How Will I Be Notified That My Chapter 7 Bankruptcy Case Is Closed?

By Laura Payet

How Will I Be Notified That My Chapter 7 Bankruptcy Case Is Closed?

By Laura Payet

Your Chapter 7 bankruptcy case is closed when the court issues an order closing it. If you have no nonexempt assets for the bankruptcy trustee to sell, your case will be closed shortly after you receive your discharge notice—usually about four months after you file your petition. If you do have assets for the trustee to administer or one of your creditors objects, the process can take longer. In either event, the court will send its closing order to you or to your attorney if you have one by mail.

Proceedings in a Chapter 7 Bankruptcy Case

Bankruptcy under Chapter 7 is also known as liquidation because certain assets belonging to a debtor in Chapter 7 bankruptcy are sold to pay creditors. When you file for bankruptcy protection, a bankruptcy estate is created that becomes the legal owner of your property. The court appoints a trustee to administer that estate. The trustee's job is to notify your creditors that you have filed for bankruptcy and to seize and sell your nonexempt assets to pay off your creditors in order of priority based on the type of debt. Ultimately, the court will issue a discharge order, sometimes called a discharge letter, forgiving your qualified debts.

Your bankruptcy case begins when you file a bankruptcy petition with the court and pay the required fee. Along with the petition, you must file certain required financial documents, such as a list of your assets and liabilities, and a statement of your current income and expenses. In addition, if you have primarily consumer debt, you must file a certificate that you have participated in credit counseling as well as a copy of any repayment plan you created as part of that counseling. Once the petition is filed, any pending collection proceedings against you are put on hold.

Thereafter, the trustee holds a creditors' meeting for representatives of your creditors. You must attend this meeting and answer questions under oath from both the trustee and the creditors about your finances and property. After this meeting, unless any of the creditors objects, the court issues a discharge order. This order won't issue until at least 60 days after the creditors' meeting. After the discharge order issues, you will be released from personal liability for your qualified debts, meaning that your creditors cannot attempt to collect from you. Certain debts cannot be discharged in bankruptcy for public policy reasons, including tax claims, alimony and child support obligations, and government fines and penalties.

Closing a Chapter 7 Bankruptcy Case

There are a few ways for your bankruptcy case to end. In the simplest case, when you have no nonexempt property that can be sold and none of your creditors objects to a discharge, the court will issue a discharge order about four to six months after you file the petition. There will be no further action in your case and the court will order it closed. If, however, you have assets that the trustee can seize and sell, your case will not be closed until all those assets have been disposed of. Depending on how complicated your property situation is, this process could take months or even years. Additionally, if any of your creditors decide to contest the discharge, your case will remain open until the court decides whether the debt in question is dischargeable.

It is also possible that the court will dismiss your case without discharging your debts. This result is generally a consequence of bad behavior, for example, if you have failed to produce necessary financial records, fraudulently transferred property that should belong to the estate, or failed to obey an order from the bankruptcy court.

Regardless of how your case is closed, the court will send you notice in the mail. The notice will come to you directly unless you have an attorney, in which case it will be sent to them. If you believe you should have received notice and you haven't, you can check with your attorney or call the court clerk to inquire about your case status.

TEASER:

Successfully discharging your debts in bankruptcy gives you a financial do-over. Read on to learn more about the process and how you'll know when it's over.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.

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