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.
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:
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.
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.
Two kinds of litigation can delay the closing of your bankruptcy case.
Find out more by reading What Is Bankruptcy Litigation?
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.
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.