Forgotten creditor in bankruptcy.

Saturday , 5, October 2013 Leave a comment

Bankruptcy Lawyer in Neptune NJ.

What Happens When a Debtor Forgets to list a debt?  A common telephone call is one from a debtor expressing their concern that they forgot to list a creditor in their bankruptcy petition. Furthermore, they are concerned that they will still owe the debt as a result of their mistake.

Depending on whether the case is a Chapter 13, or Chapter 7, provides for differing results when a debtor forgets to list a creditor. We seek to avoid this mistake by having our debtors pull copies of their recent credit reports to make a forensic check of all of their reported debts. This generally provides us with the most up-to-date debt information.

However, the situation does arise where a creditor is simply omitted. This is nothing to worry about if it is an honest mistake. In cases where a debtor lacks good faith i.e.  the debtor had known about the debt for years, but neglected to amend their petition earlier. Or where the debtor’s omission was the result of fraud, recklessness or intentional design, this can result in the debt not being discharged because it would it would prejudice the creditor’s rights.

So, if you see a debt missing in bankruptcy paperwork bring it to your attorney’s attention. He/she will amend the petition if necessary. In most Chapter 7, cases it will not be necessary. This is because generally most Chapter 7, cases have no assets and the Trustee will furnish a report that he/she made a diligent inquiry into the financial affairs of the debtor(s) and into the location of the property belonging to the estate; and that there is no property available for distribution from the estate over and above that exempted by law, which is available to the listed creditors. In New Jersey there is long standing case law, Judd v. Wolf, that makes it very clear that in a no asset chapter 7 case a debt to an omitted creditor is discharged and the debtor is not obligated to specifically notify the creditor.

That said, the suggestion of sending the omitted creditor a letter letting them know that you filed for bankruptcy, with a copy of your Discharge Order enclosed, is a good idea. This way they will know not to attempt to collect the debt.

Finally, the question arises at what to do if your Bankruptcy case is already closed i.e. you have received your discharge and final decree. In the case of a no asset case the above still applies. In the case of a of Chapter 7, case with assets you should contact Riviere Cresci & Singer LLC to see about reopening your Bankruptcy case to have the forgotten debt included in your original Bankruptcy case and ultimately discharged.

The New Jersey personal bankruptcy attorneys at Riviere Cresci & Singer LLC can answer any questions you may have concerning filing Bankruptcy, or any general bankruptcy questions. If you live in New Jersey, including Howell, Jackson, and Monroe, Manalapan Lakewood call us for a free consultation to find out how we can help you.

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