Why is the Trustee Taking So Long?
As a bankruptcy attorney, my email inbox is flooded every day by notices from the Bankruptcy Court on each active case. Today I received a notice on an old Chapter 7 case that was filed back during the summer of 2009. The case started as a “no asset” bankruptcy and was closed in typical fashion a few months after it was filed. Then in 2010 the debtors sent their tax return to the Trustee, as all debtors must do, and it turned out they were entitled to a pretty hefty tax refund for 2009. Since the case was filed in the summer about half way through the year, the Trustee took about half of the tax refund. Now, almost a whole year later, the Trustee is finally setting a notice of claims bar date.
So why is the Trustee taking so long on what apparently was a no asset Chapter 7 case filed in the summer of 2009? I really do not know the answer but would speculate that because Trustees are very busy with the flood of bankruptcy cases in recent years, this particular Trustee is honestly just now getting around to addressing this issue. The good thing is, this delay does not in any way affect my clients since they have already received their discharge. It is the creditors who have lost out by waiting for this nominal payment for nearly two years.
Naturally clients want to know: “When will my case be closed?”
Like a typical lawyer I have to respond: “It depends. Your case will be closed when your Trustee finishes administering your case and after your discharge has been entered. In most “No Asset” Chapter 7 cases, your case will be closed soon after you receive your discharge. If the Trustee has assets to administer, however, your case may remain open for some time, maybe even years. Remember, you receive all the benefits of the Chapter 7 from the moment of filing so the date your case is closed has very little significance. Furthermore, even if your case closes quickly, if you end up with a huge tax return next year that is partially or fully attributable to pre-bankruptcy income, your Trustee may have to reopen your case to administer the refund. By “administer” I mean that the Trustee will take your refund and pay it pro-rata to those creditors who file timely proofs of claim.”
The important thing to remember is that the date your case is closed has very little significance. What you want is the discharge order and in a Chapter 7 that will usually be entered about 90 days after the case is filed regardless of whether the case is closed soon thereafter or, as in the case that prompted this discussion, it stays open for years while the Trustee does their job.