Differences Between a Bankruptcy Discharge and Being Closed


Bankruptcy is such a highly technical process that the United States Courts recommend you hire an attorney if you intend to file. Part of the complexity arises from the terminology of bankruptcy, much of which sounds similar but has very different meanings. While you ultimately do want the court to close your bankruptcy case, your primary goal is to obtain the bankruptcy discharge.

Discharge in Bankruptcy

When you file bankruptcy, you divide up your debts on various schedules based on their dischargeability. While bankruptcy can eliminate debt, it doesn't necessarily get rid of everything you owe. Certain obligations, including taxes you owe the IRS or alimony you owe your ex-spouse, remain in force even after a bankruptcy discharge. All other types of debts are dischargeable debts, including doctor bills and credit card debts. The discharge protects you forever from your creditors and removes your personal liability to pay. For most debtors, receiving a bankruptcy discharge marks the technical end of their case.

Closing in Bankruptcy

The closing of a bankruptcy case is usually an administrative process. After your discharge, the court typically closes your case within a few days, or even less. However, the closing of your case will generally have little effect on you if you have already received your discharge. When the court closes a bankruptcy case, it essentially says that all business before the court regarding the case is over, and that anyone who had objections is too late to file them.

Reasons for Delay in Closing

If your case closing is delayed, the primary reason is most likely that the court has not yet had time to distribute your assets. If you managed to qualify for a "no-asset" bankruptcy, which means your creditors had no right to any of your property, the court should close your case shortly after you receive your discharge. However, if your creditors are entitled to some of your property, the court has to take that property from you, sell it, and pay off your creditors. This can take days, weeks or even months. The court will not close your case until you have turned over all the property that the court required.

Revocation of Discharge

Although extremely rare, there are instances in which the court can overturn your discharge and render you liable once again for your debt. If the court discovers an incidence of fraud related to your case, it has the legal ability to rescind your discharge. However, this provision only extends for one year after you receive your initial discharge. After this time frame, you cannot typically lose your discharge no matter what the reason.

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