Bankruptcy

Do I Have to Include This Credit Card in my Bankruptcy? Do I Have to Include My House in my Bankruptcy? Do I Have to Include My Car in my Bankruptcy?

By Joseph McDaniel, Esq.

I always know when somebody doesn't do their homework before they come in to see me, because this is one of the questions that crops up with some frequency. In fact, it's probably one of the top ten most frequently asked bankruptcy questions in Arizona.

Does that make it a FAQ in consumer bankruptcy law in Arizona? Probably, but that's less important than the consequences of failing to list a creditor or asset in your Chapter 7 or Chapter 13 Bankruptcy filing in Arizona.

The short version is this: you must list all your creditors in your case; an intentional, fraudulent failure to list a creditor is a bankruptcy crime, and I'll plug in the statutory reference the next time I work on this little consumer bankruptcy blog.

With a few exceptions, of course.

For instance, you don't have to list a credit card as a creditor if it's not a creditor.

When is a creditor not a creditor? Well, what is the sound of one hand clapping?

Sorry.

A creditor is not a creditor if that creditor was paid in full, and is therefore owed no money whatsoever; then a creditor is no longer a creditor, and does not have to be listed as a creditor.

ON THE OTHER HAND, now that creditor has received a preference payment if we file a bankruptcy case for you within 90 days (if it's an ordinary unsecured creditor, like a credit card) or within a year (if the creditor is an insider like a mother, father, brother or partner).

So what do you think the creditor would prefer? Getting listed as a creditor and discharged in a bankruptcy, or getting paid in full, and then getting sued for return of the preference by the bankruptcy trustee (and they do so like to sue for the return of preferences. Sigh.)and the trustee's bankruptcy lawyer?

How about your house loan? Do you have to list your mortgage?

Uh, yeah.

How about the loan on your car? Well, probably a good idea, because everybody is going to know about it anyway, and your failure to list it doesn't do you any good in any context (the existence of the lien on your car is public record in Arizona, and the trustees routinely check for a car listed in your name and not listed in your bankruptcy schedules), and probably does you a ton of bad. Up to and including getting you a pair of striped pajamas and three squares at public expense.

So do you get to keep a credit card after you file your bankruptcy in Arizona?

Well, the old gimmick among experienced bankruptcy lawyers worked like this: if you had a credit card with a zero balance on the date of the bankruptcy filing, you just let it sit there (no debt, so no obligation to list it) and about half the time, that credit card would still be good after the filing.

That doesn't work very well anymore. The computers of the various banks, credit card companies and mortgage lenders have apparently become buddies, and they discuss your debts and open accounts when they play Zynga Poker on Facebook during the week.

So the old gimmick of the zero balance credit card doesn't work worth a darn anymore.

What works just fine for people who are lucky enough to have friends and family is this: they wait until after their bankruptcy, and after the bankruptcy they borrow five thousand from a family member and open a secured credit card account with somebody.

A secured credit card looks just like any other credit card, but it's really more like a debit card. You deposit five thousand, and you get a "credit limit" of less than five thousand, but you have the convenience of being able to use a credit card to reserve hotels and rent cars when you travel on business.

Now, the issue of whether you have to "include" a creditor in your bankruptcy case in Arizona is a totally different question than do I get to repay a debt that I listed in my bankruptcy case in Arizona?

It's also totally different from the question, "Can I keep my house and car and dog and horse if I file a bankruptcy in Arizona?"

And I talk about those questions a lot on this bankruptcy blog, and I'll keep doing so!

NOTHING HERE CONSTITUTES LEGAL ADVICE RE A CHAPTER 7, CHAPTER 13, CHAPTER 11, OR CHAPTER 12. FIND AN ARIZONA BANKRUPTCY LAWYER WHO IS BOARD CERTIFIED IN BANKRUPTCY LAW, AV RATED, AVVO 10 RATED, ON SUPERLAWYERS, OR JUST VERY EXPERIENCED AND A FORMER CHAIR OF SOME BANKRUPTCY SECTION OR COMMITTEE. NOTHING HERE MAY BE USED AS LEGAL ADVICE IN CONNECTION WITH ANY BANKRUPTCY, WHETHER THAT BANKRUPTCY IS IN PHOENIX, GLENDALE, TEMPE, MESA, SCOTTSDALE, OR ANYWHERE ELSE.

Full post as published by Arizona Bankruptcy Attorney Blog on August 03, 2010 (boomark / email).