When you file a bankruptcy case, the main goal is usually to eliminate the obligation to repay debts.

But what if you don’t know everybody you owe money to?

This is very typical and can result in different ways, such as:

  • You had recent medical treatments, but have not yet received all your bills;
  • Your debts are old and  haven’t opened your mail for several years and you don’t know who you owe.

What happens in cases like these?

Do you have to wait to file your bankruptcy case until you receive all the bills?

It depends in part on which bankruptcy chapter you are filing.

In short, failure to list your debts can impact you in a Chapter 11 or 13 case, but usually not in Chapter 7.

Chapter 7 No Asset Case

In the Ninth Circuit, in a Chapter 7 case where no assets are being liquidated and distributed by the Trustee (known as a “no asset” case), the failure to include a creditor in, and thereby provide them notice of, the bankruptcy filing is of no effect on the dischargeability of the debt. [In re Beezley, 994 F.2d 1433 (9th Cir. 1993)]

When you receive your discharge you will be discharged from all debts that are dischargeable regardless of whether or not you listed them, as long as the debt existed or arose prior to the date your case was filed.

BUT, if any of those unlisted creditors had a basis to object to the discharge, such as for fraud, then they can still seek to reopen your case to litigate that after your case is over because they did not receive notice of the bankruptcy in time to file an objection in the normal time deadlines.

Most Chapter 7 cases are “no asset” cases, unless you have a lot of non-exempt equity in your home or other assets (in which case you normally would not be filing Chapter 7).

[See more on what exemptions are and how they work.]

The rationale for this is that if there is no distribution being made to the creditors, the fact they did not receive any notice of the bankruptcy is  “no harm, no foul” situation.

They would have been no need for them to file a claim.

So the only prejudice to them is if they have a basis to object to the discharge, and they can seek to do that if they have grounds when they become aware of the bankruptcy.

Chapter 13 or Chapter 11 or Chapter 7 Asset Cases

In Chapter 13, Chapter 11, and Chapter 7 cases where the Trustee is making a distribution, there is a definite need for creditors to file a claim in order to be paid.¹

In 13 and 11, payments are made (usually monthly) and disbursed to creditors.

Thus, they need to receive adequate notice to file a claim in order to share in the distribution.

And if they are not listed in the schedules, they likely won’t know about the bankruptcy or the need to file a claim.

In these instances, it does make a difference whether they were listed.

Failure to list and give notice to creditors in these cases will result in no discharge of the debt to that creditor.

There is a limited time, while the case is open, where you can amend to add the creditors.  But once distribution has commenced, adding a new creditor becomes problematic because it would disrupt the percentages being paid to all creditors.

Which Chapter Should You File?

If you have a lot of debts but you don’t know yet who they are owed to, even after doing research, it may pay you to file a Chapter 7 case, assuming you are eligible to do so and do not have any non-exempt assets that a Trustee would be interested in liquidating.

But not everyone can file Chapter 7.  You may have too much income, or too many assets, or there may be other reasons.

Your attorney can advise you on which Chapter is best for you, but be sure to let them know if you are unaware of any of your debts, because a risk assessment will need to be done to determine how significant the failure to list them will be in your case.


¹ Technically, in a Chapter 11, no claim is required to be filed if the creditor agrees with the amount listed in the debtor’s schedules.  But this article assumes the creditor was NOT listed.

Image courtesy of Phil Gwinn