Recently I answered a question from Lynn, “My Car Went Missing From My Driveway Because My Ex-Husband Didn’t Make The Payments.”
In that question she brought up the fact that she had gone bankrupt but had not included all of her debts in her bankruptcy and now she was in trouble with those debts not included.
I went to my famous bankruptcy attorney friend, “Lisa”, and asked her to give us all some additional feedback about the situation. Here is what she said.
“The most common bankruptcy MISTAKE!
I’ve heard it a million times:
- “Oh, I don’t want to file bankruptcy on [my car, my house, my dentist, the loan with my relatives, etc.]– I can pay THAT, I just need to file on my other bills!”
- Or, “I did not list my student loans [taxes, etc.] because I know I cannot get rid of those debts in bankruptcy.”
News Flash: You are NOT ALLOWED to “choose” which debts you list. You are REQUIRED, under penalty of perjury, to list everything you owe, without exception!
Your lawyer told you this and probably gave it to you in writing, but let’s face it, when you’re under financial stress and the emotional upheaval of a bankruptcy filing we don’t tend to take in every important detail like we do under ordinary circumstances.
Only certain debts are forgiven or discharged, but they must ALL be listed.
Now just because you are required to LIST all of your debts in your bankruptcy, does not mean that they will all go away.
But I want to pay [my Doctor, mother, etc]!
No problem, as long as you do it after you file. Just because you list a debt, does not mean that you cannot later voluntarily pay that debt after your case is filed. It only means that you cannot be legally forced to pay the debt if it is discharged in your bankruptcy.
Be aware that if you pay family members or other “insiders” prior to filing your bankruptcy, those family members may be sued to get the money you paid them back. This is because bankruptcy law requires that you not “prefer” one creditor over another prior to your bankruptcy. Everyone would rather pay their parents than the credit card company, but bankruptcy law doesn’t allow you to make such preferential payments. For details about this and what you can do, consult your bankruptcy lawyer.
Now to address a few specifics in your inquiry:
Any secured property that you wish to keep after your filing must be kept contractually current (payments and insurance). The fact that you trusted this to someone else will not serve as an excuse. There are two issues: (1) will you be liable for any debt remaining after the sale of the vehicle or home and (2) can you somehow “keep” the home or get the vehicle back.
- You will not be liable for any balance on the vehicle or the home after your bankruptcy, but if you do not properly add these creditors to your bankruptcy filing (and in Chapter 7 your time to do this is limited) the creditors will not know that you filed bankruptcy and they may well try to pursue for the debts. Therefore you should correct your error of failing to list any creditors you owed on the date you filed your case as soon as possible. Your lawyer will tell you what to do and what you will owe in fees and filing fees to add your omitted creditors.
- Given that over $10,000 is due in a few days on the house, you will have to decide whether it is realistic to attempt to salvage the home based on your ability to make payments, the value of the home above the amount you owe (if any). If it makes sense based on these factors, you will need to work with the mortgage company directly, or if that is not possible, convert your case to chapter 13 so that you can cure the amount you are behind over a 3 to 5 year repayment plan. Your lawyer can best advise you.
Finally, you should be aware that you may receive 1099 forms for forgiveness of debt. Know that if this happens, you should use the IRS form 982 that lets you avoid liability for any debt forgiveness you got as a result of bankruptcy. ”
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