Regarding creditor list in a no asset Chapter 7 bankruptcy?

[ScaredGuy]

Hi guys, I've posted on here numerous times and despritfreya and justbroke have been a huge help. I ran a small business which was an LLC and it had to close a few months ago and the LLC has now been formally liquidated by the secretary of state. I am now in the process of working with an attorney to file a personal Chapter 7 bankruptcy. The attorney told me that as long as my Chapter 7 is a no asset case, any creditors including LLC creditors who we do not explicitly list in my personal Chapter 7 bankruptcy would still technically be included, so in the future if a customer of the LLC tries to sue me personally, I can simply respond stating that I went through a no asset Chapter 7 bankruptcy and that should stop their case from moving forward. I want to verify that this is indeed the case for business-only creditors who did business with the LLC - if we do not include them in the Chapter 7 filing, they will still technically be included since I will have a no asset case?

Basically I'm concerned that it might backfire by formally including all of the LLC customers as creditors in my personal Chapter 7 because someone might try to object to the case. Thanks for any further information on this.

[despritfreya]

. . . The attorney told me that as long as my Chapter 7 is a no asset case, any creditors including LLC creditors who we do not explicitly list in my personal Chapter 7 bankruptcy would still technically be included, so in the future if a customer of the LLC tries to sue me personally, I can simply respond stating that I went through a no asset Chapter 7 bankruptcy and that should stop their case from moving forward. I want to verify that this. . .

Yes and no.

In a no asset case, an omitted creditor (or potential creditor) is still subject to the Discharge. However, if the creditor had/has a claim under 11 USC 523(a)(2), (4), or (6) then such is not the case. . . See 11 USC 523(a)(3)(B).

Basically, if the creditor could assert a claim against a debtor for fraud, breach of fiduciary duty or wilful & malicious injury, such debt will not be subject to a discharge if the creditor was omitted.

This is one reason I prefer listing all potential creditors even if there was no personal guaranty - the "info only" situation. While the likelihood of a claim under 523(a)(2)(4) or (6) is minimal, I just like to cover all bases. Again, the decision to do so is up to the client and if he/she has a reservation about it, then ok, so long as the client understands the potential consequences, even if very small.

Des.

[ScaredGuy]

despritfreya thank you for this. The attorney I'm working with had his assistant enter the creditor information, and for these business-only creditors, his assistant did not enter $0 owed for the total claim so it instead says "Unknown" in the Total claim amount for each of these LLC-only creditors. Will this cause any significant issues? I recall you recommending to have it say "For info only" and $0 owed for each business-only creditor. Thanks for any thoughts on this.

Yes and no.

In a no asset case, an omitted creditor (or potential creditor) is still subject to the Discharge. However, if the creditor had/has a claim under 11 USC 523(a)(2), (4), or (6) then such is not the case. . . See 11 USC 523(a)(3)(B).

Basically, if the creditor could assert a claim against a debtor for fraud, breach of fiduciary duty or wilful & malicious injury, such debt will not be subject to a discharge if the creditor was omitted.

This is one reason I prefer listing all potential creditors even if there was no personal guaranty - the "info only" situation. While the likelihood of a claim under 523(a)(2)(4) or (6) is minimal, I just like to cover all bases. Again, the decision to do so is up to the client and if he/she has a reservation about it, then ok, so long as the client understands the potential consequences, even if very small.

Des.

[despritfreya]

despritfreya thank you for this. The attorney I'm working with had his assistant enter the creditor information, and for these business-only creditors, his assistant did not enter $0 owed for the total claim so it instead says "Unknown" in the Total claim amount for each of these LLC-only creditors. Will this cause any significant issues? I recall you recommending to have it say "For info only" and $0 owed for each business-only creditor. Thanks for any thoughts on this.

I do not see a problem. We have different ways to approach things. I say "$0" others say "unknown". I would ask the attorney about whether or not the "disputed" box should be checked for each one that is listed as "unknown".

Des.