I Got a Discharge, Why Isn’t My Case Over?

26 Jun I Got a Discharge, Why Isn’t My Case Over?

In Chapter 7 cases, getting the discharge is sometimes only part of the work that is done. In the rare “asset” cases there is another part, and it sometimes requires some assistance from you.

The trustee who hears your case is obligated to collect any unprotected assets for liquidation (or recover any transfers) which might be used to repay creditors. That is his primary purpose in the bankruptcy process — and how he makes money. Under the law, even though you have been granted a discharge of your dischargeable debt, you are still under a duty to help the trustee do his job as well. If you do not cooperate, the court can revoke your discharge.

The kinds of things a trustee can be pursuing are as simple as cashing a tax refund check or selling some stock through a broker or as complex as unwinding the sale of a business. It is as varied as the lives of the folks who have to file bankruptcy. Part of the “deal” you make in return for discharging debt is promising to help the trustee do that job.

While the trustee can’t typically make you do his job for him — for example, make you sell a house and give him the proceeds — he can demand that you help him by, for example, giving him the deed to that house, allowing it to be listed and shown to potential buyers and the like. He could ask you to appear in court and give testimony about things, transfers or other matters. He might need information about how much you paid for assets, so he can do the estate tax returns. And so on.

Finally, even after the trustee has turned everything into cash, he has to pay creditors with the money. Creditors will be given notice to file proofs of claim in order to share in the distribution. The trustee will need to review these claims by creditors to be sure they are legitimate and filed in the right distribution categories. Sometimes he will need your help in this to determine if an objection needs to be filed.

Once this is all sorted out, the trustee will be able to distribute money to the creditors who are entitled and he can file a final report with the court. At this point, the trustee is discharged of his responsibilities for your case and it will close quickly after that.

How long can this take? There’s no absolute deadline. Most trustees try very hard to close out their estates as quickly as possible. The U.S. Trustee (or Bankruptcy Administrator, in Alabama and North Carolina) overseeing trustees will normally require regular reporting on these cases and will push trustees to distribute funds and close cases as soon as possible.

But it can, in rare cases, take years. When I briefly represented a trustee, he had the unenviable task of finishing up a case that was over a decade old and had previously been served by two other trustees. That’s an extreme example and most trustees want their cases closed quickly. If nothing else, they often are not paid their commission for their work until the end.

Does it sound like you could be needed to help with the closing of your case a long time after you thought it was over? That’s possible but very unlikely. Trustees are human and they don’t want to inconvenience folks unnecessarily. Many of them also represent folks who file bankruptcy so they can sympathize.

So in the vast majority of cases, there will be little or no demand for your help after the discharge is granted to you. But it is important that you stay in touch with your lawyer in the event there is some information the trustee needs.

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I have been a bankruptcy attorney since 1989. Our firm represents consumers filing bankruptcy almost exclusively, although I have represented bankruptcy trustees as well as creditors. For 2017-2019 I served on the American Bankruptcy Institute's Commission on Consumer Bankruptcy. Our Report recommended numerous changes to improve bankruptcy law to make it serve everyone in the process more effectively. If you live in Eastern Missouri, visit our website, send an e-mail or give us a call (314) 781-3400. Our website: STLBankruptcy.com

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