Chapter 7 Meeting of Creditors - What to Expect

Chapter 7 Meeting of Creditors - What to Expect

Usually during the initial consultation, a Chapter 7 debtor will ask, with some trepidation, if he or she is required to appear in court. The answer is that most Chapter 7 debtors will never see the inside of a court room. However, every Chapter 7 debtor must attend a 341(a) meeting.

Section 341(a) of the Bankruptcy Attorneys or accountants who are familiar with Bankruptcy Attorney is required to send a written notice to all creditors of the adjourned date (for which the debtor usually will be charged an additional fee).

The debtor is required to bring his latest pay stub (called a payment advice), and may be required to bring documentation to prove his expenses if requested by the trustee. In addition, the debtor is required to produce his latest bank statement(s) and brokerage statement(s) if any. Although not required, a debtor who owns real estate should provide a copy of a comparative market analysis and a mortgage payout statement. This will allow the trustee to determine whether any equity exists. If the debtor does not speak English well, it is advisable to bring a translator and to notify the trustee in advance.

Although called a meeting of creditors, it is rare for a creditor to attend a meeting, and even more rare for a creditor to question the debtor. In the cases that I have seen a creditor attend and question a debtor, it is usually because an unsophisticated creditor believes that he is required to appear, or a creditor is trying to find out the location of collateral. If the creditor is not represented by an attorney, the exchange between the debtor and creditor can get a bit unpleasant because they tend to know each other. Therefore, the trustee usually limits questioning and advises the creditor to retain counsel.

For the most part, the trustee conducts the questioning of the debtor. In most cases, the questioning lasts for less than 5 minutes. In all cases, the trustee confirms that the debtor signed the petition and other required documents, and reviewed them for accuracy. He asks about assets, income, expenses, possible lawsuits, domestic support obligations, transfers of property, and why the debtor got into financial trouble. More time will be spent if the debtor sold real property within 3 years of the filing, or if the debtor had his own business.

I have been involved in many 341(a) meetings both as a trustee and as debtor's counsel. No matter what you say to a client, he is going to be nervous about the 341(a) meeting. The debtor is worried that he may freeze, that he may forget something important, that he will make a misstatement, that the trustee will say something that will embarrass him, that he will not get his discharge. Being questioned under oath by a trustee, who certainly is not your friend, is enough to make anyone nervous.

How is the best way to handle the matter as debtor's counsel? As an attorney, you want the questioning to be over as soon as possible, and you want no surprises. The best way to get this result is to make sure that you have properly vetted the petition, schedules and other filed documents to make sure they are accurate. You want to prepare your client for the hearing. Sample questions are available in the Chapter 7 Trustee's Manual which is available on the Internet. Go over the questions with the client and have them give answers to the questions. If the debtor sold a house, get the closing statement to ascertain what money the debtor received. Then find out what he did with the money. If the debtor lost his job shortly after selling his house, it is reasonable to assume that he used a good amount of the proceeds to survive until a new job. If the debtor owned a business, make sure that he has the records and can answer basic questions about the business and its finances. Preparation is the key.

I ask my clients to show up for the meeting early. As stated above, in today's economic environment, panel trustees may have upwards of 70 cases per month for which they must conduct 341(a) meetings. Trustees will usually schedule 30-40 meetings for a single day beginning at 9 AM and going until 3 or 4 PM. If your client gets to the hearing room early, he can listen to the questions that the trustee is asking the other debtors. They tend to be the same questions. He can also see that the rest of the debtors in the room look like him, sound like him and are in the same boat. This tends to calm down your client. Finally, I stress to the client that I am there to protect him- that's my job.

Most 341(a) meetings are closed by the trustee at the end of questioning. In some cases, the debtor may be required to provide some additional documentation. It is advisable to meet all reasonable requests of the trustee as soon as possible. The quicker the 341(a) meeting is closed, the quicker the debtor will receive his discharge- and that is the goal.

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Survive Chapter 7 Bankruptcy - Ten Simple Steps to Prepare for Your Section 341 Meeting of Creditors

Survive Chapter 7 Bankruptcy - Ten Simple Steps to Prepare for Your Section 341 Meeting of Creditors

The slim envelope arrived in your mailbox days after you filed your Chapter 7 Bankruptcy Attorney had mentioned that you had to go to Court to finalize your Bankruptcy Attorney states. However, before you pack up the car and make a run for the border, take a deep breath and read on.

The term "Meeting of Creditors" is a misnomer. Creditors rarely, if at all, appear at the Section 341 Meeting. And if one does attend, usually the reason for the creditor's appearance is benign. For example, the creditor may simply want your signature on a reaffirmation agreement. On the other hand, if you are surrendering an asset, such as an automobile, the creditor may inquire about the location and condition of the vehicle.

"If creditors are not an issue, then why do I even have to go to this thing?" you may find yourself saying. Well, there is someone that needs to talk to you, and that person is the Chapter 7 Bankruptcy Attorney and verify that he or she received the notice and has it on the calendar.

2. Take another good look at the notice. Where will the meeting be held? Do you know how to get there? Do you know where to park? Make sure you find out and plan to arrive early. There are lots of obstacles that can slow you down - road construction and detours, lack of available parking spaces, weather, even nerves. Your best bet is to arrive with time to spare. If you arrive late, you risk the chance that your case will be dismissed (or at best, the meeting rescheduled).

3. Take one more look at the notice. Who is the trustee assigned to the case? Is the name of the trustee or his or her law firm familiar? If they represented you (or represented another party's interest against you), there likely is a conflict of interest, and the trustee will need to decline the case. If you suspect a conflict of interest, contact your attorney. If the case is assigned to a different trustee, your 341 meeting will likely be rescheduled to a different date or time.

4. Verify that all required documents have been filed with the Court. If you receive a notice or order from the Court and suspect that a required document was not filed, get on the phone to your attorney.

5. Make sure you have valid picture identification, such as a state-issued identification card or driver's license.

6. Make sure you have a valid notice of social security number. If your social security card is missing in action, the trustee may also accept a current W-2 form or health insurance card.

7. Read the Bankruptcy Attorney should have previously supplied you with this short document. If not, ask him or her to provide you with a copy.

8. Review you bankruptcy documents once more. Are they accurate and complete? If you notice any changes that need to be made, discuss them with your attorney and make a note to discuss these issues with the trustee at the 341 meeting.

9. Take a small notebook to the meeting. You can use this to jot down any requests that the trustee (or your creditors) make, so that you can remember what you need to do after you leave the meeting.

10. Relax! If you get too nervous and need a couple moments to compose yourself during the questioning process, let the trustee know. As long as you are completely honest and truthful, you really have no reason to worry.

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