NLISTED CREDITORS IN A “NO ASSET” CHAPTER 7 BANKRUPTCY CASE
You filed your “no asset” chapter 7 bankruptcy and thought you obtained a discharge from all your past debts. But you unintentionally omitted a trade creditor from your petition and that creditor has been calling daily demanding payment in full and threatening suit, claiming it was never notified of the bankruptcy. You are wondering now whether you must pay the claim and if not what you can do to stop the calls and demands.
- DO NOT PAY OR AGREE TO PAY THIS DEBT WITHOUT FIRST CONSULTING WITH LEGAL COUNSEL
Most jurisdictions have adopted a “no harm , no foul” rule , whereby a debt will be discharged in the bankruptcy case, even if the debt is not listed in the bankruptcy and the creditor is not notified of the bankruptcy, if the following apply:
- The Court never set a deadline for creditors to file a proof of claim. This is the case in virtually all no asset cases. In a no asset case the unlisted creditor is not harmed, because there was no distribution for the creditor to receive. However, if the court did set a deadline for filing proofs of claim, then the obligation to the creditor is not discharged if the creditor was not listed in the bankruptcy and did not otherwise receive notice of the bankruptcy in time to file a proof of claim. It is the setting of a deadline for the filing of a proof of claim that is the key. Ironically, it does not matter whether the creditor would not have received any distribution from the trustee on the claim. Nor does it matter that no distribution was made by the trustee to any creditors. It is also irrelevant that a distribution was made by the trustee, but the omitted creditor would not have been paid anything even if a proof of claim had been timely filed, for example if the distribution all went towards administrative costs and priority claims. In any of these instances, the debt survives the discharge.
- The creditor does not have the type of claim for which the creditor could have filed a lawsuit in the bankruptcy court to have the debt declared not discharged, such as for fraud or intentional injury.
- The creditor does not have the type of claim which is never discharged in bankruptcy, such as child support, spousal maintenance, most taxes, etc.
- DEALING WITH THE OMITTED CREDITOR:
The biggest difficulty is often convincing an omitted creditor that its claim was discharged and that the post-discharge injunction of 11 USC §524 prohibits collection efforts. Typically, this will require the assistance of competent counsel. At a minimum the creditor should be sent a legal letter advising of the law and the applicable court rulings in your jurisdiction.
The bankruptcy courts will not normally allow a closed case to be reopened for the purpose of listing an omitted creditor, since the matter is considered moot, butthe debtor may re-open the bankruptcy and request sanctions against a creditor that refused to stop collection efforts, in violation of 11 USC §524. In addition, since the creditor is attempting to collect on an invalid debt, the harassment may also constitute one or more violations of the Fair Debt Collection Practices Act and/or applicable state consumer protection, especially if it continues after receipt of the lawyer’s letter.Again however, this is a matter you should bring up with your local counsel.
Law Offices of Christopher C. Carr, MBA, P.C., is a quality bankruptcy and debt relief practice, located in Valley Township, west of Coatesville, Pennsylvania, where Attorney Christopher Carr, a Chester County bankruptcy attorney, who has over 30 years if diversified ;egal experience, concentrates on serving the residents of and businesses located within Western Chester County and Eastern Lancaster County, Pennsylvania, including the communities in and around Atglen, Bird in Hand, Caln, Christiana, Coatesville, Downingtown, Eagle, Exton, Fallowfield Gap, Honeybrook, Lancaster, Lincoln University, Modena, New Holland, Parkesburg, Paradise, Ronks, Sadsbury, Thorndale, Valley Township, Wagontown & West Chester, Pennsylvania. If you reside or do business in the area and need assistance with a legal issue, please call Mr. Carr at (610)380-7969 or write him at firstname.lastname@example.org today!
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Other Attorneys Blogging on the Letter U Include:
U.S. Trustee Omaha and Lincoln, Nebraska Bankruptcy Attorney, Ryan D. Caldwell http://bankruptcyblog.caldwell-lawfirm.com/2011/11/23/bankruptcy-alphabet-u-is-for-u-s-trustee.aspx Unauthorized Practice of Law Cleveland Bankruptcy Attorney Bill Balena http://ohiobankruptcysource.com/?p=2601 Underwater Jay Fleischman, bankruptcy attorney in New York City http://www.consumerhelpcentral.com/bankruptcy-alphabet-underwater/ Underwater Metro Richmond Consumer and Bankruptcy Attorney, Mitchell Goldstein http://www.morethanbankruptcy.com/u-underwater.html United States Trustee Maui Bankruptcy Attorney, Stuart Ing http://www.bankruptcyhi.com/2012/02/u-is-for-the-united-states-trustee/ Unsecured Cathy Moran, Bay Area Bankruptcy Lawyer http://www.bankruptcysoapbox.com/bankruptcy-alphabet-2/ Upside-Down Vehicles Wisconsin Bankruptcy Lawyer, Bret Nason http://nasonlawfirm.com/archives/962 Unlisted Asset Allen Park, Michigan bankruptcy lawyer, Christopher McAvoy http://downriverbankruptcy.com/unlisted-undervalued-assets-bankruptcy/#axzz1uLBcDSOL Unsecured Creditor Livonia Bankruptcy Attorney, Peter Behrmann http://www.livoniamichiganbankruptcy.com/u-is-for-unsecured-creditor-in-bankruptcy/
Law Offices of Christopher C. Carr, MBA, P.C., is a quality Chester County Bankruptcy Practice, located in Valley Township, west of Coatesville, Pennsylvania, where Attorney Carr, who has over 30 years if diversified experience as an attorney, concentrates his practice on serving the residents of and businesses located within Western Chester County and Eastern Lancaster County, Pennsylvania, including the communities in and around Atglen, Bird in Hand, Caln, Christiana, Coatesville, Downingtown, Eagle, Exton, Fallowfield Gap, Honeybrook, Lancaster, Lincoln University, Modena, New Holland, Parkesburg, Paradise, Ronks, Sadsbury, Thorndale, Valley Township, Wagontown & West Chester, Pennsylvania. If you reside or do business in the area and need assistance with a legal issue, please call Mr. Carr at (610)380-7969 or write him at email@example.com today!
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