Bankruptcy lawyers know that all debts need to be scheduled. Clients think or hope that they get to pick and choose.
Every effective bankruptcy lawyer needs a line, a phrase, or a story to squelch the client’s instinct to exclude things from their bankruptcy filing.
The instinct to omit
Often the client’s desire to be less than forthcoming is born of fear or ignorance. The job of a bankruptcy attorney is to figure out which it is and overcome it.
Clients sometimes confuse “include” in the bankruptcy with “discharge” in bankruptcy. When they tell you they don’t want to include a debt, they may be indicating that they expect to repay the debt.
Fine, I tell them. We list everyone, because that’s what the law requires and you sign the schedules under penalty of perjury.
After your bankruptcy attorney completes the filing, you can pay who you will with what you can.
After the discharge
The Bankruptcy Code specifically provides in §524(e) that nothing prevents the debtor from voluntarily repaying a debt. That’s my favored solution, so if circumstances change in the future, the debtor is required to repay.
A debtor can also reaffirm a debt, if they choose, and the court approves the reaffirmation.
At the front end, tell the whole truth .
Sometimes, the debtor fears embarrassment or some sort of retaliation as a result of listing a debt in the bankruptcy papers. Look for ways to alleviate the anxiety. Perhaps alerting a family or friend in advance of the filing, at a time of the debtor’s choosing, will lessen the hesitation to be forthcoming.
Perhaps you want to use a story of debtors who lost their discharge because they swore falsely that they had included every creditor. It happens.
It’s a cardinal rule of bankruptcy that you list all creditors. Period.
In my office, clients who are unwilling to do so are shown the door.