In our previous post we discussed the due process requirements that underpin a debtor’s bankruptcy discharge. We noted that a debtor’s failure to schedule an actual or potential claim may prejudice the debtor’s ability to discharge any debt under such claim.

Courts understand that debtors may inadvertently fail to list or schedule a debt. Under such circumstances, the Bankruptcy Court will conduct further proceedings to determine whether the debtor’s failure to schedule ultimately prejudiced the creditor, i.e. whether the creditor ultimately learned of the bankruptcy proceeding in time to file a proof of claim or dischargeability order.

If, however, the debtor’s failure to list or schedule the debt was due to “fraud or intentional design,” courts have held that the debt is nondischargeable. This punitive effect arises out of the Eleventh Circuit case of Samuel v. Baitcher. Subsequent to Baitcher, the Bankruptcy Court for the Middle District of Florida has held that by mandating the nondischargeability of debts unscheduled due to fraud or intentional design, Baitcher effectively imposes a judicially created supplement to the Bankruptcy Code.

Like the tort of negligence, “intentional design is evidenced by a blatant disregard of a known duty” to schedule a known creditor’s claim. As before with the burden of proving actual notice or knowledge, the onus is on the debtor to prove an absence of fraud or intentional design.

In our next post we will discuss the unscheduled creditor’s ability to collect a non-discharged debt.