Definition of Closed Bankruptcy

In most Chapter 7 cases, a case is closed shortly after a discharge or dismissal has been issued. The closing of a bankruptcy case is typically more significant for the court than for an individual debtor. It is essentially an administrative entry, indicating the court's role in a case is over. A bankruptcy case is closed after all applicable deadlines for objections have passed and the case trustee has submitted a report indicating his work is complete. This usually happens about two months after the trustee meeting with the debtor.

A common reason for the delay in a case closing is that a debtor files an "asset case" in a Chapter 7 bankruptcy. An asset case means the debtor has non-exempt assets that the trustee can sell for the benefit of creditors. As the seizure, liquidation and distribution of these assets can take time, an asset case usually isn't closed right after the discharge, as most non-asset cases are. For asset cases, the bankruptcy will not close until the trustee has completed his administration of the case.

An adversary proceeding is a separate lawsuit related to a bankruptcy case. An example would be a creditor objecting to the dismissal of a debt. Adversary proceedings are usually filed while a case is open, and most creditors cannot file one after a case closes. However, in some cases, a trustee may file an adversary proceeding if new information comes to light after a case closes. For example, in a Chapter 7 case, any money you inherit within 180 days of your case filing is part of your bankruptcy estate and subject to court administration. If a trustee finds you received an inheritance in this time frame, he may file the lawsuit even if your case is closed.

In certain situations, a closed case may be reopened. An adversary proceeding will reopen a closed case, as will certain other administrative changes. For example, if a debtor omitted a creditor in his Chapter 7 case, he can reopen the case and add the creditor to the list. In the Central Bankruptcy District of California, 11 motions or other documents require case reopening, in addition to all adversary proceedings filed after the closing. Some of these administrative matters require a fee, in addition to proper paperwork.