What does Unscheduled Debt mean?
An unscheduled debt is any debt that should have been listed by the debtor in the bankruptcy schedules when they were filed with the court but was not. Depending on the circumstances, an unscheduled debt may or may not be discharged.
Because bankruptcy offers many debtors the ability to discharge unsecured debts, a debtor must follow very stringent requirements when they are disclosing all of their potential and current claims. If a debtor is not completely honest when they list their debts the bankruptcy court may deny their discharge, arguing the creditor was denied due process.
For example, if a debt is not listed this is considered unfair to the creditors who, through no fault of their own, "were prejudiced by not having the opportunity to protect their rights and assert their interests." An exception may exist, however, if the creditor did in fact have notice of actual knowledge of the bankruptcy filing. In this case the debt may be discharged.
If the creditor does not have knowledge the court will consider the reason why the debt was not listed and make a determination for dischargeability. Generally, if the debt is not properly listed it will be up to the debtor to prove to the court that the creditor knew about the debt and the bankruptcy filing and had the ability to protect their rights to collect the debt.
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Category: Employment Law