Do I have to include all my debts in my bankruptcy?

One of the questions we are asked most frequently is whether you need to include all your debts when you file bankruptcy. It often arises in the context of debts to family members or other people you wouldn't want to disappoint. The answer is YES, you must include each and every debt you have when you file. The rationale is that if you were selective about which debts to include in your bankruptcy, some creditors might be treated preferentially.  The Bankruptcy Code is written to ensure that if you are able to discharge some or all of your debts, each of your creditors is treated equally. This means that, in the event you'll be paying back some percentage of your unsecured debt (typically, this would be a Chapter 13 bankruptcy), each creditor will take a pro rata share of what you pay. If your case is a "no-asset" bankruptcy (most Chapter 7s), you may not be paying anything to your unsecured creditors, but it is still essential that they be listed on your bankruptcy schedules and that they receive formal notice that you've filed.

One thing we suggest if you owe debts to friends or family is to call them and let them know that you're filing. While bankruptcy may wipe out your legal obligation to pay back your debts, you are not freed from your moral obligations. You can tell your friends or family, if you wish, that you intend to pay them back after your bankruptcy case closes. This can be a tough conversation, but it is definitely better that you tell them rather than have them hear of it for the first time when they receive notice in the mail from the Bankruptcy Court.

It is very important that you don't pay back friends and family once you make the decision to file bankruptcy. In fact, one of the questions that you'll be asked by the Bankruptcy Trustee is whether you have paid back any friends or family in the past year. If you have, the trustee could potentially sue that person and take the money back.

As always, this isn't intended as specific legal advice.  We recommend you contact a bankruptcy attorney to discuss your situation.