When compared to many other legal matters, a Chapter 7 bankruptcy is a relatively quick process. As a general rule, you should expect your case to last approximately four to five months. This timeline, however, varies depending on where you live and where you file your case. In addition, several things may occur during your case that will extend the length of your Chapter 7 bankruptcy.
A Chapter 7 bankruptcy begins with the filing of the case and ends when the case is closed by the bankruptcy court. (For more detail on the process, see Chapter 7 Bankruptcy: An Overview.)
Your Chapter 7 case begins immediately upon the filing of your bankruptcy petition with the bankruptcy court. As soon as you file your case, the court assigns you a case number and the automatic stay is put in place. The automatic stay prevents your creditors from attempting to collect on the debt that you owe while you are in your Chapter 7 bankruptcy.
Once you file your case, the court will schedule your meeting of creditors, often referred to as your 341 hearing. Depending on where you file, this hearing will usually be scheduled for around four to six weeks after the day you file your case. (Learn more about bankruptcy’s meeting of creditors.)
Approximately two months after your meeting of creditors, the court will issue your discharge. The discharge is the formal acknowledgment that you are no longer liable for certain debts you had when you filed your bankruptcy case. (Learn more about the bankruptcy discharged.)
For most people filing bankruptcy, the most important step in the bankruptcy process is the receipt of the discharge. The discharge is essentially the whole point of the bankruptcy. Once you have received your discharge, you might consider your Chapter 7 bankruptcy completed, but the actual closing of the case is a separate – and final – step in your bankruptcy. Often, the court will close the case at the same time that your discharge is issued, but the closing of the case may be delayed for various reasons. (Learn more in When Is My Bankruptcy Case Over?)
The process described above may be delayed at several points. In most cases, issues that come up during a Chapter 7 bankruptcy may add several months to a case. In very complicated situations, a case may remain open for several years.
The most common things that delay a case include:
Before you receive your discharge, you must take a financial management course within 60 days of your meeting of creditors. (This is different from the credit counseling course that you take when you file for bankruptcy.) Failure to complete this course within the time allotted will delay your discharge and the closure of your case.
In the worst case scenario, the court will close your case without granting your discharge. This means that you leave your bankruptcy still owing your debts. Although you can usually reopen your case in order to file the certificate showing you completed the financial management course, this can be costly and complicated, and take more time.
There are several reasons a creditor, the trustee, or the United State Trustee Program might object to certain aspects of your case.
Creditor objections. A creditor may object to your ability to discharge some of your debts. Those objections often involve an allegation of fraud or some other wrongdoing, or assert that the debt you are attempting to discharge is not dischargeable for other reasons. (Learn more about creditor objections to dischargeability.)
Trustee objections. The types of objections the trustee and United States Trustee Program could make range widely, from those regarding transfers you may have made prior to your bankruptcy, to general issues of bad faith. (Learn more about bankruptcy trustee objections.)
Objections will likely delay both you receiving your discharge and the closing of your case.
If the trustee has identified an asset that might be sold in your case, the process of valuing that asset, acquiring it from you, and selling it, when necessary, will almost certainly delay the closing of your case.
Example. Let’s say the trustee plans to sell your home. The trustee must list your house with a realtor, show the property, and negotiate and close the sale. Once you add the additional time necessary for the trustee to have that sale authorized through the court, gather claims from your creditors, and pay them, the whole process will a significant amount of time to your case.
If the trustee is able to sell or acquire the asset quickly, this process may add just a few months to your case. But if the trustee has difficulty acquiring or selling the asset, this process could add years to your case, although this is rare.
In most situations like this, the court will grant the discharge long before closing the case. While it may be frustrating to have the case linger on, keep in mind that once you receive the discharge, you are no longer liable for your dischargeable debts.