Infrequently, a client will come to me after they receive their bankruptcy discharge with a debt that the client forgot to include in their bankruptcy. At the time the client filed the bankruptcy, the debt was not listed on their credit reports nor had the client received a bill for the debt to the best of their knowledge. Often, this type of missed debt is a medical bill from a small medical provider.
What can the client do? They received their discharge, and forgot to list a creditor. There is still hope! If the bankruptcy trustee determined that the client’s bankruptcy was a “no asset” case, meaning there was no property to liquidate and pay a dividend to creditors with, then a missed creditor is also discharged by operation of law. In Re Beezley is the court case in the 9th Circuit (Oregon is included in this Circuit) that sets forth that an unlisted creditor in a “no asset” case is still discharged, provided that the creditor was not fraudulently omitted from the bankruptcy.
However, if there are assets to be administered through the bankruptcy by the trustee, rendering an “asset case,” a consumer who missed listing a creditor and receives a discharge will still be liable for the debt to that creditor. This is based on the fact that the creditor may have received a distribution of funds from the bankruptcy had the creditor been listed in the bankruptcy.
The vast majority of chapter 7 bankruptcies are “no asset” cases, and probably twice a year a client will come to me with an old medical bill that they had forgotten to include in their bankruptcy. If the case was a “no asset” case, I will send a letter to the creditor informing the creditor that the debt was discharged by operation of law pursuant to In Re Beezely.
The idea and goal, however, is to capture all creditors in your bankruptcy when you file.
If you are interested in learning more about bankruptcy, please call today for your free in-office consultation in Eugene.
I look forward to hearing from you.
Attorney at Law
116 State Highway 99 N #101
Eugene, OR 97402
541 762-1967 telephone
541 762-1968 facsimile