A lot of paperwork is involved when you file for bankruptcy, including documentation for your income, assets, and a comprehensive list of your debts as well as your creditors. This complete list of creditors is used by the court to inform everyone concerned about your bankruptcy. Since all of this involves a lot of paperwork, it is quite possible that one or two creditors might miss making the list. Since creditors also have legal rights in your bankruptcy case, if any of them fails to get a mention in your list of creditors while filing for bankruptcy, what effect can it have on your case?
What is the creditor mailing list?
According to Los Angeles based law firm Recovery Law Group, the “Creditor Mailing List” (also known as the mailing matrix) should include all your creditors along with their contact information. It must also include debts like student loan debt which are not handled via bankruptcy. Once you file for bankruptcy, this mailing matrix is used to inform all creditors of it. This is an important step as creditors wish to be kept in the loop when such an occurrence happens.
The creditors, depending on which chapter of bankruptcy you file, might be involved in the confirmation of your debt, or pay-out of your liquidated assets, or might be required to approve the repayment plan. To be eligible for their repayment portion, they are required to file a “proof of claim.” If they have no information about your bankruptcy, they cannot file a proof of claim and thus will lose their chance of getting payment from your bankruptcy.
The creditor mailing list is an integral part of your case. When you file for bankruptcy, you get automatic stay protection which effectively ceases all collection actions by creditors. Unless the creditors are aware of your bankruptcy, they will not follow automatic stay. Thus you might lose wages to garnishment or have your home foreclosed or face a lawsuit for collection if you miss out any creditor on the creditor mailing list. Additionally, omitting a creditor can affect your bankruptcy too! The bankruptcy forms are filed under a penalty of perjury, i.e. leaving any information off the papers intentionally is considered a crime. The unintentional omission is understood by the court and you are given a chance to rectify your mistake. If you have unintentionally left any creditor off from the mailing list, the consequence depends on which chapter of bankruptcy you have filed.
Adding creditor in Chapter 7 bankruptcy
In Chapter 7 bankruptcy, also known as liquidation bankruptcy, your non-exempt assets are surrendered to the court which is then sold off to pay the creditors. Many times, thanks to state and federal exemptions, debtors have little to no non-exempt assets; such cases are known as “no asset” bankruptcy cases. When some non-exempt property is available, which can be sold off to pay creditors, the bankruptcy is known as an “asset” bankruptcy. In case you forget to include a creditor in the creditor mailing list while filing for Chapter 7 bankruptcy, the outcome depends on whether it is an asset or no-asset bankruptcy.
- Asset bankruptcy
When you have non-exempt assets, unsecured creditors get paid in proportion to the amount you owe them, when they file a proof of claim. When you leave a creditor off the mailing list, they won’t be notified of bankruptcy and subsequently will not be able to file proof of claim, thereby losing out on their repayment amount. Any unsecured creditor who is left out of their rights can go after you to collect the dues after a bankruptcy discharge. The only respite you have in this case is that they can collect dues only from non-exempt assets. Chapter 7 bankruptcy exemptions can help save a number of your assets. Secured creditors, if they are left out of creditor mailing list, have rights to pursue collection actions against you after your bankruptcy discharge.
- No asset bankruptcy
In this case, since there are no non-exempt assets, the unsecured creditors (credit card, medical bills, personal loans, etc.) do not get anything in bankruptcy. Since unsecured creditors do not have any property attached to their debt, they don’t have any proof of claim to file. If you accidentally forget to add an unsecured creditor’s name to the list, not much of consequence happens in this particular case. As is the case with no asset bankruptcy, unsecured creditors, listed or not, get nothing in such cases. The debt gets discharged with creditor having no claim to collect.
Consequences of leaving a secured creditor out of the creditor mailing list are far more serious than leaving an unsecured creditor out. You can face collection actions after a bankruptcy discharge. Secured debts which are linked to the property are not discharged during bankruptcy but can be surrendered or reorganized. All of this requires the involvement of the creditor. If you wish to reaffirm your car loan, you need to make payments through and even after your bankruptcy. If you miss adding the name of your auto lender or any other secured creditor off the mailing list, the debt won’t be discharged and the creditors are eligible to collect the payment even after your bankruptcy, which may include foreclosure and/or repossession of said property.
Certain debts like child and spousal support, government taxes, etc. are not discharged during bankruptcy. Since these debts won’t be discharged, the accidental omission of such debts will not have any effect on your bankruptcy case. They were and remain collectible even after bankruptcy. Since a majority of Chapter 7 cases are no asset cases, there aren’t any major consequences of the accidental omission of a creditor.
What happens if you fail to add a creditor in Chapter 13 bankruptcy?
Creditors have more involvement in a Chapter 13 bankruptcy compare to a Chapter 7 case. They have a say to review, object or approve your repayment plan. If and when your repayment plan is approved, the payments are divided amongst your creditors proportionately. If you fail to include a creditor in this type of bankruptcy, the debt won’t be included and therefore not discharged at the end of your bankruptcy. This leaves the creditor free to attempt collecting the debt after your bankruptcy discharge.
Options available for you if you forget to add any creditor when you file for bankruptcy
Irrespective of the type of bankruptcy filed, if you realize you have unintentionally omitted any creditor, you should contact and inform your bankruptcy attorney of it. They can help guide you on ways to fix the mistake. If you haven’t reached the end of your bankruptcy, filing a form in bankruptcy court to add the missing creditor can help get the problem solved. In case you have got your bankruptcy discharge and get a collection notice from a left out creditor, you need to contact your bankruptcy attorney. Depending on the type of bankruptcy you had filed, the lawyer can find out if the creditor has any right to collect dues or not. An unsecured creditor trying to collect dues from you has no right to them if you filed for a no-asset Chapter 7 bankruptcy. The creditor can be informed by the lawyer of the case in such a situation. If that is not the case, the bankruptcy lawyers can assess whether different factors like the statute of limitation can affect your dues to the creditor.
If you remember to have left out a creditor, contact your bankruptcy attorney immediately. Wilful omitting of a creditor is considered a form of perjury, which can lead to the filing of criminal charges and even dismissal of your bankruptcy case. Bankruptcy can be trying times, emotionally and financially. It is important to have a bankruptcy attorney by your side in such cases. If you don’t have one, feel free to call 888-297-6203 to get your case evaluated.