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, it could remain open for a significantly longer period if you have "nonexempt assets" the Chapter 7 trustee appointed to your case 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.
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 will issue 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.
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 issuing a 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.
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