Can I leave one credit card out of bankruptcy?
People ask me that probably twice a week. The short answer, is, No, you can’t. You can’t leave one credit card out of bankruptcy.
Here’s the long answer.
Travis, not his real name, did NOT ask his lawyer. He just decided, on his own, to leave one credit card out of bankruptcy.
Travis bought furniture on a store credit card, two weeks before he came to see his lawyer. His store credit card was so new, it didn’t show up yet on his credit report. (I strongly encourage everyone I talk to, to bring their credit report from experian.com/reportaccess. I explain why that’s my favorite, here.)
He might have guessed that might not look good. So he decided to leave one credit card out of bankruptcy–that furniture store credit card.
When he filed his bankruptcy case, a few weeks later, that furniture store card wasn’t on the papers. Probably Travis figured he’d get a monthly bill and pay it like nothing happened. That didn’t work out.
What happened instead.
The furniture card found out that Travis filed bankruptcy within forty-eight hours. They hit the ceiling. They ran down to the bankruptcy court complaining about Travis’ “bankruptcy fraud.” They pointed out that Travis lied on his credit application with them–because he promised to pay them back over four years, knowing that he was filing bankruptcy in a couple weeks. And he lied to the bankruptcy court, by leaving their card off the list, when he swore he listed everybody.
(Just to make it clear, when you sign your bankruptcy papers you are signing under penalty of perjury–the truth, the whole truth, you know how that goes.)
Where did this end up? Travis got a judgment against him for the entire amount of the furniture. It was all due NOW. On top of that, the furniture company added their attorney’s fees to what he owed for the furniture.
It could be worse. Since his lie to the bankruptcy court was so blatant, a really mean bankruptcy judge could have turned down his whole bankruptcy. He could even–now this almost never happens–be looking at five years in prison. (As a practical matter, that doesn’t happen when you leave out a creditor or two. It can happen if you “forget” to tell the court about valuable property you own. Here’s the story of how that happened to a guy named Jon Mays.)
After they got a judgment, the furniture store credit card did work out a payment agreement–but if they wanted to, they could just hit him with a garnishment. Getting a garnishment right after your bankruptcy is NOT a good way to build back up your good credit.
So, can you leave one credit card out of bankruptcy? No, you can’t. You are required to list everybody you owe money to.
And, if you you try, you’ll find out all the big credit card companies check your credit at least once a month, more like once a week, or even daily.
Also, lying to your lawyer is not a good policy either. It will rarely work out the way you plan.