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Archive for the ‘creditor schedules’ tag

Debts Sold or Assigned to Collection Agencies

April 15th, 2019 at 7:00 am

What happens if you list a creditor in your bankruptcy case but, unknown to you, it sold the debt to a collection agency that you don’t list? 


Our blog post two weeks ago was about needing to list all your debts in a bankruptcy case in order to write them off. This is part of a series of blog posts about debts that may not get discharged (written off) in bankruptcy. The law says that bankruptcy does not discharge debts that are “neither listed nor scheduled” in the bankruptcy documents. Section 523(a)(3) of the Bankruptcy Code.

Special Scenarios

This raises some practical questions, including the following:

  1. Is a debt covered if you don’t list it but the creditor still learns about your bankruptcy case?
  2. What happens if you list the creditor but it had previously sold the debt to a collection agency?
  3. What do you do if you don’t know all of your debts because you’ve moved or lost track of them for some other reason?

We addressed the first of these last week, and discuss the second one today.

Debts Listed but Sold to Collection Agency

So you list the creditor on your bankruptcy schedules but after filing learn it sold the debt to another entity. Let’s assume you know the name and address of the new creditor or collection agency.

Debts Sold Before Your Bankruptcy Filing

Let’s start with the situation that the debt was sold to the new entity before you filed the bankruptcy case. You only find out about it after your filing. You either receive a new notice about it or dig up an older one you hadn’t found earlier.  What should you do?

There’s a decent chance that when the creditor you listed gets the bankruptcy notice it will forward it to the new owner of the debt. That would seem to be the sensible and business-like thing for it to do. Then the new owner would learn about your case even without being listed on your bankruptcy schedules. It would be covered by your bankruptcy case and the debt would likely get discharged. (See our last blog post about the creditor’s “actual knowledge” exception.)

Three Problems

There are three problems with this.

First, the listed creditor may simply not bother to pass on your bankruptcy notice to the new debt holder. The creditor no longer has any interest in the debt. It doesn’t owe you any favors. Why shouldn’t it just throw away the bankruptcy notice, and not inform the new debt holder? Then this new debt holder—the creditor you actually owe—may well never find out about your bankruptcy. You could easily continue owing the debt. It’s not safe to rely on the listed creditor to tell the new debt holder. It’s way too risky.

Second, even if the listed creditor does pass on the bankruptcy notice the new debt holder may not receive it. Or that debt holder may simply say it never received it. Good luck getting proof that it did. Collection agencies sometimes attempt to collect debts (purposely or inadvertently) that a bankruptcy has legally discharged. Without proof that the collection agency received notice of your bankruptcy filing you may still owe the debt. At the very least you’d have a much harder time getting them to stop trying to collect on the debt.

Third, even if the new debt holder does receive notice about your bankruptcy filing, it may not happen fast enough. You have no control when your listed creditor would get around to passing on information about your filing. There would be some delay between the time the creditor receives the bankruptcy notice and when it forwards it. In some situations the timing when the new debt holder receives the bankruptcy information is crucial. See our last blog post for a discussion about this timing issue.

Formally Adding Creditors to Your Schedules After Filing

So instead of relying on your listed creditor to inform the new debt holder it’s better to take the initiative.

First, you can formally add the new debt holder to your bankruptcy schedules, after your original filing. Your lawyer does this through an “amended schedule.” This is generally the safest option. Here’s one local bankruptcy court’s information about this procedure.

You do have to pay a modest additional filing fee (currently $31—see item #4 in the court fee schedule).  Plus your lawyer might charge you for the extra service (although not necessarily).  

Another option may be to contact the debt holder—either yourself or your lawyer—without using an “amended schedule.” This contact may fulfil the requirements of the “actual knowledge” exception. What’s critical is to have appropriate evidence of this contact in case you need proof of it later. There may be timing considerations. Also, you may be required to use an “amended schedule” based on local bankruptcy rules.

 Don’t decide this on your own. Talk with your bankruptcy lawyer for advice about resolving the situation the safest and most cost-effective way.

Debts Sold After Your Bankruptcy Filing

Creditors should not sell or assign your debt after they get notice of your bankruptcy case. At least they shouldn’t without informing the new debt holder about your bankruptcy case.

But sometimes they do sell the debt after getting notice about your bankruptcy case, whether intentionally or out of carelessness. Then the discussion above applies. If your bankruptcy case is still active, your lawyer should probably file an “amended schedule” adding the new debt holder.

