The First Circuit Court of Appeals recently ruled that unlisted debts remain undischarged in a no asset Chapter 7 case, in Colonial Surety Company v. Weizman, decided May 6, 2009. The First Circuit recognized that there was a difference of opinion on this issue in other circuit courts of appeal. Maine Bankruptcy Judge Haines in the case of In re McKinnon, had ruled years before that unlisted debts in a no asset Chapter 7 case were discharged. This new First Circuit Court decision effectively overrules In re McKinnon.
The First Circuit noted that unlisted debts in a Chapter 7 remain "undischarged", rather than non-dischargeable. Non-dischargeable debts are debts which either the Court or the Bankruptcy Code determine should not be discharged. By contrast, undischarged debts are debts which which may still be discharged provided the debts be properly listed in the case and the creditors be provided with an opportunity to challenge a debtor's right to a discharge as to that debt. Wth respect to unlisted debts in a bankruptcy case which has been closed, a debtor may ask the Court to reopen the case and amend his or her bankruptcy schedules to list the debt.
The impact of this new First Circuit decision is significant since it reverses a long standing decision in the Maine Bankruptcy Court. Debtors must work more diligently to properly list their creditors in every bankruptcy case in the future.