Most cases proceed through the Chapter 7 bankruptcy process without a hitch. But that’s not always the case. In fact, you might not realize that you’ve made a mistake until after the court closes the matter.
If you find yourself in this situation—perhaps because you forgot to file a necessary document, or didn’t realize a creditor could still get paid unless you filed a particular motion—there’s a solution. You can ask the court to reopen your case and give you time to fix the problem.
Be aware that someone else can request the reopening of your case, too, such as for failing to disclose a valuable asset in your bankruptcy paperwork. In this article, you’ll learn more about unfinished business that can resurface in bankruptcy court.
Some mistakes occur more frequently than others—and forgetting to file a required course certificate is at the top of the list. Here’s what happens (and how to fix it).
When you file for bankruptcy, you’re required to take two educational courses. The first is a credit counseling course—commonly referred to as the “first course” or “pre-bankruptcy filing” course—that you’ll complete before filing for bankruptcy. The second is a financial management course taken after filing. It’s often called the “debtor education” class, the “second course,” or the “post-bankruptcy filing” course.
Most people file the first certificate along with the other official forms (bankruptcy petition and schedules) needed to start a case (but not always). Although it’s possible to forget to file the first certificate, the problem usually doesn't start there. It’s the second course—the debtor education requirement taken after filing for bankruptcy—that tends to be at the root of most closure problems.
The issue arises because, after filing, it’s easy to focus on other things and forget about the requirement. Exacerbating the problem is the fact that the time to file the certificate of completion is limited. It’s due no later than 60 days after the date first set for the 341 meeting of creditors (the hearing all bankruptcy filers must attend). If you don’t file it on time, the court will dismiss the case without issuing a discharge (although the court will send a notice reminding you about the requirement beforehand).
Other things can happen after the closure of your bankruptcy case, as well. For example, you might need to do one of the following:
You’ll follow the reopening procedure discussed below.
If the court dismisses your matter because you forgot to file your certificate, all is not lost. You can ask the court to open it and give you additional time to file official Form 423 Certification About a Financial Management Course (the form you use to tell the court that you completed the class).
You can do this by filing a motion (a legal document) that explains why the court prematurely closed your case. Additionally, you’ll ask the court to reopen the case so that you can fix the error by filing proof that you completed your debtor education course. If the court grants the motion, you’ll file two additional motions: one requesting permission for additional time to file Form 423 and another asking the court to enter the discharge that wipes out your dischargeable debt. The court will likely grant your requests without setting a hearing, but reopening your case will cost you—you’ll have to pay the filing fee again.
The procedure is more complicated when your request could affect others in a negative way. The court must give the affected party the opportunity to argue against the motion. For example, if you’re asking the court to extinguish a creditor’s lien, the creditor will lose the right to recover property from you that it could use to repay your debt. If you don’t have the right to do so—for instance, the lien is not a non-purchase money lien attached to personal property—then the creditor can object to the removal and will likely win.
Filing motions in bankruptcy court isn’t easy, and it’s important that you understand both the procedure (how to do it) and the consequences before attempting to reopen a case yourself. You should also be aware that the exact procedure can be different in different courts. For instance, some courts will allow you to make all three requests in one motion. If you’re not sure which procedure your local court prefers, you should contact a bankruptcy attorney practicing in your area.
The bankruptcy trustee—the court-appointed official responsible for overseeing your case—might want to revisit your matter, too. Here are a couple of reasons why:
The trustee cannot personally reinstate your case, however. Instead, the trustee will ask the U.S. Trustee’s office to file a motion asking the court to reopen the case.
If you believe that the property or funds in question should not be liquidated and distributed to creditors, you can oppose the motion on those grounds. A bankruptcy attorney will be in the best position to advise you about your defenses and the strength of your case—especially given that such allegations touch on bankruptcy fraud. Ultimately, the court will decide the appropriateness of the request.
(To find out what you should do before meeting with an attorney, read Bankruptcy: Preparing to Meet with a Lawyer.)