The creditor’s sale or assignment of the debt can also occur between the time you file bankruptcy and the time the creditor receives notice of it. It may sell or assign the debt after you file bankruptcy but before it knows about your filing.

Again, the discussion above applies. You could hope that when this creditor gets notice of your bankruptcy filing it will inform the new debt owner. There’s a decent chance that it would do so, since the sale had just happened. Its file on you may still be open or would have just been closed a short time earlier. But again, your listed creditor may still not bother to inform the new debt holder. So, talk with your bankruptcy lawyer as soon as you find out about new debt holder. Remember that timing can be extremely important. In most situations filing an “amended schedule to add the new debt holder is the appropriate solution.


Creditor Not Listed But Knows about Your Case

April 8th, 2019 at 7:00 am

Usually if you don’t list a debt, it doesn’t get discharged.  An exception is if the creditor still learns about your case, on time. 


Last week’s blog post was about the importance of listing all debts in a bankruptcy case to write them off. Debts “neither listed nor scheduled” in the bankruptcy documents are not discharged (legally written off). Section 523(a)(3) of the Bankruptcy Code.

Special Scenarios

This rule raises a number of practical questions. Here are some common situations:

  1. You don’t list a debt but the creditor finds out about your bankruptcy some other way.
  2. Your debt has been sold or assigned to a collection agency without your knowledge
  3. You don’t have good records of your debts and you may not know some of their names and addresses.

Today we address the first of these.

Creditor Knows About Your Bankruptcy Case

If you don’t list a debt it’s still covered by your bankruptcy case if that creditor knows about the case. The Bankruptcy Code says a debt is not discharged “unless such creditor had notice or actual knowledge of the case.”  Section 523(a)(3)(A) and (B)

This doesn’t mean that you can avoid listing a creditor on your debt schedules because you know it will find out about your case some other way.

First, what if the creditor doesn’t actually find out or claims that it didn’t? You could end up owing the debt. It’s much safer to list the debt in your bankruptcy documents.

Second, you are required to list all your debts. Bankruptcy is not just about you and that one creditor.  If you want the benefits of bankruptcy you must play by the rules, which include listing all your debts.

If you have any reason for not wanting to list a debt, talk with your bankruptcy lawyer. There is usually a workable solution to your concerns.

Must Know about Your Case “In Time”

There’s an important condition to this “notice or actual knowledge” exception. Your creditor needs to learn about your case in time to participate in it.

So what’s the deadline for your creditor to learn about your case if you don’t list its debt?

There are 3 possible different deadlines for 3 different kinds of cases.

1. Proof of Claim Deadline

First, some bankruptcy cases give creditors the opportunity to file a “proof of claim.” That’s a document a creditor files at bankruptcy court documenting what it believes you owe. In Chapter 13 “adjustment of debts” cases creditors file proofs of claim to receive any money through your payment plan. In “straight bankruptcy” Chapter 7 “asset” cases creditors file proofs of claim to possibly share in the liquidation of any non-exempt (unprotected) assets. In these cases the bankruptcy court mails out a formal notice giving a strict deadline to file proofs of claim. 

In these cases your unlisted creditor must learn about your case in time to be able to file a proof of claim. Section 523(a)(3)(A).

2.  Creditor Objection Deadline

Second, sometimes a creditor has grounds to object to the discharge of its debt on the basis of your fraud or similar bad action in the incurring of the debt. This can happen in either a Chapter 7 or Chapter 13 case.  In all cases the bankruptcy court mails creditors a notice of the strict deadline to file an objection. 

In these cases your creditor must learn about your case in time to be able to file such an objection. Section 523(a)(3)(B).

3. Possibly No Deadline

Third, in other bankruptcy cases neither of the two situations above applies. In fact that covers most Chapter 7 cases. Most have no assets to distribute because everything the debtor owns is exempt, or protected. The case is a “no asset” case. With nothing to distribute, the court does not ask creditors to file proofs of claim. So there’s no deadline to do so. Also, most creditors have no grounds based on fraud or similar bad actions to object to the discharge of its debt. So any deadline to file such an objection doesn’t apply. So what’s the deadline for an unlisted creditor to learn about your case so that its debt is discharged?

In some parts of the country there is essentially no deadline in these kinds of cases. If you find out at any time about a debt you didn’t list in a “no asset” Chapter 7 case, you or your lawyer may be able to simply inform the creditor and the debt is covered in your case. The debt is then included in the discharge of debts that you received in your case. That may be true even if your case is already completed.

