One of the most common questions I am asked is why a clients need to list their mortgage, their car loan, the “credit card that payments are current on that’s just used for emergencies and I really need” or the loan from Mom on their bankruptcy schedules. While the short answer is, “Because you have to,” the full answer is more nuanced than that.
First, the Bankruptcy Code and Rules require that all creditors be scheduled in your bankruptcy filing. This is primarily so that they will receive notice of the bankruptcy filing, and stop all collection activity pursuant to the automatic stay. If they are not scheduled, they do not get notice and do not know to stop. The Bankruptcy Code defines “creditor” as “An entity that has a claim against the debtor that arose at the time of or before” the bankruptcy is filed. This includes the mortgage, the car loan, the credit card, and Mom. (Many people are worried that merely scheduling their mortgage or car loan means that they will lose their house and car. This is not true. The overwhelming majority of people who file for bankruptcy keep everything they have.) Failing to list all of your debts can get you into trouble in your case.
From a creditor’s perspective, bankruptcy is all about the same type of claims being treated in the same way. For example, all general unsecured debt–credit cards, medical bills and most personal loans–receive the same distribution in a bankruptcy case, regardless of who is owed the money. This means that Mom gets the same amount as Bank of America. It means that the hospital bill for saving your life is treated the same as the credit card bill for dinner. If you do not schedule all creditors, they cannot be treated the same.
Failing to include all of the required information also is perjury. You sign the schedules under penalties of perjury, stating that you have listed “all entities holding claims”. At the Meeting of Creditors, you are typically asked, under oath, whether you listed all of your assets and all of your creditors.
So when your bankruptcy lawyer asks you to list all of your creditors, please make sure that you list all of your creditors!
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Last modified: October 22, 2012