September 25, 2017

Do I Really Need to List all My Creditors in Bankruptcy?

YES!  The simple answer is: Yes.  Some clients will want to file bankruptcy on a select group of creditors (such as credit cards, lines of credit, etc.), yet want to keep a second group of creditors out of their bankruptcy (such as primary physicians, friends, and family).  This post details why it is absolutely necessary to list all creditors when filing for bankruptcy relief.

The primary reason to list all known creditors is to avoid perjury.  The bankruptcy petition is signed under penalty of perjury, which includes declaring that all creditors are listed.  If a consumer knowingly fails to list a creditor in his or her bankruptcy filing, this is tantamount to committing perjury. Additionally, a consumer should list all creditors, particularly if an unlisted creditor decides to try and collect on a debt later on.  If a consumer deliberately fails to list a creditor in the bankruptcy, the creditor could essentially survive the bankruptcy process intact.

What types of creditors, generally, are people hesitant about listing?  Family, friends, and family doctors are the top three categories.  I reassure my clients that they must list all creditors known to them, but they can voluntarily repay any creditor after the bankruptcy is completed.  Often, clients may opt to voluntarily repay a long-time family physician (or opt not to, per the bankruptcy).  This is true for family and friends, too.  Nothing stops a client from voluntarily repaying any one creditor he or she chooses.  But the crucial point is that all creditors, despite who they are, must be listed in a client’s bankruptcy schedules.  If a client deliberately fails to list a creditor, this amounts to perjury.

If you have questions regarding bankruptcy and how it may affect family, friends, or even doctors for which you may owe a debt to, please feel free to call today to schedule your free consultation in Eugene.

Will People Find Out that I Filed Bankruptcy?

A common question I receive is: “Will people find out if I file bankruptcy?”  This post details who will find out about your bankruptcy, and who will probably never find out about your bankruptcy (unless you first disclose this fact to them).

A bankruptcy filing is a public filing; it becomes part of the public record.  However, it is difficult for the average person to access this record, and even difficult for many attorneys to access this record, unless they practice in bankruptcy and/or the federal court system.  So, who will find out that you filed bankruptcy?

First, your creditors will find out you filed bankruptcy; this is a given.  We file bankruptcy for relief from our creditors. Second, any co-borrowers or co-signers will receive notice of our bankruptcy.  Co-borrowers’ or co-signer’s will be affected by our bankruptcy; we will usually no longer be financially liable for the debt these individuals co-signed — therefore, notice must be provided. Third, if we have a domestic support obligation (child  support, spousal support, etc.) that claimant, or person who receives these payments, must receive notice of the bankruptcy and special notice must be made to the trustee in such cases (see DSO Form post).  Third, the credit bureaus will receive notice that we filed bankruptcy via the creditors we list in our bankruptcy. Our credit reports will, then, report that we filed bankruptcy. Fourth, prospective lenders of credit and car loans will discover we filed bankruptcy  – as soon as you file bankruptcy you will receive applications for credit cards and car loans.  Lenders will use the bankruptcy court’s database to establish new business.

Your friends and family will most likely never know you filed bankruptcy unless you inform them first that you have.  The newspaper does not print the names of people who filed bankruptcy.  To access information regarding who filed bankruptcy, a person would need to go down to the bankruptcy court to search names (this is no easy task);  or, have access to the bankruptcy court’s database, which is not granted easily (generally you must be an attorney or creditor).

Therefore, when I am asked “will anyone know I filed bankruptcy,” my answer is: creditors, the court, co-borrowers, claimants of domestic support obligations, but hardly ever any friends or family.  Rest assured, although bankruptcy is a public activity, few people will know if you file bankruptcy or not. And in fact, I am certain that you know at least three people (if not more) who have filed bankruptcy, yet you are unaware that they have filed bankruptcy.

If you are interested in bankruptcy and would like to learn more about the process, please call today for your free in-office bankruptcy consultation.

 

Chapter 7 Bankruptcy: Voluntary vs. Involuntary

When it comes to a chapter 7 bankruptcy, there are two options available: 1.) it can be filed voluntarily by the debtor; or, 2) it can be filed by a debtor’s creditors, thereby resulting in an involuntary bankruptcy.  This post discusses both voluntary and involuntary bankruptcies, and when involuntary bankruptcies may occur (which is rare).

The vast majority of chapter 7 bankruptcy cases are voluntarily filed; a person has decided that he or she wants to file bankruptcy, and does so.  However, there is a second, yet very uncommon type, of filing: an involuntary chapter 7 bankruptcy.  Involuntary bankruptcy filings usually involve a business as the debtor.  In the common situation, the business owes creditors money and has defaulted on contracts with the creditors.  The creditors are having difficulty getting paid or pursuing the business’s assets.  Faced with the difficulty of recovery, some creditors may file an involuntary bankruptcy for the business.  This is particularly true if the creditors know the business can repay or liquidate assets to pay its debts, but refuses to do so.    It is extremely rare that creditors would file an involuntary bankruptcy for an individual, though.

Once the creditor files a bankruptcy petition “for” the business, the business will receive notice of the bankruptcy filing.  The business will then have 20 days to respond.  If the business does not respond, the bankruptcy court will allow the bankruptcy to proceed.  But if the business does respond, there will be a hearing before a bankruptcy judge to determine whether the petition was filed in good faith and if the business has failed to pay its debts.  If the court determines that the bankruptcy petition was indeed filed in good faith and that the business is refusing to pay its creditors, the chapter 7 bankruptcy proceeding will continue. If the judge, however, rules for the business, the bankruptcy case will be dismissed and the business may be entitled to any damages as a result of the involuntary bankruptcy filing.

If the bankruptcy moves forward, however, a Chapter 7 Trustee will be appointed to administer the bankruptcy estate for the business.   The Chapter 7 Trustee will be in a position to liquidate the assets of the business in order to pay some (if not all) of the debt owed to the creditors.  Such assets would include, but are not limited to, accounts receivables, investments, inventory, goodwill (selling the business name), tools, intangible property such as copyrights, patents, and other various assets.   As a result of a chapter 7 bankruptcy, creditors may be in a better position to be paid on contract; however, such a maneuver should be saved only for the most extreme cases.  Therefore, involuntary chapter 7 bankruptcies are extremely uncommon for business debtors, and even more uncommon for individuals.

 

Pursuant to 11 U.S. Code § 528: "I am a debt relief agency. I help people file for bankruptcy relief under the Bankruptcy Code."

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