How Cases Move Through Federal Courts
Chapter 7 Bankruptcy Cases
Discharge and closing of the case
When all the assets have been paid to creditors, the case is closed. If the debtor is a business, it ceases to exist. If the debtor is a person, his or her debts are discharged.
A discharge wipes out most of an individual’s debts as legal obligations, thus preventing creditors from trying to collect what they are owed after the bankruptcy is over. Regardless of whether the debtor receives a discharge, however, a creditor can object to either the overall discharge of the debtor or to the discharge of the debtor's specific debt.
The breadth of the discharge varies among chapters of the Bankruptcy Code. Under Chapter 7, there are sixteen types of debts that can’t be discharged, including some taxes, debts based on embezzlement or larceny, and alimony and child support. In a no-asset case, which is typical, the debtor normally receives the discharge within sixty days of the 341 meeting.
An individual debtor might choose to reaffirm a particular debt, which means he or she agrees to repay it even though there is no legal obligation to do so. This may be good for both parties. For example, a debtor who is behind on payments on a home theater system may agree to continue the payments. The debtor can continue to enjoy the system and doesn’t lose the investment already made in it; the creditor gets money without having to repossess the system and sell it to someone else.