Often people ask me at a first meeting or consult if they need to include all the people they owe money to, including family and friends. They also ask if they can leave out their credit card debt and if they can keep a credit card.
The answer is a simple one. You must include all debts in a proposal or a bankruptcy. Both are formal proceedings that allow you to get a fresh start from all debt. Anyone you owe money to must be listed on your statement of affairs at the time of your filing. This includes all unsecured debts like your car loan, bank loan, all credit cards, outstanding utility bills and yes, money you owe to friends and family. Even your mortgage must be listed, although a mortgage is not included as part of the bankruptcy because it is a secured debt.
You Want A Fresh Start
Since you want a fresh start by filing bankruptcy, this actually makes a lot of sense. There is little point “cherry picking” and being potentially stuck with a debt after you have completed the bankruptcy or proposal. Including debts to friends and/or family is difficult, however, it could be more difficult down the road if you have excluded them and there is a falling out between the parties. You do not want to be responsible for the debt after you have completed your bankruptcy or proposal because you deliberately excluded someone.
It is important that you be honest when listing your creditors. Leaving a creditor off intentionally, if it is discovered, can jeopardize your bankruptcy discharge. Without this discharge, you will not be relieved of all of your other debts. Honest mistakes can be repaired and addressed, but trying to hide a debt would actually put you in a worse situation.
Surrendering Credit Cards
As for keeping a credit card, I get asked this question most often if people have points they have accumulated on the card and they owe no money on the card at the time of the bankruptcy or proposal. Credit cards, the actual card itself, is the property of the credit card company that issued it to you and it needs to be returned to that credit card company when you file for bankruptcy or a proposal. Bankruptcy law also states that you must hand over any credit cards to your trustee at the time your file. So unfortunately, even with points and no balance, the card needs to be returned.