Asset Cases. Approximately 99 percent of all consumer bankruptcy cases filed under Chapter 7 are “no asset” cases. A “no asset” case is a case in which all of the debtor’s assets are either exempt from seizure under federal or state law, or are of such minor value that the bankruptcy trustee abandons the assets. The 5th Circuit Court of Appeals has stated that in “no asset” cases, a debtor may receive a discharge of unlisted debts if: Index
► the failure to schedule the creditor was not intentional but was due to negligence or inadvertence;
► the bankruptcy court’s docket will not be unduly disrupted; and
► the creditors right to file a discharge contest has not been prejudiced.
At best, this area of bankruptcy law is very grey, and a debtor should never rely on it. First, the process of obtaining a discharge of an unlisted debt is very expensive and cumbersome. Under current practice in this circuit, the debtor must attempt to reopen his bankruptcy case and ask permission to add the unlisted creditor to the bankruptcy schedules. Second, the debtor would then have the difficult burden of presenting evidence in court proving all three elements listed above. The most recent two case opinions on this subject ruled against the debtor, and did not allow him to add the unlisted creditor under circumstances suggesting that the debtor was merely negligent in failing to list the creditor. Finally, if the creditor has any possible means of claiming that the debt was non-dischargeable because of fraud or other misconduct, the court will usually deny the debtor permission to add the unlisted creditor. Index