Debtors often ask me not to include a specific debt in their bankruptcy. In most cases the motivation behind these requests is that the debtors wish to keep a house or a car and they believe that if the debts that are secured by their property are listed in the schedules, they will lose the property. That belief is inaccurate. The following is a general rule for listing creditors in bankruptcy schedules.
Debtors are required to list all of their creditors in their schedules when they file bankruptcy. Being listed in bankruptcy schedules affects creditors differently depending on the type of debt. Secured creditors have to be listed in the schedules but the debts don’t necessarily have to be discharged. For example, a debtor who has a car payment must list the debt in her schedules but can choose to reaffirm the debt so that it will not be discharged in the bankruptcy. Priority debts, such as child support or income tax liability, must be listed in the schedules, but these debts are generally nondischargable, meaning the debtor will still be liable for the debt after the bankruptcy case is closed. Unsecured debts, with the exception of student loans, are almost always subject to full or partial discharge in bankruptcy. Debtors cannot choose to reaffirm these debts. Making payments to one unsecured creditor in preference to other unsecured creditors is not permitted and can result in the money being seized by the trustee. As you can see, just because a debt is listed in bankruptcy schedules, it doesn’t necessarily mean that the debt or the property will be affected by the bankruptcy case.