For most filers, a Chapter 7 case will end when you receive your discharge—the order that forgives qualified debt—about four to six months after filing the bankruptcy paperwork. Although most cases close after that, your case might remain open longer if you have property that you can’t protect (nonexempt assets). During that time, you must cooperate with the trustee appointed to administer your case. Your case will close after the trustee sells the assets, pays out the funds, and files a report with the court.

What Happens in Every Bankruptcy Case

When you file a bankruptcy case, you’ll have to complete certain requirements before you can qualify to have your debts discharged (wiped out). At a minimum, you’re required to:

• fill out bankruptcy paperwork with details about your financial situation, including your assets, debts, income, and expenses
• pay a filing fee (or submit a fee waiver)
• provide 521 financial documentation to the bankruptcy trustee (the official tasked with managing the case)
• attend the 341 meeting of creditors
• successfully oppose any objection to the discharge, and
• complete credit and debt counseling courses (you’ll complete the first course before filing your paperwork).

You’ll have to wait 60 days after your meeting of creditors before the court will issue your discharge order. If all of your property is exempt—meaning that you’re allowed to keep it—the court won’t have to take any further action in your case and will most likely close it.

What Is a Discharge Letter?

A “discharge letter” is a term used to describe the order that the bankruptcy court mails out toward the end of the case. The order officially discharges (wipes out) qualifying debt, such as credit card and utility bill balances, medical debt, and personal loans.

If all goes smoothly, the court will order the discharge. In a Chapter 7 bankruptcy, it’s issued 60 days after the first 341 meeting of creditors date. (The order could be delayed—or even prevented—by a creditor who successfully opposes the discharge.) In a Chapter 13 case, the court orders the discharge after plan completion.

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, as called by some, the discharge letter. It won’t explicitly list the debts discharged in your matter, 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, you’ll want to provide the case number and discharge date as it appears in the letter.

What Happens if I Have Property I Can’t Keep?

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 years to track down the property and liquidate it.

The trustee may need your help in gathering the property. You have a duty that continues throughout the case to cooperate with the trustee and the court, or you risk the court revoking your discharge. Failing to cooperate means that you'll likely experience the worst possible outcome: to lose your nonexempt property and lose almost any benefit that you would gain from the bankruptcy discharge.

What Happen if Litigation Occurs?

Two kinds of litigation can delay the closing of your bankruptcy case.

• Determining the dischargeability of a debt. If you or one of your creditors files a lawsuit asking the court to determine if one of your debts is dischargeable or not, the court will keep your case open until it decides the fate of that debt. This kind of lawsuit will not usually interfere with your general discharge unless the trustee or the creditor challenges your right to discharge all your debts.
• Trustee’s litigation to gather assets. Sometimes a trustee will have to file a lawsuit against a third party to get access to your nonexempt property. For instance, if you sold a car for half its value to your cousin a month before you filed your bankruptcy case, the trustee may have a right to the full value of the car. If your cousin refuses to turn over the car or pay the full value, the trustee may have to file a lawsuit. Or, the trustee could file a lawsuit to get back an unusually large payment you made to a favorite creditor before you filed your Chapter 7 case. Your duty to cooperate also applied when the trustee files one of these lawsuits.

Find out more by reading What Is Bankruptcy Litigation?

The Trustee’s Final Report

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 clerk of the court will close the case.

Reopening a Closed Chapter 7 Bankruptcy 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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