Listing Creditors in a Bankruptcy Petition
If you are considering filing for bankruptcy you probably have a number of questions about what creditors must be listed and what payments you can make in the months leading up to bankruptcy. Clients may have a number of reasons for wanting to exclude creditors, including wanting to keep and ongoing business or personal relationship with a particular creditor. However, when filing for bankruptcy you are required to list every debt owed. You may not pick and choose what to include in your bankruptcy petition.
The next natural question is can you pay off the debt prior to filing for bankruptcy to keep it out of your petition. The answer depends on the nature and the amount of the debt. Any payment to a friend or family member in the year leading up to bankruptcy can be reversed by the trustee. This is because any payment to a friend or family member is automatically presumed to be fraudulent by the court. You will want to avoid this type of payment, even if you are paying back an amount borrowed from that individual.
Payments to ordinary creditors, meaning not friends or family, should not exceed $600 in the months leading up to bankruptcy However, if your minimum payment is over $600, for example if your mortgage is $1,000, you may pay what is actually owed. The idea is that the bankruptcy code is written so that debtors may not try to exclude certain creditors from the bankruptcy or give any creditor preferential treatment. If you do make a payment of more than $600 the trustee may reverse the payment and make that payment a part of your bankruptcy.
It is true that if you file bankruptcy and name certain creditors they make cancel your accounts or not do business with you in the future. Unfortunately, they still must be listed. There are a few options that may be available. You may choose to voluntarily repay the debt after the bankruptcy is closed if you choose. However, doing this will eliminate some of the benefit that filing for bankruptcy offers as you will not truly be starting over.
There are a number of creditors that specialize in working with people that have filed for bankruptcy and can get you on the right start to improving your credit. If you still have questions, or would like to speak with a St. Louis Bankruptcy Attorney, call us today!