Do I have to list all of my debts in a bankruptcy?

Many people find themselves considering bankruptcy to get rid of debts they cannot pay off, but have some debts they may want to keep. Maybe they have a mortgage, or a car loan, or perhaps they have debts they are current on and are hoping to retain some positive marks on their credit. They often wonder if they are required to list those debts on their bankruptcy.  So, do all your debts have to be listed in a bankruptcy?

The short answer is that all your debts must be included on your bankruptcy schedules.  Debts of the same type are generally treated the same way, but there are a couple exceptions. In bankruptcy, there are three main kinds of debt: secured debt, priority debt, and general unsecured debt.

Secured debt is a debt like a mortgage or a car loan. These debts are secured by property of some kind; if you do not pay these debts, the property can be taken by the creditor who gave you the loan. If you care current on your secured debts and you have income, you can generally keep your car loan or your house loan in either a Chapter 7 or a Chapter 13 bankruptcy and continue paying on those loans under the original terms. The lender must still be notified of the bankruptcy though, even if you intend to continue paying on the loan.  Remember that even after a bankruptcy you must pay on these debts or the property can be taken.

Priority debt is a special kind of debt created by the bankruptcy code. Debts included in this category are alimony and child support, as well as certain tax debts, the most common being income tax you may owe for the past three tax years. Priority debt survives a Chapter 7 bankruptcy, meaning it does not go away, but it still must be listed. In a Chapter 13, alimony and child support must be paid during the bankruptcy case either through the case or through an existing wage withholding order from the state courts or child support office. Even though this debt will not go away, you must let the IRS and any other tax authorities you may owe know that you filed bankruptcy, as well as letting the recipient of your alimony or child support know you are filing a case.

Finally, there is general unsecured debt. These are debts like credit cards, personal loans, pay day loans, and medical bills. In a Chapter 7, all debts like this must be listed and they are all treated the same way by the bankruptcy court. You cannot pick and choose how the bankruptcy court treats them but you can treat them differently after the case is filed.  You can choose to voluntarily pay debts after you file a Chapter 7 bankruptcy so if you had a private physician you wanted to continue seeing you might continue to pay on a debt to them.  In a Chapter 13, you may treat a medical debt differently if the provider, usually a doctor, dentist, psychiatrist, or chiropractor, may refuse to continue seeing you if do not pay the debt. You may also be able to continue paying on an unsecured debt to protect a co-signer on it. However, the general rule remains that you must let all your creditors know about the bankruptcy, and they are generally treated the same with very few exceptions by the bankruptcy court.

Bankruptcy is about giving people a “fresh start” that helps them get rid of debts and payments they can no longer afford. Part of that fresh start is making sure the court treats everyone equally.  This is why you must list all of your creditors in the case, even those you are going to treat them differently afterwards.  Everyone is brought to the table in bankruptcy but not all of them are served the same way. 

Our bankruptcy attorneys at Coons and Crump spend all of their professional time handling consumer bankruptcy cases.  We have offices in Wichita, Topeka, Lawrence and Overland Park, Kansas.  If you have questions about what would happen if you need to file a bankruptcy please contact us and we will go over your options.  All initial consultations are free and you can often get one of the attorneys on the phone when you call.  

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