Tuesday, March 27, 2007

Must I list all of my debts in bankruptcy?

Recently, I received an email asking about filing a chapter 7 bankruptcy The writer asks:

"Do I choose which debts I want to include in my bankruptcy or does the trustee do this? I have a bank loan for my truck which I pay on time and I want to keep my truck and keep making payments. Do I have to include this loan in my paperwork for a bankruptcy? What happens if I don't include it?"

Answer: All debts must be listed in the bankruptcy petition. You can select to 'reaffirm' certain debts. Most chapter 7 consumers reaffirm financed items -cars, houses, jewelry, furniture and electronics. You can usually keep the asset by agreeing to keep paying for it. Now, your budget has to show that you can afford the payments, otherwise the judge could request that you prove how you can afford the payments if your budget shows you cannot.

Similarly, you must list all debts in a bankruptcy case, technically even small personal debts, such as the $10 you owe your Aunt Sue should be listed too! Otherwise, it would be bankruptcy fraud if you intentionally omit a creditor from a bankruptcy petition.

Amendments: if you find out that you inadvertently left a debt out of your bankruptcy filing, perhaps an old medical bill from 4 years ago, don't fret. You can always amend to include that bill in your case. If you do not, it will not be discharged under the bankruptcy code under BAPCPA. The court charges a nominal fee to amend to add another debt if you case is still open.