Chapter 7 bankruptcy is referred to as a liquidation bankruptcy because your nonexempt assets are sold by a court-appointed trustee to pay your creditors. After all of your eligible assets are liquidated, you receive a discharge of any remaining debt owed to the creditors listed in your bankruptcy petition. However, if you forgot to list a creditor or asset, or were unaware of a debt owed or asset owned at the time you filed for bankruptcy, you may be able to reopen your case to include these items.
Notice to Creditors
A key principle in bankruptcy law is that your creditors must be given notice of your bankruptcy filing with sufficient time to file their claims against your bankruptcy estate. Since your creditors receive payment only for debts they can prove you owe, they must file evidence that you owed them money. If you failed to list a creditor on your initial petition, the creditor would not have received notice of the bankruptcy filing; thus, been unable to file a claim with the bankruptcy trustee.
Distributed Asset Cases
Many petitioners' Chapter 7 bankruptcy cases do not have assets available for distribution to creditors, either because they have no property of value or their assets are exempt by law from liquidation. However, if you had assets that were sold by the trustee and distributed to your listed creditors, you are not eligible to receive a discharge from the omitted creditor because it did not receive its portion of the asset distribution. Therefore, in such cases, reopening your bankruptcy to include the unlisted creditor will not discharge the forgotten debt.
Motion to Amend
Forgetting to list a creditor in bankruptcy is not an infrequent occurrence. Therefore, the courts have set up a procedure that allows you to reopen your previously closed bankruptcy and amend your initial petition to list the omitted creditor. The process requires you file a written request, called a motion, with the bankruptcy court that handled your case and ask that it reopen your bankruptcy. You will need to explain how you need to amend your petition, and any other schedules and forms filed with the court, to include a creditor that you omitted in the previous filing and provide a statement to the court explaining why the creditor was not listed in the initial filing.
The Chapter 7 bankruptcy petition requires that you fill out various forms, called schedules, disclosing information necessary for processing your case. When amending your petition, you must attach a corrected copy of the petition for bankruptcy as well as any amended schedules to the motion to amend your bankruptcy petition. The amended petition and schedules should appear exactly as they had in your previous filing, except they should now include the omitted creditor's information or identification of the forgotten asset. Common schedules that may need to be corrected include "Schedule D -- Creditors Holding Secured Claims" and "Schedule E -- Creditors Holding Unsecured Priority Claims." Copies of most bankruptcy forms are available on the U.S. Courts' website or at the clerk's office at your bankruptcy court.
The motion to amend and any exhibits should be filed with the clerk of the bankruptcy court, and a copy must be given to the trustee who was assigned to your case. You will also be required to pay a filing fee to the bankruptcy court at the time you submit the motion. After the motion is filed, and a copy of the filing is served on the trustee, you will receive a scheduling order from the court notifying you of important dates in your reopened case, including any dates when you are to appear in court.
If your bankruptcy was a no-asset Chapter 7 -- wherein you did not have any assets liquidated for sale - and you are seeking to add a forgotten creditor, you may not need to reopen your case. Many courts have concluded that it is unnecessary to reopen a closed Chapter 7 to add an unlisted creditor since there is no money to be distributed to it. In these cases, the court simply deems the debt to have been discharged when the initial case was closed. However, you must still give notice to the creditor and the court that you wish to discharge the forgotten debt as part of your prior bankruptcy.