Chapter 8 Life after Bankruptcy

• Library: How to File for Chapter 7 Bankruptcy (Nolo) (2022 Ed.)

CHAPTER 8 Life After Bankruptcy

Newly Acquired or Discovered Property

Notifying the Trustee

Trustee's Motion to Reopen Your Bankruptcy Case

Newly Discovered Creditors

Postbankruptcy Attempts to Collect Debts

Attempts to Collect Clearly Discharged Debts

Attempts to Revoke Your Discharge

Postbankruptcy Discrimination

Government Discrimination

Nongovernment Discrimination

Rebuilding Credit

Create a Budget

Check Your Credit Report for Accuracy

Negotiate With Some Creditors

Stabilize Your Income and Employment

Get a Credit Card

Work With a Local Merchant

Borrow From a Bank

Congratulations! After receiving your discharge, you can get on with your life and enjoy the fresh start bankruptcy offers. There could still be a few things left to do, however. For example, you might want to rebuild your credit. You might also need to take action if any of the following occurs:

• You receive or discover new nonexempt property.
• A creditor tries to collect a nondischargeable debt.
• A creditor attempts to collect a debt that has been discharged in your bankruptcy.
• A creditor or the trustee asks the court to revoke your bankruptcy discharge.
• A government agency or private employer discriminates against you because of your bankruptcy.

This chapter explains how these events typically unfold and how you can respond to them. But don't worry: Very few people face these circumstances. If you were complete and honest in your paperwork, it's unlikely that you'll run into any postbankruptcy problems. We provide the information in this chapter just in case you're one of the rare exceptions.

Newly Acquired or Discovered Property

If you omit property from your bankruptcy papers or acquire certain types of property soon after receiving a discharge, the trustee might reopen your case. The trustee probably won't take action unless the property is nonexempt and is valuable enough to justify reopening the case, seizing and selling the property, and distributing the proceeds to creditors. Even so, if the property you acquire or discover is of little value, you should still tell the trustee about it. Reopening the case is the trustee's decision, not yours.

Notifying the Trustee

It's your legal responsibility to notify the bankruptcy trustee if either of the following occurs:

• Within 180 days of filing for bankruptcy, you receive or become entitled to receive the type of property discussed below.
• You discover you failed to list some of your nonexempt property in your bankruptcy papers.

Newly Acquired Property

If you receive or become entitled to receive the following types of new property within 180 days after your bankruptcy filing date, you must report it to the trustee, even if you think the property is exempt or your case is already closed:

• an inheritance (property you receive or become entitled to because of someone's death)
• property from a divorce settlement, or
• proceeds of a life insurance policy or death benefit plan. (11 U.S.C. § 541(a)(5).)

(These categories are discussed in more detail in Ch. 3.)

If you don't report it and the trustee learns of your acquisition, the trustee could ask the court to revoke your discharge. (See "Attempts to Revoke Your Discharge," below.)

To report this property to the trustee, use the Supplemental Schedule for Property Acquired After Bankruptcy Discharge form. A blank copy is on the companion page. The other option is to add the property to the Schedule A/B form and check the "amended" box. You might want to call the trustee's office and ask the trustee's preference. When you've filled out one of the forms, follow these steps:

Step 1: Photocopy a Proof of Service by Mail (a blank copy is on the companion page) and fill it out, but don't sign it.

Step 2: Make three photocopies of the Supplemental Schedule and the Proof of Service forms.

Step 3: Have a friend or relative mail the original Supplemental Schedule and a copy of the Proof of Service to the trustee and the U.S. Trustee. Then, sign the Proof of Service.

Step 4: File a copy of the Supplemental Schedule and the original Proof of Service with the bankruptcy court. No additional filing fee is required.

Step 5: Keep a copy of the Supplemental Schedule and the Proof of Service for your records.

In some areas, the court might require you to file amended bankruptcy papers. If that happens, follow the instructions in Ch. 7 in "Amending Your Bankruptcy Papers."

