When Is My Chapter 7 Bankruptcy Actually Over?

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 Detroit air … You thank your attorney 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 bankrupcy case is not closed automatically when the discharge is issued. That is indeed the point in time where you can more or less 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 Trustee, the discharge does not necessarily mean that the case is closed and that everyone is done with you yet.

If 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.

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 such things is part of the service that we ought to be providing.

If you are a Michigan resident and would like to discuss whether bankruptcy is a viable option for you, please contact me at (248) 977-4182 or jhilla@aronofflinnell.com to schedule a free, initial consultation.