Debts not listed in Chapter 7

[Anonymous]

A few years ago my wife filed a Chapter 7.  I recently pulled her credit report in order to start rebuilding her credit.  It is at 599.  I have very good credit and a decent income so I am hoping to help her.  Currently we have everything in my name because of her poor credit so it would be nice to get this fixed.  There might be a time when she can't simply depend on me and my credit.

In looking at the report I found that there are 3 collections which are NOT listed as Chapter 7 Bankruptcy discharged.  They are listed as unpaid.  I asked my wife about these and she believes she likely didn't include them on the Chapter 7.  One is around $400 for a storage unit bill and the other two are both medical bills around $100 each.  I understand that we might be able to reopen the case but I don't think that would be worth paying a lawyer to do when the total is under $700.

Ultimately my goal is to get these addressed in some manner so that her credit score is improved.  Should I just pay them?  Can I send them a letter to get these updated?  If a letter, what should it say or is there a sample out there? 

What is my likely best course of action here?

Thanks!

[Anonymous]

Hi drewstl,

Welcome! 

If the debts pre-dated the BK, my first thought would be to confirm whether or not they were Included In Bankruptcy.  Can DW access a copy of her papers?

[chasmith]

Even if they weren't included on the debt schedule, it's my understanding that (especially in a no-asset case) they are discharged anyway.  It might be worth a consultation with a lawyer (preferably the one who handled the BK) to determine your course.  I believe it's never a good idea to try to reopen a BK, but in this case I think you just have to send them a copy of the discharge.

[Anonymous]

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@chasmith wrote:

Even if they weren't included on the debt schedule, it's my understanding that (especially in a no-asset case) they are discharged anyway.  It might be worth a consultation with a lawyer (preferably the one who handled the BK) to determine your course.  I believe it's never a good idea to try to reopen a BK, but in this case I think you just have to send them a copy of the discharge.

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+1.  Absolutely!

[MarineVietVet]

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@chasmith wrote:

Even if they weren't included on the debt schedule, it's my understanding that (especially in a no-asset case) they are discharged anyway.  It might be worth a consultation with a lawyer (preferably the one who handled the BK) to determine your course.  I believe it's never a good idea to try to reopen a BK, but in this case I think you just have to send them a copy of the discharge.

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How can something not listed (and therefore not approved by the BK court) be included in the discharge? It's been a long time since my BK and the laws have changed probably more than once and you might be absolutely right about this but can you name a source for this opinion?

From a BK years ago to:
EX - 3/11 pulled by lender- 835, EQ - 2/11-816, TU - 2/11-782

"Some people spend an entire lifetime wondering if they've made a difference. The Marines don't have that problem".

[chasmith]

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@MarineVietVet wrote:

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@chasmith wrote:

Even if they weren't included on the debt schedule, it's my understanding that (especially in a no-asset case) they are discharged anyway.  It might be worth a consultation with a lawyer (preferably the one who handled the BK) to determine your course.  I believe it's never a good idea to try to reopen a BK, but in this case I think you just have to send them a copy of the discharge.

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How can something not listed (and therefore not approved by the BK court) be included in the discharge? It's been a long time since my BK and the laws have changed probably more than once and you might be absolutely right about this but can you name a source for this opinion? 

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A good point, I was stating an impression from watching conversations in this and other forums. So I did a BING search and found this:

After I received a discharge in a chapter 7, I have discovered two additional creditors. These debts were incurred before I filed for my chapter 7 case. According to your website, if I did not add these additional creditors to my bankruptcy then I am “SOL,” and I have to pay these debts. Is there anything that I can do to avoid paying these omitted debts?

There is good news. Many courts would hold that these debts will be discharged in a no‑asset chapter 7 case even if they are not listed. The bankruptcy code is not at all clear on this subject. While the trend appears to be that the unlisted debts in no‑asset cases are discharged without any further action, the code has been interpreted in differently in many courts. Some courts would allow you to reopen the case to add a debt. Others would rule that the debt cannot be added and therefore is not discharged.

The bankruptcy courts that have ruled that unlisted debts are discharged in a no‑asset case have carefully reviewed Section 523(a)(3)(A). This section bars debt from a discharge if they were not listed in time for the creditor to file a timely proof of claim. The proof of claim is used by the Trustee to determine the proportion to divide the debtor’s assets between the creditors. In a no‑asset case, there will be nothing to divide and no reason to file a proof of claim. As a result, in no‑asset cases the bankruptcy notice instructs creditors that they are not to file a proof of claim. The bankruptcy courts that take this position reason that since it will never be too late to file a proof of claim, a debt is not excepted from discharge because it has not been listed.

