When applying for Chapter 7 bankruptcy, all debts must be included in the filing, even debts owed to family members or friends. The purpose of including all debts is to ensure fairness in the bankruptcy process and to prevent any preferential treatment to certain creditors.

The bankruptcy court and its trustees will review the filing and determine how to distribute any available assets to creditors fairly and equitably. Failing to include all debts in the filing could result in the case being dismissed or other legal consequences. Be honest and thorough when filing for Chapter 7 bankruptcy and include all debts owed.

How Do You List All Debts?

It is important to know that you are required to include all of your creditors when filing for bankruptcy. Creditors can generally be categorized into two groups: secured and unsecured creditors.

Secured creditors are those who have provided you with debt that is secured by collateral. This means that if you fail to meet your repayment obligations, the secured creditor has the right to repossess the collateral. On the other hand, unsecured creditors are those who have provided you with debt that is not secured by collateral. While they cannot repossess any property, they can still sue you to recover their money.

What Happens If You Unintentionally Forget To List Debt?

It is not uncommon for debtors to unintentionally forget to list some of their debts when filing for Chapter 7 bankruptcy. In such cases, if the creditor or creditors in question do not suffer any harm or loss, bankruptcy courts may still discharge the debt. This is known as the “no harm, no foul” approach.

However, this does not mean that debtors should intentionally omit creditors from their filing. The bankruptcy court will consider the reasons for the omission and the impact of the debt on the bankruptcy case. If the debt in question would not have been paid regardless, the court may overlook the omission. But if the debt would have affected the bankruptcy case and the creditor would have faced prejudice by not being included in the filing, the court may not discharge the debt.

While there may be some leeway for innocent mistakes in Chapter 7 bankruptcy filings, debtors have to make a good-faith effort to list all of their debts and seek legal advice to ensure that their filing is complete and accurate.

Asset Vs. No Asset Chapter 7 Bankruptcy

There are two types of Chapter 7 cases: asset and no-asset. The type of case you have will determine what happens to any unlisted debt.

Asset Chapter 7 Case

In an asset case, it is crucial to list all debts to properly allocate the money available to distribute among creditors. If you omit certain liabilities, creditors may not receive their rightful share, and any debt belonging to unlisted creditors will not be discharged.

No Asset Chapter 7 Case

On the other hand, in a no-asset case, creditors who are not listed will not be affected since no money is being distributed. In such cases, courts may discharge debts without issue. However, there may be exceptions. If an unlisted creditor goes to court and secures an order, their debt may be non-dischargeable.

What If You Enter Into A Debt Repayment Agreement?

The general rule is that you must include all debts, regardless of whether there is a repayment agreement or not.

Debtors can enter into voluntary debt repayment agreements as they wish, and it’s possible to repay debts that would normally be discharged in Chapter 7 bankruptcy. However, you cannot use assets that a creditor is waiting to receive. The best approach is to wait for your bankruptcy case to close and then make a voluntary repayment agreement.

Filing Chapter 7 Bankruptcy With Lincoln-Goldfinch Law

Creditors get notified of a debtor’s bankruptcy, so it makes sense to include all debt when completing bankruptcy forms. A bankruptcy attorney from Lincoln-Goldfinch Law will help you list your debts, among other necessary documentation. They will be a valuable source throughout your Chapter 7 bankruptcy journey and ensures that no legal steps are left unturned.

Summary

When filing for Chapter 7 bankruptcy, it is essential to list all debts, including those owed to friends or family members, to ensure fairness in the bankruptcy process. Failure to include all debts in the filing could result in legal consequences. 

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