Property Not Listed in Your Papers

If you discover that you forgot to list property in your bankruptcy papers after your bankruptcy case is closed, you don't need to file any documents with the court. You must, however, notify the trustee. A sample letter is shown below.

Letter to Trustee

1900 Wishbone Place

Wilkes-Barre, PA 18704

October 22, 20xx

Francine J. Chen

Trustee of the Bankruptcy Court

217 Federal Building

197 S. Main St.

Wilkes-Barre, PA 18701

Dear Ms. Chen:

I've just discovered that I own some property I didn't know about when my bankruptcy case was open. Apparently, when I was a child, I inherited a bank account from my uncle, the proceeds of which were supposed to be turned over to me when I turned 21. Although I turned 21 eight years ago, for some unknown reason, I never received the money.

The account is in the Bank of New England, 1700 Minuteman Plaza, Boston, MA 02442, and has a balance of $4,975.19. As you know, I opted for the federal exemptions in my case and do not own a home, so I believe this property would be exempt under 11 U.S.C. § 522(d)(5). Please let me know how you intend to proceed.

Sincerely,

/s/
Ondine Wallace

CAUTION

Omitting property could put your discharge at risk. If the trustee believes you were playing fast and loose with the bankruptcy court by intentionally omitting the property from your petition, the trustee can reopen your case and attempt to cancel your discharge. If it would appear to a neutral person that your omission could have been deliberate, consult a bankruptcy lawyer before talking to the trustee.

Trustee's Motion to Reopen Your Bankruptcy Case

If the newly discovered property is valuable and nonexempt, the trustee might reopen your case, take the property, and have it sold to pay creditors. As noted above, the trustee will probably do this if it looks like the profit from selling the property will be greater than the cost of reopening your case and administering the sale.

To get to these new assets, the trustee files a motion to reopen the case. Judges usually grant these motions unless they think the property isn't valuable enough to justify reopening or too much time has passed. How much time constitutes "too much" varies with the facts of the case. Once reopened, the trustee will ask for authorization to sell the new assets and distribute the proceeds.

CAUTION

Get help if you're fighting the trustee's attempt to reopen your case. If you can bear to lose the property, consider consenting to what the trustee wants. But if your discharge or valuable property is at stake, consult a bankruptcy lawyer. You could oppose the motion to reopen on your own, but you will need to do a lot of legal research. (See Ch. 10 for tips on lawyers and research.)

Newly Discovered Creditors

Perhaps you inadvertently failed to list a particular creditor on your schedule. As we pointed out in Ch. 7, you can always amend if you discover the omission while your bankruptcy case is still open. But suppose you don't become aware of your omission until your bankruptcy is closed. Does that mean that the debt survives your bankruptcy? Not at all. If the creditor had actual knowledge of your bankruptcy, then it's the same as if the creditor were actually listed in your papers.

Suppose, however, that the omitted creditor didn't have actual knowledge, or you lost track of one or more of your creditors and had no way to identify them in your bankruptcy schedules. Even then, the chances are great that the debt will be considered discharged.

If yours was a no-asset case (all your property was exempt), the debt is considered discharged. The exception would be if leaving out the debt caused your creditor to lose the opportunity to contest the discharge on the grounds of fraudulent or embezzling behavior or a willful and malicious act (such as assault or libel). It is often possible to reopen the bankruptcy and let the bankruptcy judge rule on whether the debt is, in fact, dischargeable. If the creditor sues you in state court for a judgment, you could argue the issue in that forum or have the case removed to bankruptcy court.

Suppose yours was an asset case and your unsecured creditors received funds from your bankruptcy estate. In that case, your situation will be more complicated. Because your nonexempt assets were already distributed to your other unsecured creditors, the omitted creditor would be unfairly discriminated against if the debt were discharged. So you can expect to remain responsible for such a debt. If the debt is large, you might want to hire a lawyer to reopen the case and argue that the debt should be discharged in your particular circumstances. (See Ch. 10 for advice on finding...