Can a Debtor Exclude Some Creditors When Filing Bankruptcy?

Understanding Bankruptcy: Can a Debtor Exclude Some Creditors?

Bankruptcy offers a fresh start to those individuals or entities drowning in debt. It is a legal procedure that allows debtors to eliminate or repay some or all of their debts under the protection of the federal bankruptcy court. However, one question that often arises is whether a debtor can exclude certain creditors from the bankruptcy case?

Comprehensive Disclosure is a Requirement

The primary principle in any bankruptcy proceedings is full disclosure. When filing for bankruptcy, the debtor is required to list all their assets, income, debts, and expenses. This includes all creditors, whether they are personal, credit card companies, or mortgage lenders. The debtor cannot choose to exclude some creditors, as this would be considered fraudulent.

What About Co-signed Debts?

Even in situations where a debt is co-signed, both the primary borrower and the co-signer are legally obligated to pay. Filing for bankruptcy does not eliminate the co-signer’s responsibility, and the creditor can still pursue them for payment. The debtor cannot protect the co-signer by excluding the debt from their bankruptcy filing.

The Consequences of Excluding Creditors

Trying to exclude some creditors from a bankruptcy case can have severe consequences. If it’s discovered that a debtor intentionally failed to list a creditor, the bankruptcy court can deny the discharge of that debt. In extreme cases, the debtor could face penalties for bankruptcy fraud, which can include fines or imprisonment.

What Happens to Excluded Debts?

In the event that a debt is accidentally left out of the bankruptcy filing, what happens next can depend on the type of bankruptcy filed. In Chapter 7 bankruptcy, the debt might be discharged if the bankruptcy case is a “no asset” case, meaning the debtor has no non-exempt assets for the trustee to sell. However, in a Chapter 13 bankruptcy, the omitted debt may not be discharged, and the debtor may still be responsible for paying it.

Conclusion

Bankruptcy proceedings require full and complete disclosure of all assets and liabilities. Attempting to exclude certain creditors from a bankruptcy case is not only against the law, but it can also lead to severe consequences. It’s crucial to consult with a knowledgeable Fresno, CA bankruptcy lawyer to understand your obligations and rights in a bankruptcy case. Contact Liviakis Law Firm at 916 459 2364 for more information and guidance on bankruptcy proceedings.