Fear Of Failure To List Creditors
There is a fear that many chapter 7 debtors have with regard to failing to properly list creditors. The bankruptcy code provides that creditors be given due process with regard to the bankruptcy filing. This means that creditors must be given notice of the bankruptcy so that they have an opportunity to object to the discharge, object to the particular debt and seek specific other relief with regard to the case. In the event that a creditor is unaware of the bankruptcy filing, then there is a split among the judges and districts with regard to the dischargeability of that creditor’s debt.
Aurora Bankruptcy Case
In the current bankruptcy case in Aurora, the debtor reopened the case several years after it was filed to try and hold a particular creditor in contempt of court. This is done by way of a rule to show cause. The burden actually shifts to the creditor to prove or show why he should not be held in contempt for violating the discharge injunction. In this particular case, the judge determined that although not properly listed, the creditor did have actual notice of the bankruptcy filing. The creditor was a business contemporary of the debtor and thus, was well aware of the bankruptcy case. 
The creditor continued to pursue legal action against the debtor claiming that the particular debt was not properly listed and that he didn’t have proper notice. The judge found that the debt was discharged and that the creditor had sufficient notice to provide for due process. Although the debtor was seeking monetary damages as a sanction award, the judge simply enjoined the creditor from further action and denied the debtor’s request for damages which included attorney’s fees.
2-Fold Lessons
The lessons from this decision are two-fold. First, if you are a debtor, make sure that you list all of your creditors. As I mentioned above, the creditor in this particular case was a business contemporary of the debtor. The debtor should have done a much better job of providing actual notice at the time of filing. Second, if you are a creditor and you are aware of a bankruptcy filing, do not pursue collection efforts subsequent to the bankruptcy discharge. The creditor in this particular case could have been sanction. I believe that the judge was lenient in allowing the matter to simply terminate. I have seen many other cases where creditors who had sufficient notice were in fact sanctioned.
Debtor Re-Opened Case
Please note that the debtor in this case was forced to reopen the case because there was an issue as to whether or not the notice was sufficient. If the debtor would have properly noticed the creditor, then the creditor would not have likely brought any further action against the debtor. Thus, it is imperative and prudent for a debtor as well as for debtors’ attorneys to provide as detailed information as possible concerning a bankruptcy case filing. If this had been done properly in the present case, the debtor from Aurora would not have had to go through all this trouble post-discharge.