But because the statute does not directly address this situation, your local court may interpret it differently. You might still owe the debt because you didn’t give the creditor notice about your bankruptcy. Again, talk with your bankruptcy lawyer as soon as you learn about a debt that you forgot to include for advice about your specific options.


Debts Not Listed in Your Bankruptcy Documents

April 25th, 2016 at 7:00 am

If one of your creditors is not included in your “schedules” you risk continuing to owe that debt after your bankruptcy is finished.


Legal Obligation to List All Creditors

Overall you are required by law to list all your debts and their creditors on your bankruptcy schedules. You can’t do a partial bankruptcy, listing most of your debts but hiding one or two that you don’t want to be affected. You must include every debt on which you are legally obligated.

Debts Not Included May Not Be “Discharged”—Legally Written Off

If you do not include a debt in your formal bankruptcy documents when you file your case you risk not discharging that debt at the time all your other debts are discharged.  See Section 523(a)(3) of the Bankruptcy Code.

In a Chapter 7 “straight bankruptcy” case the discharge happens quite quickly—usually about 3 to 4 months after your case is filed. In a Chapter 13 “adjustment of debts” the discharge almost always doesn’t happen until you finish the payment plan, which is usually 3 to 5 years after your case is filed.

Adding Debts after Your Case is Filed

If you forget to include a debt at the beginning of your case, you can usually add it through a “supplemental schedule.” But you would have to pay an additional filing fee, so it’s better to get it right from the start.  

There are exceptions but usually you must add any debts within about two months after your case—either Chapter 7 or Chapter 13—is filed in order to do so on time.

Debts Not Included Still Discharged

If a creditor finds out about your bankruptcy filing even if you neglect to list the debt, that debt may still get discharged. The Bankruptcy Code refers to this as a creditor with “notice or actual knowledge of the case.”

But the creditor must receive this notice or knowledge of your case in time. When the deadline is depends on the type of case—Chapter 7 or 13—and depends on specific details of the case—for example, in a Chapter 7 case whether the bankruptcy is collecting any assets for distribution to the creditors.

But in general the creditor need to get notice or have knowledge of your case as stated above, about two months after your case is filed.

It’s of course risky to not formally list a debt but rely on the creditor getting notice or having knowledge informally. So it’s usually better to list every debt at the beginning, or to add any additional one through a “supplemental schedule.”

Including Questionable Creditors

Because you certainly don’t want to go through a bankruptcy case only to be left owing a debt that you could have discharged, you should of course be thorough about including all your debts. Your bankruptcy attorney will help you to know how to do that, including using credit reports and other tools.

It’s also prudent to also include those to whom you may owe a debt but are not sure, in order to cut off their rights to pursue you later. So include not just your conventional, obvious creditors but also those which you only might owe something to. It might help to think of these as not so much creditors as claimants—those who might have a claim against you.

For example, if you were the driver in a vehicle accident, your creditor schedules should include the other driver, any passengers in all vehicles, any affected pedestrians, and even the owners of any damaged non-vehicular property (such as barriers or signs belonging to the city, county, or state). Plus, where applicable, their attorneys and insurance companies should be included.

Beyond vehicle accidents, think about any disputes or lawsuits you’ve been involved in, or may be coming around the corner. Consider debts that you have co-signed or could be held legally liable for some reason. Especially consider debts owed by ex-spouses on which he or she is legally obligated by the divorce decree to pay, but that if he or she fails to do so, you may well still be legally liable to the creditor.

Bankruptcy gives you the opportunity to cut off the rights of those who may possibly have a claim against you. Those who do not get notice of your bankruptcy case may be able to legally pursue you later, so it is only sensible to make the effort to include every possible creditor.

Including Multiple Possible Creditors on a Single Debt

This also applies to situations where you know you owe a debt but are not sure which creditor or collector currently owns the debt. List them all.

It’s very important to list—as much as you can—both the original creditor AND its collection agency, AND whatever other collection agencies you’ve heard from. Also include any attorney of these creditors and collectors, if you’ve heard from any.


If all this sounds a bit overwhelming, that’s exactly why you have an attorney—to help you discharge ALL possible debts so that you get a full, fresh financial start. He or she will help you become aware of certain kinds of unexpected creditors and then take the steps to give them timely notice of your case.


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