Bankruptcy Bullets: Debts Not Listed on a Bankruptcy Can Still be Forgiven

Even if you forgot to list a creditor on your Chapter 7 bankruptcy, the debt may still be wiped out.

This statement seems to go against all logic. After all, as most creditors would argue, it doesn’t seem fair that a debt not listed in a bankruptcy should be discharged. Where is the notice, the opportunity to protest, the creditor’s “day in court?”

Some of these questions were answered in 1993 by the case Beezley v. California Land Title Co. (In re Beezley), 994 F.2d 1433, 1434 (9th Cir. 1993). The court decided that in a case where there is no money for the creditors, called a “no asset case”, reopening the matter just to add the forgotten creditor would be meaningless, since under bankruptcy law all the debts, even those the Debtor wants to add later, are already discharged.  In short, whether or not the debt is listed is not important.  What matters is that the case was “no asset” and that the debtor received a discharge.

So what should you do if years after you received a discharge a forgotten creditor “comes out of the woodwork” and sues you for the debt?  First, contact the lawyer who handled your case.  She’ll know what to do.  If you didn’t have a lawyer, or can’t find him, you should consider hiring one.  There is a standard legal attack on the creditor’s lawsuit called a demurrer  which will end the matter permanently for you, but it needs to be prepared quickly by experienced, trained legal counsel, and the cost is usually minimal.

Mark Brenner has over 38 years of experience and has successfully handled many of these matters by using the ruling in Beezley and other legal authorities to make the creditors go away.

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