Quoted from stangbat:
Thanks, that was informative. I understand why a stay would be granted when someone files for bankruptcy. But I don't understand why one would be granted when the bankruptcy was discharged unless this is just an automatic thing in such cases.
This is another example of where terminology in a bankruptcy case can get confusing. The "Automatic Stay" is typically in place throughout the case, unless the court grants specific relief to certain creditors. Only the debt can be "discharged". The bankruptcy case itself will eventually be either "dismissed" or "closed".
In Kevin's Chapter 7 case, at the last court hearing, Sean Cowley (Trial Attorney for the U.S. Trustee's Office) threatened to file an adversary proceeding under 11 U.S.C. §727(a) petitioning the court to DENY a discharge of Kevin's pre-petition debts.
That threatened filing motivated Kevin to sign a Stipulation after the hearing that ultimately gave Sean what he wanted...
That "Stip" will soon be followed by a permanent order denying the discharge of the pre-petition debts.
Nevertheless, the case has not yet been dismissed or closed. No party has filed a "Lift Stay" motion with the court, so the Automatic Stay is still in place. Kevin still has to produce certain documents before the next hearing, and Keith still has several adversary proceedings pending before the court for the avoidance and recovery of preferential or fraudulent transfers.
a) the real estate transfer to Amanda Kulek;
b) the 32-ft Dutchman RV transfer to Kathy Kulek;
c) the cash and CNC machine transfers to VirtuaPin;
d) the pinball machine transfers to Tim Fife; and
e) the cash transfer to David Truckel/Truckle.
Several of the terms used above are clarified in the following paragraphs, along with reference sources:
1) Automatic Stay
3) Dismissal and Closing
1) Automatic Stay
The Automatic Stay is typically lifted when a case is dismissed or closed, but it is sometimes lifted while a case is still active, if a creditor files a "Lift Stay" motion and the court grants relief from the Automatic Stay. A Lift Stay motion might be filed when a creditor wants to proceed against real property, or a creditor wants to proceed with a state court lawsuit. The motion must demonstrate "cause" for lifting the Automatic Stay, and must be supported by admissible evidence. For example, if a creditor asserts a secured claim, the motion must contain admissible documents that assert a valid security interest, and all documents that support an assertion of lack of adequate protection or a lack of equity in the relevant property.
Until the Automatic Stay is lifted, creditors do not have the right to take action against the debtor or the property of the estate.
A discharge is a court order that forgives a debtor of certain specific debts. The discharge order prohibits a creditor from attempting to collect from a debtor a debt that has been discharged. However, not all debts are dischargeable. Parties can file written requests (adversary complaints) to have the court determine if a debt is dischargeable.
(a) Creditor, Trustee, or U.S. Trustee Asks the Court to Determine if There is a Discharge
(i) Some unsecured debts are not dischargeable because Congress has determined they are types of debts that should not be discharged because of public policy reasons. Examples are:
-- spousal and child support obligations;
-- certain tax debts;
-- most educational loans;
-- debts related to injuries or death caused by driving while intoxicated; and
-- debts arising from fraudulent conduct.
(ii) It is also possible for a debtor to be denied a discharge of all unsecured debts if a debtor has not been honest, forthcoming, or cooperative in the bankruptcy case. These scenarios are listed in Section 727 of the Bankruptcy Code and usually involve the U.S. Trustee, a trustee, or a creditor filing a lawsuit in a chapter 7 bankruptcy case to determine that the debtor should be totally denied a discharge.
3) Dismissal and Closing
(a) Dismissal vs. Closing of a Bankruptcy Case -- The main differences between dismissal and closing of a bankruptcy case involve discharge, ability to file another bankruptcy case, and the consequences of filing another bankruptcy case.
(i) Dismissal of a Bankruptcy Case – Dismissal ordinarily means that the court stopped all proceedings in the main bankruptcy case AND in all adversary proceedings, and a discharge order was not entered. Dismissal can occur because a debtor requested the dismissal and qualifies for voluntary dismissal. Dismissal can also occur without a debtor's consent if the court orders dismissal on its own, or a trustee or a creditor files a motion to dismiss the bankruptcy case, and the court grants the motion.
(ii) Closing of a Bankruptcy Case – Closing means that all activity in the main bankruptcy case is completed. This means that all motions have already been ruled upon, and if a trustee was appointed, the trustee has filed a statement that all trustee duties have been completed.
Closing does not mean that a discharge was entered unless all activities related to determining discharge have been completed.
Closing does not necessarily mean that all adversary proceedings are finished.