When Does My Chapter 7 Bankruptcy Case End?

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.

If all goes well, 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. But, if you fail to complete all requirements or a creditor objects, sometimes your case will conclude without a debt discharge.

What Happens in Every Chapter 7 Bankruptcy Case

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:

• 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).

But the discharge letter or order sent out by the bankruptcy court doesn't close the case.

When Chapter 7 Bankruptcy Ends With a Discharge

Most Chapter 7 cases close within days of the bankruptcy court issuing a discharge—usually four to five months after filing. Before the case closes, the trustee must file a Final Report with the court. If the case is a "no asset" case, the report won't delay the closure of the case because the trustee won't need to sell property or pay claims to creditors. Unless any party objects to the final report, the court will issue a final decree, and the court clerk will close the case promptly after issuing the discharge.

However, the trustee or court sometimes needs additional time to complete required actions. When that occurs, the case will remain open for a more extended period after the issuance of the discharge. You must cooperate with the trustee until the bankruptcy court resolves all matters.

You Have Property You 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 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.

The Court Must Resolve Litigation

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:

• Determining the dischargeability of a debt. If you or one of your creditors files a lawsuit asking the court to decide if one of your debts is dischargeable, the court will keep your case open until it decides the fate of that debt.
• Trustee's litigation to gather assets. Sometimes, a trustee must file a lawsuit against a third party to access your nonexempt property.

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. You'll receive the discharge in the normal course, but the case will remain open until the dispute ends.

When Chapter 7 Ends Without a Discharge

Not all Chapter 7 bankruptcy cases end successfully with a debt discharge that eliminates qualifying debt. If you don't fulfill all requirements, or the trustee or creditor finds something wrong with your bankruptcy case, the bankruptcy court will dismiss your action without issuing a debt discharge.

Failure to Meet Financial Requirements

Only people who can't afford to repay creditors through a Chapter 13 plan qualify for Chapter 7. You likely know that you must pass the means test to qualify for Chapter 7—the test that assesses earnings during the six months before filing—and if you filed for Chapter 7 despite failing the means test, the bankruptcy court would transfer or "convert" your case to Chapter 13.

But that's not the only event that could trigger a Chapter 13 conversion. For instance, if your Schedules I and J disclosures listing your current income and expenses demonstrate you have money remaining each month that could be used to pay creditors in Chapter 13, the bankruptcy court will convert your case.

Example. Vincent took and passed the means test when determining whether he qualified for Chapter 7 bankruptcy. As required, he listed his current income and expenses in Schedules I and J when preparing the bankruptcy petition. Because bankruptcy filers don't list the monthly debt payments for bills that the case will discharge, and Vincent has always been frugal, his monthly expenses were $300 less than his income. When reviewing the filing, the trustee noticed the available funds and filed a motion asking the bankruptcy court to convert Vincent's case to Chapter 13, which the court granted.

Example. Shana passed the Chapter 7 means test, and her disclosures on Schedules I and J didn't show disposable income that could be used to pay creditors. However, her food expenses appeared significantly higher than average. The court disallowed the excessive costs because she couldn't provide a reason for the above-average costs—such as a food allergy—or receipts verifying the expenses and converted the Chapter 7 case to Chapter 13.

Failure to Meet Procedural Requirements

Filing for Chapter 7 bankruptcy isn't necessarily complicated. Even so, many things can go wrong if you aren't familiar with the process. The following list includes the most common procedural reasons a bankruptcy judge might dismiss a Chapter 7 case.

Failure to do one or more of the following will typically result in a dismissal without a discharge:

• Complete and file the bankruptcy petition, schedules, and other required forms.
• Accurately disclose all income, expenses, assets, and prior transactions within the bankruptcy forms.
• Submit certificates for the required credit counseling and debt management courses.
• Forward tax returns, paycheck stubs, bank statements, and other financial documents to the trustee, administrator, or court.
• Cooperate with the Chapter 7 trustee appointed to the case.
• Attend the 341 meeting of creditors—the one appearance required of all Chapter 7 filers.
• Successfully defend a motion or fraud lawsuit filed by the trustee or a creditor.

Learn more about who doesn't qualify for Chapter 7 bankruptcy.

Reopening a Closed Chapter 7 Bankruptcy Case

Even the judge's final decree in the case won't necessarily spell the end. Sometimes, it's necessary to reopen the case. This often happens when the trustee, one of the creditors, or the debtor becomes aware of an asset the filer should have included in the petition when filing the case. Although a filer must cooperate with the trustee if the case is reopened, the court won't have the power to revoke your discharge more than a year after the case was closed.

Need More Bankruptcy Help?

Did you know Nolo has made the law accessible for over fifty years? It's true—and we wholeheartedly encourage research and learning. You'll find many more helpful bankruptcy articles on Nolo's bankruptcy homepage, and information needed to complete the official downloadable bankruptcy forms is located on the Department of Justice U.S. Trustee Program.

However, online articles and resources can't address all bankruptcy issues and aren't written with the facts of your particular case in mind. The best way to protect your assets in bankruptcy is by hiring a local bankruptcy lawyer.