A bankruptcy filing is a matter of public record, so anybody can find out about it. But mostly just your creditors will know.
Who Will Be Directly Informed?
Your creditors are the only ones who will be informed by the bankruptcy court. And mostly those are the companies and people that you and your attorney put on your bankruptcy creditor schedules. There are some entities which get notice of every bankruptcy, generally the IRS and your state taxing agency.
As to what creditors you list on your bankruptcy documents, you are legally required to list all of your creditors, but in some situations you do have a limited amount of discretion. Usually it is wiser to list and thus give notice to any and all possible creditors—when in doubt, include it. That’s because bankruptcy gives you the opportunity to cut off the rights of those who may possibly have a claim against you. Those who do not get notice of your bankruptcy case may be able to come after you later, so it’s crucial to include everybody.
This includes not just your conventional, obvious creditors but also those to whom you might only have a potential or contingent debt or claim. For example, if you were a driver in a vehicle accident, you would be well advised to list the other driver, any passengers in either vehicle, and the owners of any property that may have been damaged (such as the state or city if any signs or barriers were hit), as well as their attorneys and insurance companies. (See our next blog post about who to list in your bankruptcy case.)
Family Gifts vs. Debts
What if a family member or friend had helped you out by giving you some money that was clearly a gift? Is that person a creditor who should be listed? Or how about a “loan” which you need to pay back “only if and when you can afford to.” If you’d rather not have that person know about your bankruptcy, can you skip listing him or her?
We’ll address this more in our next blog post, but talk with your attorney about whether the money you received was, in the eyes of the law, more likely a gift or a loan. If it was truly a gift, you don’t have an obligation to list it and tell the person about your bankruptcy. But if it was a loan, or if there is a significant risk that it was a loan, then you would be obligated to list it. Besides, if it was or might have been a loan, the advantage of writing off whatever legal obligation you may have would almost always be worth the embarrassment of the person learning about your bankruptcy.
Bankruptcy As a Public Event
Your bankruptcy filing is a matter of public record, so anyone who wants to find out whether you filed could do so. And of course it will be on your credit record so that future potential creditors will know about it. (See our upcoming blog post on bankruptcy and your credit record.)
Since bankruptcy is a legal matter processed through an open court system, your filing is something that anybody can find out about even if they are not a creditor getting specific notice of it.
It may be helpful to acknowledge this basic theme of bankruptcy: you get the extraordinary benefit of legally breaking your otherwise binding commitment to pay your creditors, but in return you need to honestly disclose your financial life in order to show that you qualify for that benefit. The point is not to shame you but for you to demonstrate that you meet the legal requirements.
Most of the time people you know have better things to do than to be scouring the public records to find out if you filed bankruptcy. So in most cases the only people who will know about your bankruptcy are your creditors and anybody you choose to tell.