Unlisted Debts Are Not Discharged in First Circuit
By L. Jed Berliner, Western & Central Massachusetts Bankruptcy Attorney on May 8, 2009 in Bankruptcy Practice and Procedure, Debts Not Dischargeable, Discharge of Debt, Featured, Life After Bankruptcy
Unlisted, unscheduled debts are not discharged in the First Circuit, which covers Puerto Rico and New England (except Connecticut). All medical bills must all be listed, even if you believe them to be covered by insurance, because the insurance company may later deny the claim. Cosigned or guaranteed debts of others must be listed, even if payments are current, because a future default means the debt comes to you.
This is due to yesterday’s First Circuit ruling, that an unlisted possible indemnification obligation (a type of guarantee of another’s debt) was not discharged. The debtor didn’t list the contingent debt in his no-asset case because nothing was owed at the time of the bankruptcy filing – it arose one year later, when the other party defaulted on a future construction performance. Too bad for the debtor.
Established lower court precedent in Massachusetts and elsewhere, and other circuit courts, approved the discharge of unlisted debts in no asset cases. The First Circuit reversed the lower courts and disagreed with the other circuits. An unlisted debt is just not discharged. It left a door open for a debtor to ask that a case be reopened to add an unlsted creditor, but good cause must be shown for the omission.
This adds another nasty burden to the well-meaning debtor who does not have perfect, super-human records. Colonial Surety Company v. Weizman, 2009 U.S. App. LEXIS 9742.
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