Revoking Discharge or the Case is Not Over Just Because You Receive a Discharge

I am sorry that I have been away so long ... things are very busy. Last week I meet a new client with a revoked discharge from their Chapter 7 bankruptcy. I have not had one of my clients' discharge revoked (knock on wood) yet! However, one of my clients came close. Now, let me back up and explain some terms and law.

First, cases end one of a few ways, they can be discharged or dismissed. The goal of filing a bankruptcy case is to obtain a discharge of the debtor's debts. This means that the debtor does not owe the creditor any more at the end of the case. Some debts are not dischargable, such as child support, some taxes, and student loans (in general). Discharge is a good thing for the debtor. Dismissal means that the case is over but the debts are still out there. The bankruptcy did not resolve the debts and they still may be collectable. (See an attorney to see how these laws apply in your case.)

Second, in Missouri and Kansas Debtors can obtain a discharge and their case is still not over. How can that be? Well, I have a few cases where someone passed away within 180 days from the date of filing the bankruptcy case and if my client receives any money or property due to the death of that person the money belongs to the bankruptcy estate. One of the Chapter 7 trustees would say at the meeting of creditors (341 meeting) that the money or property was his not the debtors. Well, often the debtor has received the discharge before the death occurs. Then, we send the Trustee a letter letting them know that someone has passed away and my client might receive something. The Debtor has an ongoing duty to tell the Trustee this kind of information. The other thing is that a prorated portion of the next year's tax refund also belongs to the estate.

I can hear you asking how that is possible ... so back to the speech ... every thing that you own on the date of filing is part of the bankruptcy estate plus a few things including any money or property that you receive due to the death of someone withing 180 days from the date of filing. The death occurs within that time frame ... it may take years to receive the money or the property. Well, the tax refund is part of what debtors own on the date of filing. For example, if you file on June 30th then 1/2 of the year is over and 1/2 of the tax refund belongs to the trustee (after exemptions).

What happens sometimes is that Debtors are short on money and they spend the Trustee's share of the tax refund ... Then the Trustee files a Motion to have the money turned over to them. After all it is the Trustee's job to protect the creditors. If my clients are honest with me and themselves we can often work this out with the Trustee ... The Trustees are just doing their job but they have allowed our clients to make reasonable payments ... so that it will be paid off in about 10 months or less.

This is were some problems may arise. Clients must keep their attorneys informed as to their address and phone numbers. If the attorney can't reach the Debtor then the Debtor won't know that they need to do something. Then, the next thing you know the Trustee is seeking to revoke their discharge ... then the Debtor has done all of this work and still owes money to the creditors (exceptions may apply). It is the exceptions that make the practice of law interesting.

To all of my clients ... please keep us informed of your addresses even if you think that the case is long over. Maybe I will get the holiday and or Christmas cards out again this year! I have not mailed them out for 7 years ... it could be the right year to do it.

Well, I need to get some rest ... Have a wonderful day.

Susan