Help re: spouse's Chapter 7 filing

[sassy]

Hi - I used this forum before when my new spouse and I filed Chapter 7 last year. Today, I found out his ex-spouse filed Chapter 7 in Eastern District of Texas on 10/14/05. Interestingly, she did not list my husband as a creditor (wouldn't have found out if not for child support hearing today - we have custody). She owes him money from their property settlement in the divorce that has not been paid. This includes $30,000 plus interest (now $71,000 with interest) for an inheritance from my husband's father that the court said she "misappropriated" and "violated her fiduciary duty" when she took the money.

I can't figure out why she didn't list my husband as a creditor unless she is trying to pull something by leaving him off with hope he wouldn't find out since we live in different states (we're in CA). I've heard that a creditor left off "accidentally" can still be discharged if there are no assets (there won't be any) but I also know we would have a chance to object to discharge of the debt to my husband (his inheritance) because she stole the money and the divorce judge was so nice to put the words "misappropriated" and "violated her fiduciary duty" in the decree.

I don't know how to proceed. Do we let the Trustee know about this? Do we leave it alone or do we have to file something? I'm at a loss with this and we really have no money for another attorney so anything I can safely do myself would help. I'm pretty savy with legal stuff and have done lots of declarations for court so I might be able to file any documents to get on the record with her filing. Any suggestions as to what we need to do next would be very helpful and much appreciated.

Thank you.

[AAAArt]

As a general rule, (with the exception of child support) Bk court decisions overrule divorce settlements.
I am sorry to hear of your situation. I'm certain that a civil suit might be one avenue you could take, but if she doesn't have any money, where are you going to get money from?
Your husband is a creditor only because of the divorce settlement. This might be a different category. I would suggest that you consult an attorney ASAP.

[StaciMM]

BK doesn't usually discharge items that were based on fraud, so it might be good to try to find an attorney to consult on about this. **Its a possibility that BK can't discharge this.**

Its impossible to know her intentions-she may have left it off trying to leave you out of the loop. Or, she may know that it is not dischargeable and did not realize that she should have listed it anyhow.

[Minnymouth]

Yes, you definitely need to talk to an attorney. You need to know you legal grounds on this.

Keep us posted, let us know what they tell you

Minny

[sassy]

Thank you to those with suggestions. I really appreciate it. I've done some research and would like to run my thoughts by everyone here to see if I am viewing this correctly. I would appreciate any thoughts.

By the way, she will have income to pay the debt once the QDRO is finally done dividing my husband's pension benefits so that's why we don't want to make a mistake on this issue and don't understand why she wouldn't try to discharge the debt.

1. Bankruptcy filing requires you to list "ALL" creditors under penalty of perjury. You can't leave someone off just because you want to for whatever reason.
2. If you leave off a creditor, it's up to you to prove that it was unintentional or by inadvertance. It would be hard for her to claim she didn't do it on purpose because her petition refers to an ex-spouse (no name included) for some pers. property still in both names. The debt is also her largest debt.
3. A creditor has a right to request non-dischargeability of a debt if they weren't notified unless the creditor had knowledge in time to file an adversarial proceeding within the 60 days of the 341 hearing (such as the creditor calls the debtor to collect and are told by phone that the debtor filed bankruptcy on a certain date and is given case number).
4. If we don't file a 523 adversarial complaint, then we aren't protecting the debt from discharge even though my husband isn't listed. If we wait until after discharge and claim she left him off as a creditor, we still have to file an adversarial complaint so either way, we have to file something and it's going to cost us financially but will cost more if we let it go.

Since we went through our own bankruptcy last year, we are trying to look at this from both sides and hope our situation helps some of you see what options a creditor has if you leave their name off.

Any thoughts are appreciated, particularly if you believe I'm not understanding the process correctly.

Thank you.

[Charmony]

Just a question, when I filed, my lawyer told me if I did not list a creditor, they could not be discharged. There for after my discharge, they could collect.

[sassy]

That is true but I believe a creditor has to object by filing an adversarial proceeding. Usually this isn't an issue if it's a no asset chapter 7 because I believe there is a certain persumption that there weren't any assets to distribute anyway but if it is a major creditor who would be apt to object, you can have a real problem if you leave their name off.

I read of a case where the couple listed a creditor but didn't give their attorney the address so the paralegal got it out of the phone book. Turned out the address was wrong so the creditor wasn't notified. The creditor didn't find out about the bankruptcy until after discharge so they filed an adversarial proceeding objecting to the discharge of their debt. The court ruled that the debtor likely didn't give the address purposely and that they had an obligation to provide it to their attorney. The debt wasn't discharged and it was the major debt. They messed up but probably because they knew the creditor would object so they thought they could be clever and list the creditor but not provide an address. It backfired big time for those debtors so it doesn't pay to leave a creditor's name off under any circumstance.

We accidentally left a small medical bill off our petition but once I knew, I notified the creditor it was a no asset and they let it go. I don't know if they had to do so but was glad they did. It was an error and not intentional and was the only creditor so we were okay. That's not always the situation so be careful.