Many families in Louisville, Kentucky choose to file a Chapter 7 bankruptcy in order to eliminate a debt that is particularly cumbersome or stressful for a family. For instance, the family may be driven to bankruptcy because of a particularly aggressive credit card company or medical bill collector which seems willing and ready to garnish wage or take other serious action.

On the other hand, the family might not want the bank that hold their mortgage or the company which financed their car to know that the family is even experiencing financial trouble, especially since they plan on paying these loans off timely once they shake off some other debts. As a result, they may not want to “file on” these creditors simply by not listing them as one of their debts.

This approach is ill-advised for a number of reasons. For one, one of the basic principles of bankruptcy law is that a debtor’s paperwork has to be accurate and complete. Even if it seems to be hurting no one, leaving a creditor off the paperwork violates the principle.

Perhaps more importantly, a debt that is properly listed can be legally discharged in the bankruptcy, meaning that even if the debtor chooses to pay the debt back, he or she is under no obligation to do so. On the other hand, not listing a debt means the creditor can act as if the bankruptcy never took place; the court’s orders do not apply to it

By way of example, listing one’s mortgage company on the bankruptcy is not only the right thing to do, it also means that, if a family should face further financial difficulties, the worst the mortgage company can do is take back the home. Otherwise, a mortgage company may be able to come back down the road and seize a family’s other property, garnish wages, and the like in order to recover the full balance of the home loan.