Sometimes a client will ask me if they can “avoid” listing one or more of their credit cards on their bankruptcy petition. I, of course, promptly say NO! Then I usually follow up and ask why on earth they would want to do that. Usually the answer is something like they have had an account with Mastercard (or whomever) for 100 years and they cannot bear to have the account close. Seriously? You want to keep paying Mastercard (or whomever) finance charges and fees?
Simply put – if you file for bankruptcy you must list all of your debts. And if you owe Mastercard (or whomever) money, you must list it on your bankruptcy schedules. Not doing so is – legally speaking – silly. The following is an real life case where a debtor in Massachusetts learned just how silly (re: stupid) it really was.
The debtor filed a chapter 7 case. One of her creditors challeged her discharge by filing an Adversary Proceeding (“AP”) alleging that she had made a “false oath” when she failed to list a number of separate credit cards on her bankruptcy petition. Instead of correcting her mistake she elected to double down in her incompetence by failing to amend her bankruptcy petition to add the credit card accounts she had omitted. When pressed on the issue, she replied:
“I didn’t list [the credit cards] because I didn’t want to totally destroy my credit. That’s basically – I didn’t think I had to, you know, divulge these small little credit cards that didn’t mean anything. They weren’t huge.”
The court ruled against her and cited her “reckless indifference to the truth”. On some level, while it is always paramount that you tell the truth in court, it is even more important that you tell the truth to the BANKRUPTCY court because the entire bankruptcy system is basically the “honors system”. Once there is evidence that you breached your obligation to be truthful the court will surely have little sympathy for you.
For those interested in the record, the case described above is Chase v. Harris (In re Harris), Bankruptcy Appellate Panel, First Circuit (April 15, 2008).