The Nebraska Bankruptcy Court issued a written opinion on January 6th stating that a debtor who intentionally or negligently fails to list a debt will be denied a discharge of the debt. A Nebraska debtor who resides in Morse Bluff, Nebraska, was recently denied the right to discharge a $751 auto repair bill that she failed to list on her bankruptcy case. In Re Flemmer, Bankruptcy Case number 09-41487.
The debtor filed her Chapter 13 case on May 28, 2009. She incurred the auto repair bill to Kubic Auto Repair & Tire Service Inc. approximately one year before filing bankruptcy, but she chose not to list the debt and indicated that she would pay the debt outside the bankruptcy payment plan. However, after Kubic sued her in Small Claims Court and began a garnishment of her paycheck, she attempted to add the debt to her bankruptcy case.
The Bankruptcy Court ruled that although a debtor may amend the list of creditors to add debts and that this particular debtor did not act in bad faith, the debt would nevertheless not be discharged since the creditor was harmed by the delay in amending the creditor list and giving notice of the bankruptcy to Kubic. By the time the creditor list was amended it was too late for Kubic to file a Proof of Claim or to object to the Chapter 13 Plan, thus the Court ruled that it would be imporper to discharge the debt. As a result, Kubic was allowed to garnish the debtor’s wages.
When a person signs a bankruptcy petition, they represent to the Court, under penalties of purjury, that they have completely and honestly listed all debts, property, income and expenses. All property transfers within two (2) years of filing bankruptcy must also be listed. Frequently I hear clients tell me that they want to leave certain debts off the case. As this case demonstrates, the consequences of not listing all debts can be disasterous.