Most people think that their Chapter 7 bankruptcy case ends when they get a discharge, but this is not correct. The case does not officially end until a document called the Final Decree is entered. It is important to know the distinction because, until the Final Decree is entered, you may have continuing responsibilities under the bankruptcy law.
(Visit our Chapter 7 Bankruptcy Center to learn more about how Chapter 7 bankruptcy works.)
The discharge. When you file for Chapter 7, you are focused on receiving a discharge. In most cases, you receive your discharge in three to four months and, for you, the bankruptcy may seem like it is over. However, if there are assets for the trustee to administer or lawsuits to pursue, the case can actually stay open much longer. (Learn more about the Chapter 7 bankruptcy discharge.)
The Final Decree. A Final Decree officially closes the case. It is not entered by the court until the trustee has reported that all of the assets have been administered and the money recovered has been paid to creditors who have filed claims.
It is not unusual for a case with complex issues involving lawsuits and appeals to go on for years after the discharge is granted. In many cases, this does not affect you -- but it can.
You must cooperate with the trustee so that the trustee can perform the trustee’s duties, which include investigating your financial affairs and collecting and liquidating all property of the estate. If the case remains open the trustee may still request documentation or information from you, and you are generally required to comply. You may also be required to testify in pending litigation or to appear and be questioned under oath in a form of deposition called a 2004 examination.
Any money or property that you did not claim as exempt and which has not been formally abandoned by the trustee is still property of the bankruptcy estate and must be turned over to the trustee. This includes money or property received from lawsuits based on pre-bankruptcy claims and tax refunds received for pre-bankruptcy tax periods.
Another common misconception is that the denial of your discharge will end your Chapter 7 bankruptcy case. This is also incorrect. If your discharge is denied, the bankruptcy case proceeds as usual. The trustee is still required to take possession of and liquidate your non-exempt assets and use the proceeds to pay creditors. The only difference is that, at the end of the case, you remain responsible for any debt that has not been paid in full through the liquidation of your non-exempt assets.
You can file a motion to dismiss your Chapter 7 case if your discharge is denied but motions to dismiss based solely denial of discharge are not often granted.
In most cases, the Final Decree ends the case for good. However, there are times when a trustee or a creditor may request that a case be reopened. Often, this happens when additional assets are identified which were not previously disclosed or known. A case can also be reopened to begin an action to set aside your discharge if it can be shown that you withheld information, provided false information or concealed assets.
There might also be situations where you want to reopen your own case. If you inadvertently left out a creditor or if a creditor is violating the discharge injunction, you may want to reopen your own bankruptcy case to obtain additional relief from the court.
The court still needs to administratively close the file but, if your case is dismissed, your involvement is ended and you have no further duties or responsibilities under the bankruptcy law. Creditors also are free to continue to pursue collection as if the bankruptcy never happened.