When is a Chapter 7 bankruptcy case closed? When the Trustee or the Court says it is!
When is a Chapter 7 Bankruptcy Case Closed? After Discharge, after contested matters are resolved—and after assets are liquidated.
Your discharge shows up in the mail, and you breathe a sigh of relief: it’s over! Your Chapter 7 bankruptcy is a thing of the past, and you can go back to living your life and breathing that fresh Michigan air … You thank your bankruptcy lawyer for a job well done, and you begin imagining a future permanently free of collection phone-calls, of bills pouring out of your mailbox every afternoon, of worrying about whether a creditor or even that inscrutable figure, the Chapter 7 Trustee, is going to do something unexpected to muck up your plans to just get it all over with and to just get on with your life.
Most of the time, this is the right way to feel when you receive your discharge. However, some of the time, it’s still too soon to celebrate.
Contrary to popular belief, a bankruptcy case is not closed automatically when the discharge is issued. That is indeed the point in time where you can feel secure in the fact that you are permanently free of the obligation to repay your pre-bankrutpcy debts. However, particularly with regard to the Chapter 7 Trustee, the discharge does not necessarily mean that the case is closed and that everyone is done with you yet.
When is a Chapter 7 bankruptcy case closed? After non-exempt assets are fully liquidated & the proceeds fully distributed.
If, as part of the Chapter 7 bankruptcy “liquidation” process, the Trustee has recovered an asset from your “bankruptcy estate” and is in the process of liquidating it and distributing the proceeds to creditors, the case can remain open potentially for months after discharge while all of this occurs. With your discharge in hand, this may not sound particularly problematic, but, so long as the case remains “open,” it remains possible for the Trustee or creditors to file motions and conduct other actions that you might just as well prefer that they no longer do.
Additionally, if, after your bankruptcy, you have an interest in selling your home (short-sale or otherwise) or modifying your mortgage, you cannot do so without the Trustee’s approval. So long as the case is open and the Trustee has not explicitly, via a notice filed with the court, abandoned your assets, the Trustee remains the administrator of the bankruptcy estate, which contains all of your property. In short, you do not have the authority to sell your own house until the Trustee is done with it, and the bankruptcy case is closed.
In still further instances, the Trustee him- or herself may actually be the one attempting to conduct a sale of the home or other real estate. Although this is a controversial practice, in the Eastern District of Michigan Bankruptcy Court, which services all of southeast Michigan, as well as Flint, Saginaw, and Bay City area, Chapter 7 Trustees regularly prowl their case-loads looking to make a buck for creditors (generally about what is left after they and their realtor and other agents take most of the sales profit) from the sale of real property that has been surrendered.
Your bankruptcy attorney, if he or she is providing quality customer service, should be able to keep you abreast of when your case actually closes, as opposed to simply calling it quits once the discharge is issued. At a certain point, if the Trustee is not closing the case, it may be that your attorney needs to push the point with him or her and file a motion forcing the Trustee to abandon the assets for which the case is being kept open, or pursue other, proactive actions. Keeping you informed of the progress of your case even after your discharge is issued is a measure of basic customer service that should be one of the reasons you decide to work with a particular attorney rather than simply hiring someone based on price or geographic location.
When is a Chapter 7 bankruptcy case closed? After adversary actions are resolved.
Additionally, if one of your creditors has filed an “adversary proceeding” (lawsuit) or other action in your bankruptcy case seeking to have your discharge denied or to have a debt declared to be non-dischargeable due to fraud or other rare circumstance, this action can hold up the closure of your case as well, until the matter is resolved one way or another.
The Hilla Law Firm, PLLC is not only experienced in dealing with Chapter 7 Trustees and the reasons that they might hold your case open after discharge but also strives to provide the highest level of personal and customer service to our clients. Our clients’ phone-calls and questions never go unanswered, and they never need wonder what stage of progress their case has reached.
If you are a Michigan resident and would like to explore your options for a Chapter 7 or Chapter 13 bankruptcy with an experienced Michigan bankruptcy attorney, please contact us at (866) 674-2317 or click the button below to schedule a free, initial consultation.