Cherry-Picking Which Creditors to Pay in Your Chapter 7 Bankruptcy

chapter7 bankruptcy judge

Who says you can’t pick and choose which creditors to keep paying and which to discharge in your Chapter 7 Bankruptcy? The bankruptcy trustee that’s who.  In a Chapter 7 Bankruptcy proceeding, as soon as you file a petition, the court appoints a trustee- an impartial individual and lawyer – whose duty includes administering your bankruptcy estate. The trustee is also responsible for making sure that all creditors are treated fairly.

It has been my experience that most debtors play favorites when it comes to their creditors. Although certain favorites are understandable, some are just plain silly. Wanting to keep your car so you can drive to work, or planning to pay your cell phone provider so you can continue receiving calls is reasonable.  Trying to keep two credit cards with outstanding balances open because you believe it will raise your credit rating after filing for bankruptcy, is silly and unreasonable. 

In a typical Chapter 7 case, your bankruptcy lawyer (assuming you have hired one) will gather your credit report and any collection notices you have received, and list all these creditors in your Chapter 7 Bankruptcy petition. Upon filing, the Bankruptcy Court will send notice to all listed creditors advising them that you have filed for bankruptcy. Any creditor that is not listed in the bankruptcy petition will not be discharged! This means that you will continue to owe them money and they can continue to collect from you even after your Chapter 7 Bankruptcy is complete. That is why it is imperative that no creditor is forgotten.

There are two main reasons why your bankruptcy lawyer should advise you to list ALL creditors in your petition. The first is to protect you from being haunted post-discharge. You may be in the financial position to pay that creditor now, but imagine you fall back on hard times after your bankruptcy is complete. You can wind up in the same situation that made you consider filing for bankruptcy to begin with. Secondly, although some trustees will not care if creditors are missing, most will question why you are giving preferential treatment to one creditor over another. You cannot prejudice some creditors by cherry picking whom you wish to pay and who get nothing. It’s not fair. If your heart is set on keeping certain debts, then you can reaffirm those obligations that you want to retain. Consult with your bankruptcy lawyer regarding reaffirmation.

Mishiyeva Law- Bankruptcy Lawyer NYC 80 Wall Street New York, NY 10005 (646) 736-6328