You may have sincerely forgotten to disclose a certain debt in your bankruptcy schedules, which is especially likely to happen if you filled them out without a lawyer’s review. Or you may have mistakenly assumed that you did not have to list a debt if it was sold to a collection agency, the debt was old or charged-off, the debt had a co-signer, or the debt was the remaining balance of a personal bill (i.e., medical bill). Whatever your case may be, you cannot simply shrug off this omission as no big deal. With that being said, please continue reading to learn what happens if you do not fix a debt omission and how an experienced Louisville, Kentucky consumer bankruptcy lawyer at Schwartz Bankruptcy Law Center can help you navigate this tricky situation.

Why does forgetting to list debts in bankruptcy hurt creditors?

You may only assume that forgetting to list a debt in your bankruptcy paperwork only hurts you, as it means it will not be discharged from your personal financial responsibility, and thus figure you can accept the loss for what it is. However, you may not realize that this oversight can hurt your creditors.

For one, it denies the creditor of your forgotten debt due process. That is, they will collaterally be excluded from the chance to participate in your bankruptcy case, receive potential payouts from your bankruptcy liquidations, or exercise their legal right to your bankruptcy discharge (i.e., harassing phone calls, wage garnishments, lawsuits, etc).

This is to say that forgotten creditors, once they realize your mistake, can resume their collection efforts once your bankruptcy case is closed and the bankruptcy court lifts your automatic stay. In a way, this gives an unlisted creditor an unfair advantage over those who were listed, experienced your bankruptcy process, and had their debts discharged.

What happens if I don’t fix debt omissions in my bankruptcy case?

Besides hurting creditors, there are other serious consequences to follow if you do not quickly rectify a debt omission in your bankruptcy case. They read as follows:

  • Your unlisted debt may remain as an active or delinquent debt on your credit report.
  • Your unlisted debt may harm your credibility when petitioning for future bankruptcy cases.
  • Your unlisted debt may lead to accusations of intentional concealment from the bankruptcy court.

Of note, the worst possible outcome may be an allegation or debt concealment. This is because it is commonly associated with bankruptcy fraud or making false statements. After all, you signed your bankruptcy schedules under penalty of perjury and verified under oath.

Bankruptcy fraud is charged as a federal offense. This means potential criminal penalties like a prison sentence of up to five years per offense, fines of up to $250,000 per count, mandatory restitution payments to identified victims, and, of course, a permanent criminal record.

There is no need to wait any longer to hire a skilled Louisville, Kentucky consumer bankruptcy lawyer if you are already ready to get on with your bankruptcy case. Reach out to our law firm, Schwartz Bankruptcy Law Center, at your earliest possible convenience.