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For most filers, a Chapter 7 case will end within a day or two of receiving your "debt discharge" or the order that forgives qualified debt. In most instances, your case will be over about four months after filing the bankruptcy paperwork. However, the Chapter 7 trustee can keep your case open significantly longer if you have "nonexempt assets" the trustee must sell or if litigation needs resolution. Ultimately, your Chapter 7 bankruptcy case ends after the trustee settles outstanding issues, sells any assets, pays out the funds, and files a report with the court.
Are You Considering Filing a Personal Bankruptcy? Start Here.Everyone must undergo the same Chapter 7 process before qualifying for a debt discharge. You'll wait 60 days after the creditor's meeting, the one appearance all Chapter 7 filers must make before the court issues your discharge order. At a minimum, you'll do the following before receiving the discharge:
But the discharge letter or order sent out by the bankruptcy court doesn't close the case.
What Is a Discharge Order or Discharge Letter?"Discharge letter" or "discharge order" are terms used to describe the order the bankruptcy court mails toward the end of the case. The order officially eliminates or "discharges" qualifying debt, such as credit card and utility bill balances, medical debt, and personal loans.
If all goes smoothly, the court will order a Chapter 7 discharge 60 days after the first 341 meeting of creditors date. The order could be delayed for several reasons, such as the trustee needing additional time to investigate the case or a creditor's attempt to oppose the discharge. Still, these problems don't usually arise unless a failing business or litigation is involved.
In a Chapter 13 case, the court orders the discharge after plan completion. The trustee usually submits the final paperwork triggering the discharge order within a few weeks.
The discharge releases the debtor from qualifying debt liability. It also prohibits creditors from attempting to collect the discharged debt. The court alerts all involved (the debtor, creditors, and legal counsel) by mailing a copy of the discharge order or discharge letter.
It won't explicitly list the debts discharged but rather the categories of debt commonly discharged in bankruptcy. It's a good idea to keep a copy of the letter handy. If a creditor calls, provide the case number and discharge date in the order.
If the court must take further action, the case will remain open, and you must cooperate with the trustee until the bankruptcy court resolves all matters.
If you have assets that are not exempt, you're required to turn those over to the trustee assigned to your case. The trustee's job is to gather the nonexempt assets, sell them, and distribute the proceeds to your creditors who filed valid proof of claims. If your case is complicated, it can take the trustee months, or in rare cases, even a year, to track down the property and liquidate it. The bankruptcy court strongly frowns on cases remaining open longer than a year.
The trustee might need your help gathering the property. Failing to cooperate could result in experiencing the worst possible outcome: losing your nonexempt property and almost any benefit you would gain from the bankruptcy discharge.
Usually, a bankruptcy lawsuit won't interfere with your general discharge unless the trustee or the creditor challenges your right to discharge all your debts. But your case can remain open even if you've received the discharge. If that happens, your duty to cooperate applies.
Here are some of the types of bankruptcy litigation that might delay your case's closing:
Example. Suppose you sold your cousin a car for half its value a month before filing. The trustee would have a right to the car's total value. The trustee would file a lawsuit if your cousin refused to turn over the vehicle or pay the total value.
Example. Suppose you paid a considerable amount to your favorite creditor before you filed your Chapter 7 case. The trustee could file a lawsuit to recover the money.
Once all assets have been liquidated and claims paid, the trustee will file a Final Report with the court. Unless any party objects to the final report, the court will issue a final decree, and the court clerk will close the case.
Even the judge's final decree in the case won't necessarily spell the end. Sometimes, it's necessary to reopen the case. Most often, this happens when the trustee, one of the creditors, or the debtor becomes aware of an asset that should have been included when the case was active. Your duty to cooperate with the trustee will continue if the case is reopened, but the court will not have the power to revoke your discharge more than a year after the case was closed.
Did you know Nolo has made the law accessible for over fifty years? It's true, and we want to ensure you find what you need. Below, you'll find more articles explaining how bankruptcy works. And don't forget that our bankruptcy homepage is the best place to start if you have other questions!
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We wholeheartedly encourage research and learning, but online articles can't address all bankruptcy issues or the facts of your case. The best way to protect your assets in bankruptcy is by hiring a local bankruptcy lawyer .