What happens if a person fails to list a debt on their bankruptcy case? That exact question was presented to the Nebraska bankruptcy court when debtor Peggy Gonzalez failed to list her landlord as a creditor in a Chapter 7 case (Nebraska Bankruptcy Case 09-81123). After the bankruptcy case was completed, the landlord sued Ms. Gonzalez for $6,000 of unpaid rent and in response she applied to reopen her bankruptcy case to add the debt. The landlord objected to reopening the case and argued that since the debt was not listed it was never discharged and that it had the right to sue for the unpaid rent.
In a previous posting I had written about how the Nebraska bankruptcy court ruled that a debt intentionally concealed in a Chapter 13 case was therefore not discharged, however Ms. Gonzalez filed a Chapter 7 case and there were no non-exempt assets claimed by the Trustee in her case, so creditors received no payments at all.
Bankruptcy Judge Timothy J. Mahoney ruled that since creditors receive no payment in a “no-asset” Chapter 7 case, the landlord’s debt was therefore discharged even though the debt was not listed and the landlord received no actual notice of the bankruptcy.
The Court was careful to limit is ruling to the following situations:
- The case must be a Chapter 7 case.
- No non-exempt assets must be available to pay creditors.
- The debt cannot be a non-dischargeable debt specified in Bankruptcy Code Section 523(a)(2), (4) or (6) (i.e. debts involving fraud, misrepresentation or malicious injury).
The Court went on to say that it is not even necessary to reopen the bankruptcy case if the above factors are present. The debts are simply discharged–whether listed or not–unless the creditor can show that had it received notice the outcome would have been different.