If I file for Bankruptcy Protection, Do I have to Include all of my Debts? Yes!

One of the most common questions that people have when they are considering filing for bankruptcy is whether they have to include all of their debts in their bankruptcy case. The answer is yes, you do.

I do not know why almost every client that I see thinks that they can keep some debts out of the Bankruptcy.  It might be because people don’t know what “include in Bankruptcy” means.  When you file Bankruptcy, you have to provide the Court, on your Bankruptcy Petition, a list of every company or person you owe.  However, just because a debt is “included” does not mean that you won’t pay that debt.

Bankruptcy law requires that you list all of your debts, even if you intend to pay some of them back.  Some reasons you’d pay debts back would be:

  1.  If they are not dischargeable in bankruptcy, such as Student Loans and some Taxes.
  2. If they are secured Debt:  For example, you’ll include your mortgage and car loan, even if you want to keep and pay for your house or car.

This is because bankruptcy is a legal process that affects your rights and obligations with respect to all of your creditors, not just some of them.

If you don’t include a debt in your bankruptcy case, you may face serious consequences, such as:

1- Losing the protection of the automatic stay, which stops creditors from taking collection actions against you while your case is pending. The automatic stay is one of the main benefits of filing for bankruptcy, as it gives you some breathing room to deal with your financial situation without being harassed by creditors. The automatic stay applies to most types of debts, such as credit cards, medical bills, personal loans, etc. However, there are some exceptions, such as child support, alimony, taxes, and criminal fines, which may not be affected by the automatic stay.

2- Losing the opportunity to discharge the debt in bankruptcy, which means you will still owe it after your case is over if you don’t include it.

3-Committing Perjury. Your Bankruptcy Petition is signed under the penalty of perjury.  So, if you leave a debt out, you’d be committing perjury, which is a federal crime that can result in fines or imprisonment.

Therefore, it is very important that you disclose all of your debts to your attorney, even if you think they are insignificant or irrelevant.

And, after you consult with me, you’ll know how each of your debts is affected by your Bankruptcy filing.

Daniel J. Winter