It depends. For the most part debtors and their attorneys are very diligent in gathering creditor information, pulling credit reports and pouring over bill statements. However, there are times when a creditor is unintentionally omitted or is simply unknown to the debtor and thus is not listed in the bankruptcy schedules. The Court refers to these debts as “unscheduled debts.”
If you discover an unscheduled debt, you may file an amendment to your bankruptcy schedules up to the point your bankruptcy case is closed, which usually occurs within two weeks after your discharge. However, once your case is closed, you must then petition the Court to reopen your case to add any unscheduled creditors — though this is rarely granted, especially in no-asset Chapter 7 cases. A no-asset case simply means you have no assets or that any assets you have do not exceed the allowable exemption limits. If you have assets available for distribution to creditors, you will unfortunately remain liable for any unscheduled debts.
In a no-asset Chapter 7 bankruptcy, the Court does not set any deadline for a creditor to file a claim — this is simply due to the fact that there are no assets to pay any claims of any creditor, listed or not. It is for this reason that the Court will not allow you to reopen your no-asset Chapter 7 to add creditors, as it would serve no purpose.
Does this mean unscheduled creditors are discharged the same as creditors who are listed in your bankruptcy schedules? For most debts the answer is yes.
In the California case, In re Beezley, 994 F.2d 1433 (9th Cir. 1993), the Court held that, “In a no asset chapter 7…the effect of § 523(a)(3) is to discharge unscheduled debts unless such debts are of the type specified within § 523(a)(2) [fraud], (a)(4) [embezzlement, larceny or fraud by a fiduciary], or (a)(6) [willful and malicious injury].”
Simply put, as long as the debt does not involve, fraud, embezzlement, larceny, fraud by a fiduciary, or willful and malicious injury, it will be discharged just the same as a debt that was listed in your schedules at time of filing or added via an amendment to your schedules prior to your case being closed.
But what happens when an unlisted creditor attempts to collect on a lawfully discharged unlisted debt? Once you have provided an unlisted creditor with notice of your bankruptcy filing and subsequent discharge, the creditor is prohibited from making any further attempts to collect on the debt. If they fail to cease collection efforts they will be in violation of the discharge injunction contained in 11 U.S.C. § 524 and you may then petition the Court to reopen your case for the purpose of seeking damages from that creditor.
Tags: chapter 13, chapter 7, creditors, debt, legal action, Life After Bankruptcy
