What happens if I forget to include a creditor in my bankruptcy case?
The Fifth circuit employs the three-prong test in Robinson v. Mann, 339 F.2d 547 (5th Cir.1964),to determine whether a debtor's failure to list a creditor prevents the discharge of the unlisted debt under § 523. In re Stone, 10 F.3d 285, 290 (5th Cir. 1994).The case states that we must examine: 1) the circumstances surrounding the failure of the debtor to list the creditor; 2) the amount of administrative disruption that would likely occur due to that failure; and 3) any prejudice suffered by both the listed and unlisted creditors. Robinson, 339 F.2d at 550 established a three-prong test to determine to determine whether a debtor's failure to list a creditor prevents the discharge of the unlisted debt under § 523. In re Stone, 10 F.3d 285, 290 (5th Cir. 1994).
With regard to the first factor, Stone held that a debtor's failure to list a creditor weighs against discharge of the unlisted debts if the failure to list a debt was intentional, fraudulent, or based on other improper motive. Stone, 10 F.3d at 291. If the failure to list the debt was due to inadvertence or negligence, the Fifth Circuit held that equity permits discharge of the debt. Id.
With regard to the second factor, if it is a no-assets case, there is no administration of property and no disruption. See In re Smith, 21 F.3d 660, 663-664 (5th Cir. 1994).The third prong of Robinson requires an examination of the potential prejudice suffered by a creditor for debtor's failure to include the creditor. The prejudice prong is the most crucial prong of the Robinson test, but the court held that creditors are prejudiced only when their rights to receive dividends and obtain dischargeability determinations are compromised. Stone, 10 F.3d at 291. Again, if it is a no-asset case, there was no prejudice. Id. at 291-92.
For more information on missing creditors in a bankruptcy, consult with a Houston bankruptcy lawyer at the Rashid Law Firm.