One of the questions I hear frequently from people considering bankruptcy is, “Do I really have to list all of my creditors?”

Sometimes the question is asked because the person has a creditor they particularly do not want to notify. Other times, they want to continue paying a particular debt and assume that means the debt should be left off the bankruptcy schedules.

The answer is simple: Yes. You need to list your creditors.

This includes creditors you intend to continue paying.

Federal bankruptcy law requires a debtor to file a list of creditors, and Bankruptcy Rule 1007 requires the list to include the entities that are included or will be included on the bankruptcy schedules. The purpose is to make sure that creditors and other parties entitled to notice receive appropriate notice of the bankruptcy case.

“But I want to keep my house.”

A common example is a mortgage.

A client may tell me:

“I don’t want to list my mortgage company because I want to keep my house and continue making my payments.”

That is not how bankruptcy works.

The mortgage company should be listed.

Listing the mortgage company does not mean that you are giving up your house. It does not mean that your house is included in the bankruptcy. It does not mean that you are asking the mortgage company to take the house. It simply means that the creditor is properly identified in the bankruptcy case.

The same thing applies to an automobile loan.

If you have a vehicle that you want to keep, you still list the automobile lender. In a Chapter 7 case, the debtor may have options for dealing with a secured automobile loan, including continuing to make payments and, when appropriate, reaffirming the debt.

The fact that you want to keep the car is not a reason to leave the automobile lender off the bankruptcy schedules.

What about a credit card with a small balance?

The same rule applies.

I have had clients tell me:

“I only owe $300 on that credit card. I want to keep that card, so I don’t want to put it in the bankruptcy.”

Unfortunately, the size of the balance doesn’t change the requirement.

If you owe the creditor money when the bankruptcy case is filed, the creditor generally needs to be disclosed.

Even if the balance is only $50, $100 or $300, it should not be intentionally omitted simply because it is a small debt.

There is another practical reason for this: you don’t necessarily know what the creditor will do after learning about the bankruptcy.

A creditor may close an account because of the bankruptcy even if you are current and even if you intended to continue using the account. That is a decision the creditor may make under its own policies and applicable law. Leaving the creditor off the bankruptcy schedules does not guarantee that the account will remain open.

Why does bankruptcy require all of these creditors to be listed?

There are several reasons.

First, bankruptcy is supposed to be an open and complete financial proceeding. The court, the trustee and creditors are entitled to accurate information concerning the debtor’s financial affairs.

Second, creditors have rights in a bankruptcy case. They may have the right to receive notice, attend the meeting of creditors, file a proof of claim when appropriate, object to discharge, object to exemptions, or take other action permitted by the Bankruptcy Code.

Third, the bankruptcy schedules are supposed to give the trustee and the court a complete picture of the debtor’s financial situation.

The requirement is not simply a technical requirement imposed by the bankruptcy court. It is part of the debtor’s obligation to provide complete and truthful information in the bankruptcy case.

Your creditors will probably find out anyway

Some people think that if they don’t list a creditor, the creditor won’t know about the bankruptcy.

That is usually not a good assumption.

Bankruptcy filings are public court records. In addition, bankruptcy information is routinely obtained by credit-reporting agencies, credit-monitoring services, financial institutions, collection agencies and other third parties.

In many cases, a creditor that was not directly notified by the bankruptcy court can learn about the bankruptcy from another source.

In other words, trying to keep a bankruptcy secret from a particular creditor by simply leaving that creditor off the schedules may not accomplish what the debtor thinks it will accomplish.

And if a creditor learns about the bankruptcy from a third party, that does not eliminate the debtor’s obligation to properly disclose the debt.

What about my electric bill or cell phone bill?

There is an important distinction here.

Not every company you pay every month is necessarily a creditor that needs to be listed as a bankruptcy creditor.

Your normal monthly utility expenses—such as your electric bill, natural gas bill, water bill or ordinary cell phone service—are generally treated as ongoing living expenses when you are current with the service.

For example, if you receive your monthly electric bill, pay it each month, and don’t have an old unpaid balance, you generally don’t list the electric company as a creditor simply because you have an electric account.

The same principle generally applies to ordinary ongoing cell phone service when there is no past-due debt.

However, if you owe a past-due balance, the analysis can be different. If there is an unpaid balance that existed when the bankruptcy was filed, that may constitute a debt that needs to be disclosed.

This distinction is important:

Having a monthly bill is not necessarily the same thing as having a pre-bankruptcy debt.

Your bankruptcy attorney should review the account if you are unsure whether a particular balance needs to be scheduled.

Don’t decide which creditors to list based on who you want to keep

This is probably the most important point.

When preparing a bankruptcy petition, I don’t tell my clients to make a list of the creditors they want to eliminate. We are trying to identify all of the debts and obligations that exist at the time of filing and properly report them.

That includes:

• Mortgage lenders
• Automobile finance companies
• Credit cards
• Personal loans
• Medical debts
• Collection accounts
• Judgment creditors
• Lines of credit
• Certain tax obligations
• Debts owed to friends or relatives
• Other obligations that constitute debts under the Bankruptcy Code

The fact that you intend to keep paying a particular creditor does not, by itself, mean the creditor should be omitted.

Bankruptcy is not about hiding debts

One of the biggest mistakes a bankruptcy debtor can make is thinking that bankruptcy is simply a process for identifying the creditors the debtor doesn’t want to pay.

It isn’t.

Bankruptcy requires full financial disclosure.

The debtor is required to provide a list of creditors and schedules of assets, liabilities, income and expenses.

The goal is to give the bankruptcy court and trustee an accurate picture of the debtor’s financial circumstances so that the case can be administered properly.

That doesn’t mean you have to surrender everything you own or stop paying every bill. It means the bankruptcy petition needs to accurately disclose your financial situation.

What should I do if I forgot a creditor?

Don’t panic—but tell your bankruptcy attorney immediately.

Creditors can sometimes be added to a bankruptcy case through amended schedules and/or other appropriate filings. The proper procedure can depend upon the type of bankruptcy, whether the creditor received notice, whether the creditor has already taken action, and the circumstances of the particular case.

The important thing is not to ignore the omission.

The safest approach is to give your attorney a complete list of your financial obligations before the case is filed and to tell your attorney about any creditor you are unsure about.

The bottom line

If you are filing bankruptcy, don’t try to decide which creditors should be listed based upon which debts you want discharged and which debts you want to keep paying.

List the mortgage even though you want to keep your house.

List the automobile lender even though you want to keep your car.

List the credit card even if you owe only a few hundred dollars.

And don’t assume that leaving a creditor off the bankruptcy schedules will keep that creditor from discovering the bankruptcy.

At the same time, remember that an ordinary current monthly utility or cell phone bill is generally different from an unpaid debt that existed before the bankruptcy was filed.

The best bankruptcy petition is a complete and accurate bankruptcy petition.

After more than 25,000 consumer bankruptcy cases, one of the things I have learned is that trying to be selective about what goes into a bankruptcy petition usually creates more problems than it solves. The best approach is to give your bankruptcy attorney the complete financial picture and let the attorney determine how each obligation should be treated under the Bankruptcy Code.