Missing Creditors in Bankruptcy? Here’s What You Can Do

You filed your Chapter 7 bankruptcy petition, ready for a fresh start. With the automatic stay, creditors are supposed to stop contacting you, but one creditor keeps harassing you for a past due payment. You check the bankruptcy forms, and dread sinks in – you forgot to list them! This blog post explores what to do in this situation.

Key Points

• Once a petition for bankruptcy is filed, the automatic stay prevents creditors from calling you.
• The automatic stay can be found in Section 362 of the Bankruptcy Code.
• A violation of the automatic stay is a violation of the Fair Debt Collection Practices Act (FDCPA).
• Even if you forgot to list a creditor on the bankruptcy petition, you can still take steps to protect yourself.

So, you filed your voluntary petition for Chapter 7 bankruptcy, and everything seems well. The bankruptcy clerk approved the petition, and the 341 meeting of creditors is scheduled in three weeks. But why does a credit card company keep leaving you voicemails telling you your payment is past due?

You decide to contact the creditor to tell them that because of the automatic stay, they are prohibited from contacting you and that it violates the Fair Debt Collection Practices Act (FDCPA). When in bankruptcy, the automatic stay prevents most civil lawsuits from moving forward, and that includes creditors contacting you. The automatic stay is listed in Section 362 of the Bankruptcy Code. You can read more about the automatic stay via this link.

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The creditor says no bankruptcy has been filed because they have not received any notice. You quickly skimmed through the bankruptcy petition and go to Schedule F where unsecured creditors are listed. It is Official Bankruptcy Form 106E/F Creditors Who Have Unsecured Claims (Individuals)). Unsecured debts are credit cards, personal loans, and medical bills.

The creditor was correct.  Now what?

Filing the Chapter 7 Bankruptcy Petition

When you file for bankruptcy, the bankruptcy petition requires that you list all your assets and debts. Any exempt assets, another way of saying protected, are referenced in Schedule C of the bankruptcy petition (Official Bankruptcy Form 106C- The Property You Claim as Exempt (Individual)).

On Schedule D (Official Bankruptcy Form 106D Creditors Who Hold Claims Secured by Property (Individuals)) of the bankruptcy petition, secured debts such as car loans and mortgages are listed. Note that if the asset, such as a car that was repossessed or a house that was foreclosed on, since you no longer have that asset, it is no longer secured debt but unsecured. So, a mortgage or car loan at that point would also be listed on Schedule F as an unsecured creditor.

Bankruptcy lawyers generally list the mortgage or car loan as a “deficiency balance” or “deficiency judgment” on Schedule F of the bankruptcy petition. The deficiency balance means there is still money owed to the creditor. Just because a car was surrendered voluntarily to the lender, that doesn’t eliminate the original balance. The lender will sell the car or home at an auction, and whatever money is received is deducted from the total balance.

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For example, the car loan balance is $25,000. The car is returned to the creditor, known as a voluntary repossession, and the creditor sells the car for $10,000. The creditor can seek the $15,000 from you. This is done by filing a lawsuit in civil court, and when the case is finalized, the creditor has a “deficiency judgment.” So, depending on what stage of the proceedings are in, the mortgage or car loan is either listed as a deficiency balance or a deficiency judgment.

Schedule G (Official Bankruptcy Form 106G Executory Contracts and Unexpired Leases (Individuals)) is for executory contracts such as car leases. Leases aren’t secured debts listed in Schedule D because a lease is a contract that has yet to be fulfilled. This means you do not own the car until the end of the lease term when you have the option to buy the car.

Possible Scenarios with Filing Chapter 7 Bankruptcy

Scenario 1-

The bankruptcy petition can always be amended while the case is pending. In this case, Schedule F gets amended. Make sure to review the bankruptcy court local rules in your district, as sometimes specific forms are required. That information is available on the bankruptcy court’s website.

When the forms are amended, there would be no need to schedule another 341 meeting. The creditor can always object if there are any issues, but that is unlikely.

Scenario 2-

If the judge already signed the Order of Discharge, then the next issue is if there are any assets to distribute. If it is a no-asset case or a simple bankruptcy where assets and personal property are protected, the bankruptcy trustee has no assets belonging to the bankruptcy estate. Bankruptcy courts have ruled there is no need to reopen the case to add the creditor as the creditor still wouldn’t get anything. Basically, in the interests of the judicial economy, it’s pointless. Judicial economy is legal talk for saying don’t waste the court’s time.

Note that this rule isn’t set in stone. This varies per district, so confirm the local bankruptcy court’s ruling on this issue by consulting with an experienced bankruptcy lawyer.

Scenario 3-

There were assets to distribute so the creditor could have received some money back towards the debt. But now, the issue is how much the creditor would have received. If not much, then chances are the creditor won’t pursue collecting on the debt. But if it is to the creditor’s advantage to pursue this financially, then at that point, you can try to reopen the case to add the creditor. If denied by the court, which isn’t likely, then payment arrangements can be made to settle the debt.

Colleges and universities can purchase my bankruptcy law textbook directly from Routledge Publishing. For paralegals and students buying single copies, you can do so via Amazon books. To access my YouTube channel, click this link.

Additional blog content is available below or by using the search bar at the top of this page:

• Bankruptcy
• Your Wallet

Please note the information on this site does not constitute legal advice and should be considered for informational purposes only.