Written by Charleston Bankruptcy Lawyer, Russell A. DeMott   
You filed a Chapter 7 bankruptcy in Kentucky, got your discharge, but you forgot to list a creditor.  Maybe you didn’t even know about that creditor, or maybe the debt is not even legitimate.  What now?  Is the debt discharged?  As with most bankruptcy issues, the answer is, “it depends.” 


There’s something you need to know about bankruptcy in Kentucky.  Kentucky is one of the states in the Sixth Circuit Court of Appeals.  Courts of Appeal are the courts in various regions of the country right below the United States Supreme Court. 


However, different courts in different circuits handle the “omitted creditor” issue in different ways.  Some courts require the debtor to file a motion to reopen his case to add the omitted creditor. 


Fortunately for debtors in Kentucky (and also Michigan, Ohio, and Tennessee—all states in the Sixth Circuit), the law is well-settled on this matter.  In In re Madaj (Zirnhelt v. Madaj), 149 F.3d 467 (6th Cir. 1998), the Sixth Circuit Court of Appeals held that a debtor’s dischargeable debts, though omitted from his schedules, are discharged in a no-asset Chapter 7 bankruptcy.  (A no-asset case is one in which there are no assets to be distributed to creditors.  Most Chapter 7 cases are no-asset cases.)  The court does not require—or permit—the case to be reopened to amend the debtor’s schedules to list the omitted creditor. 


Note that I said “dischargeable debts” and that I said “in a no-asset Chapter 7 bankruptcy.”   If you omitted a creditor and that creditor could successfully claim that the debt is non-dischargeable under one of the exceptions to discharge (like fraud or that the debt was the result of a willful and malicious injury), the debt would not be discharged.  Likewise, if assets were distributed in a Chapter 7, and the creditor did not get notice of the case, the debt would not be discharged because the creditor would have lost out on the ability to participate in the distribution of funds in the case.


I call the Sixth Circuit’s approach in Madaj the “no harm, no foul” rule.  Basically, if the debt would have been discharged as a regular, garden variety, debt in a no-asset Chapter 7, then it’s discharged.  If, on the other hand, it’s a non-dischargeable type of debt, it would not be discharged. 


Here are some things to remember about this issue:


  • Always check your credit report when you file bankruptcy.  You want all of your creditors listed.  You do not want to have to explain the Madaj case to some debt collector three years after your bankruptcy is completed.  Some of these folks just don’t get it.  And if they don’t, that’ll result in more legal work for your bankruptcy lawyer and more stress for you.      
  • Almost all credit reports have errors in them.  Some errors are material, and some are minor.  It’s common to have debts incorrectly included in your credit report.  You should list those debts in your bankruptcy as “disputed.”  Remember, you don’t want to be bothered by any creditors—real or imaginary—after your bankruptcy case is completed. 
  • Madaj ONLY applies to no-asset Chapter 7 cases, not to Chapter 13 cases (payment plan or reorganization bankruptcy) and not in Chapter 7 cases in which assets distributed to creditors. 


While there’s some comfort in knowing you’re protected by the Madaj case, remember that (1) you are required to list all creditors in your bankruptcy, and (2) Madaj doesn’t work with all types of cases.