The source is http://newjerseybankruptcycenter.com, and just as I hedged in saying "I believe" and "generally", and we can't believe everything on the Internet, this supports my belief that in a no-asset case a debt that wasn't listed is still discharged unless otherwise non-dischargeable.

To be clear this isn't a reason to knowingly omit creditors, there are a lot of bad things that can happen if a debtor does that...

[MarineVietVet]

Thanks for the link. I think we all agree though to check with a BK attorney about this to make sure.

From a BK years ago to:
EX - 3/11 pulled by lender- 835, EQ - 2/11-816, TU - 2/11-782

"Some people spend an entire lifetime wondering if they've made a difference. The Marines don't have that problem".

[chasmith]

Always check with an attorney, preferably the one engaged to file the BK.  Since the practices differ by court jurisdiction, it's especially critical to know what the court where the BK was filed will do.

[Vivalasvegas]

After filing Ch.7 in late 2010 and getting it discharged in Feb. 2011, I had a similar issue. I realized I didn't include an Amex credit card in the Ch 7. I emailed my BK Atty about opening the BK to include it. His reply is listed below. The Facts...my wife and I filed a no-asset, Ch. 7. In other words, there were no assets not protected by the BK that the Trustee could seize to pay creditors. I followed his suggestions below by calling and faxing Amex my discharge letter and the problem was solved. Hope this helps. ~ VivaLasVegas

Repy from my attorney:

"Your case was a no asset case, so it actually discharges all old creditors whether they were listed or not. Basically, that was decided in this case: In re Beezley, 994 F.2d 1433 (9th Cir. 1993). Because of that case, our judges are wary to reopen a case for a debt that was discharged, even though it wasn't listed.  Plus it costs money to reopen it if it's allowed by the judge. 

Your best remedy is to contact Amex directly and tell them to stop reporting it on your credit report, and give them your Chapter 7 case number and that you received a discharge, this debt was discharged, and quit reporting it because you're violating the bankruptcy discharge injunction.

If they fail to fix the problem, then you have to contact the credit reporting agency (Equifax, etc.) where you're seeing that item and ask them to remove it.  That is a process with them to get things removed from the credit report,  you would send them a copy of your discharge, for instance.  It's also so old that is having no effect on your credit score, but if it pops and causes problems for new credit applications, then you're still being affected by it." 

Here's the punchline... After getting Amex to realize that the the old account was actually part of the BK (by default),.. I applied for an Amex corp card through my employer. It arrived in the mail this week. The whole process took about a month.

[Anonymous]

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@Vivalasvegas wrote:

After filing Ch.7 in late 2010 and getting it discharged in Feb. 2011, I had a similar issue. I realized I didn't include an Amex credit card in the Ch 7. I emailed my BK Atty about opening the BK to include it. His reply is listed below. The Facts...my wife and I filed a no-asset, Ch. 7. In other words, there were no assets not protected by the BK that the Trustee could seize to pay creditors. I followed his suggestions below by calling and faxing Amex my discharge letter and the problem was solved. Hope this helps. ~ VivaLasVegas

Repy from my attorney:

"Your case was a no asset case, so it actually discharges all old creditors whether they were listed or not. Basically, that was decided in this case: In re Beezley, 994 F.2d 1433 (9th Cir. 1993). Because of that case, our judges are wary to reopen a case for a debt that was discharged, even though it wasn't listed.  Plus it costs money to reopen it if it's allowed by the judge. 

Your best remedy is to contact Amex directly and tell them to stop reporting it on your credit report, and give them your Chapter 7 case number and that you received a discharge, this debt was discharged, and quit reporting it because you're violating the bankruptcy discharge injunction.

If they fail to fix the problem, then you have to contact the credit reporting agency (Equifax, etc.) where you're seeing that item and ask them to remove it.  That is a process with them to get things removed from the credit report,  you would send them a copy of your discharge, for instance.  It's also so old that is having no effect on your credit score, but if it pops and causes problems for new credit applications, then you're still being affected by it." 

Here's the punchline... After getting Amex to realize that the the old account was actually part of the BK (by default),.. I applied for an Amex corp card through my employer. It arrived in the mail this week. The whole process took about a month.

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Actually, there is conflicting case law on whether or not Chapter 7 discharges unlisted debts.  In some jurisdictions, even unscheduled debts are discharged.  In others, they are not.