Most bankruptcy filers will receive a Chapter 7 discharge within three or four months from the date they submit their bankruptcy petition, but this may not mean your case is over. A Chapter 7 bankruptcy case will not end until the court issues a Final Decree. Recently on our bankruptcy forum a debtor asked, “I have received my bankruptcy discharge. Does this mean it is done or do I have continuing responsibilities?”
Chapter 7 bankruptcy discharge
Filing Chapter 7 bankruptcy may allow you to discharge certain types of unsecured debts, which allows you to avoid repaying certain creditors and bans them from their continuing legal actions to pursue overdue debts.
To receive a Chapter 7 discharge, however, a trustee will be assigned to oversee your case, they will take any property which is not exempt, and they will sell it to generate funds to repay certain creditors, with most unsecured debts subject to discharge. If the debtor has few assets the creditors may not receive any payments.
Consider, however, there may be certain debts which are not discharged. The most common can include educational student loans (exceptions exist), fraud claims, spousal support orders, willful and malicious injury claims, unscheduled debts, and certain tax debts.
Final Decree not issued
As mentioned above, even if you receive your bankruptcy discharge there may be certain actions which must be taken prior to the court issuing the final decree. For example, if the trustee is pursing lawsuits or liquidating non-exempt assets the case may remain open. The Final Decree will not be issued until the creditors have been paid and a final report has been issued to the court.
What can I do while awaiting the Final Decree?
Even if you have received the bankruptcy discharge your cooperation may be needed to complete the bankruptcy. For instance, if a trustee is in the process or collecting or selling your property or they have additional questions about your financial situation you must cooperate. In some cases you may have to testify in a pending legal case. Trustees may also continue to have control over certain assets or funds including tax refunds or lawsuits.
Generally, however, if you have received the bankruptcy discharge and the Final Decree your bankruptcy case is over. Some exceptions exist, however. For instance, if you withhold information or hide assets the court can reopen the case and set aside the discharge.
What if I do not receive a bankruptcy discharge?
In some cases the court may deny the bankruptcy discharge. A bankruptcy denial, however, will not terminate the Chapter 7 case. In fact, the trustee will continue with their normal duties including taking possession of non-exempt assets, liquidating those assets, and repaying your creditors. After the asset liquidation, however, all unsecured debts and secured debts which have not been paid will not be discharged. You will then be responsible for repaying your debts.
Financial management course before bankruptcy discharge
There are several reasons a bankruptcy discharge will not be given and the case may be dismissed. For instance, all debtors are now required to take a financial management course prior to the bankruptcy discharge. The course must be taken within 45 days of the first meeting of creditors. If you fail to take the appropriate course the court may choose to close your bankruptcy case without issuing a bankruptcy discharge.
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