When Is a Bankruptcy Case Over?

Receiving a discharge of debts does not close the bankruptcy case

Once a bankruptcy trustee’s duties are complete, preference and fraudulent transfers recovered and all nonexempt assets liquidated and distributed to creditors, the bankruptcy estate is fully administered and can be closed by the Bankruptcy Court. If a trustee gives notice of no dividends under Bankruptcy Rule 2002(e), the case can be closed almost immediately. Otherwise, the case remains open until a final order is entered by the Court. Many debtors mistake a discharge order for an order closing the case.

A debtor will receive a notice of the discharge from the Court. However, debtors rarely receive the order closing the case. The difference between the two is important. A discharge order discharges the debtor from debt, however, it does not release the assets of the bankruptcy estate. Until the case if fully administered and the Bankruptcy Court enters an order closing the case, a debtor may not transfer any property which has been included in the estate regardless of whether it qualifies as exempt. The delay in closing a case occurs mostly often when a trustee is holding an estate open to administer nonexempt assets. Depending on the assets, it could take several months for the case to close. If you are in that position, you can file a motion to compel the trustee to abandon all other assets which will allow you transfer property abandoned by the trustee before a final order of dismissal is entered. If there are no assets to administer, the trustee will issue a final report and account of the trustee which is filed with the Bankruptcy Court and the U.S. trustee who is responsible for overseeing the activities of bankruptcy trustees. Absent a timely objection by the U.S. trustee or a party in interest, the Bankruptcy Court will issue an order discharging the trustee and closing the case. Only after the final order closing the case has been entered is a debtor free transfer property which was once part of the bankruptcy estate. If not represented by a bankruptcy attorney, after a discharge has been granted it is recommended that a debtor periodically check with the Bankruptcy Court to determine whether a final order closing the case has been entered.

- Richard V. Stokan, Jr.