The court will usually permit the debtor to reopen a closed bankruptcy case. This happens so that the debtor can seek relief that was overlooked) during the bankruptcy. But, why would that happen?
Here’s why. During your bankruptcy case, you might have an opportunity to avoid certain liens on your property. But sometimes people opt not to do it. For example, maybe you plan to surrender the property. If so, why go to the trouble and expense? Filing the legal work necessary to avoid liens is complex. But maybe later you get a loan mod or find some other way to retain the property. If so, then you can still own that property. But it will be subject to liens Liens that you could have avoided. With the passage of time, you might forget all about the avoidable lien. That is, until it pops up in escrow on the title report. Then, you need to scramble fast to do something about the lien.
Another reason is that you might have hired an inexperienced lawyer. Bankruptcy is complicated. We have seen many cases where the lawyer didn’t even know about lien avoidance. We have even seen cases where the lawyer thought the bankruptcy would automatically avoid a lien.
For example, during the bankruptcy case the debtor might not have been aware of a judgment lien and only learned about the lien years later. In that case the debtor might seek to reopen a closed bankruptcy case in order to then file a motion seeking to avoid the lien. Please go to our chapter on How Chapter 7 Effects Liens. It will explain the “why and wherefore” of liens than be removed in a Chapter 7 bankruptcy case. people often learn about old liens years after their bankruptcy. Often, this comes to light in the middle of escrow to sell or refi your property. (Read this if you are facing a “stuck” escrow.)
Many bankruptcy cases are closed without the debtor receiving a discharge. This will happen if you forget to file a certificate of debtor education. This is just one more way you can screw up your case. Even if everything else was done correctly. However, the court can allow you to reopen a closed bankruptcy case so that you can complete the required bankruptcy debtor education and file the certificate of completion.
How you reopen a closed bankruptcy case
The actual legal process is fairly simple. Especially for an experienced bankruptcy lawyer. It involves paying a filing fee to the bankruptcy court of around $260. You also file a written motion to reopen the case. In the motion, you need to explain why you want to reopen the bankruptcy case. After reopening, you proceed to file your normal lien strip motion, or whatever it is that you need to do.