For many people, one of the most stressful events that occurs during a bankruptcy is the meeting of creditors. This is often called the “341 hearing.” The date, time, and location of the creditors’ meeting is assigned when the bankruptcy Petition is filed. Creditors’ meetings are mandated for all types of bankruptcies including individual debtor filings under Chapter 7 and Chapter 13. Creditors’ meetings are important, but do not warrant the anxiety that most people experience. Here are answers to five frequently asked questions about the meeting of creditors.
Who attends the meeting of creditors?
Typically, the attendees are:
- The individual debtor or both debtors if the bankruptcy is a joint filing
- The attorney for the debtor or debtors
- The bankruptcy Trustee assigned to the case (and, sometimes, an assistant for the Trustee)
Representatives of creditors are permitted to attend, but in individual bankruptcies, creditors RARELY appear. Media, family members and spectators are generally not allowed. Note that the bankruptcy judge does not attend; this is not a courtroom proceeding. Generally, the meetings are held in small conference rooms. The rooms typically have one table and several chairs. The Trustee brings the meeting to order, runs the meeting and asks the questions. These meetings are recorded.
What is the purpose of the meeting of creditors?
Every bankruptcy is initiated by the filing of a Bankruptcy Petition. Under the Bankruptcy Code, the purpose of the meeting of creditors is to allow creditors to explore aspects of the Petition to gauge whether the Petition was filed in good faith. In theory, the creditors attend the meeting to ask questions of the debtor and to gather information. But, as noted, in practice, creditors rarely attend.
Why do creditors rarely attend the meeting of creditors?
Very likely, efficiency and excessive cost are the two main reasons why creditors rarely attend creditors’ meetings in individual bankruptcy cases. Take, for example, a national credit card company. At any given time, such a company may have thousands of borrowers who have filed bankruptcy petitions. It would be cost prohibitive to send a representative to each creditors’ meeting, particularly because the meetings are brief and are held in hundreds of locations around the country. Moreover, a great deal of information is provided in the Petition itself. Thus, sending a representative may not result in the creditor learning new information. For these reasons, if a creditor has concerns or issues, it is much more efficient to send correspondence to the Trustee or to the debtor’s attorney.
How long does the meeting take?
The meeting of creditors generally lasts between 10 and 15 minutes.
What happens during the creditors’ meeting?
In general, the Trustee has various tasks that must be accomplished during the meeting. The Trustee asks questions and the debtor is expected to provide truthful answers. Among the tasks are these:
- Verification of identity — the trustee must verify the identity of the debtors in attendance
- Verification of signature and accuracy — the Trustee must also verify that the debtor or debtors signed the Petition and that the information contained in the Petition is true and accurate; for example, the Trustee is required to ask questions like “are your bankruptcy schedules true and accurate?” and “did you list all of your assets and debts?”
- Probing for any substantial change — the Trustee must also explore whether there has been any substantial change in the debtor’s financial condition or assets since the Petition was filed; for example, the Trustee might ask if the debtor has obtained new employment.
- Clarifications — the Trustee must attempt to clarify questions raised in the Petition
- Obtaining missing information — the Trustee must also attempt to obtain missing or incomplete information
In addition to the foregoing, if warranted by the information shown in the Petition, the Trustee will explore the debtor’s assets, expenses and income. The Trustee is tasked with finding as many assets and as much income as possible in order to provide payment to the creditors and the Trustee has the power to liquidate assets where appropriate. Thus, some questions might be directed at finding additional value or assets that are not necessarily apparent on the face of the Petition. For example, maybe the debtor listed a “1972 Ford Mustang” as an asset and indicated that the value was $1,000. The Trustee might ask questions that probe the basis for and accuracy of that valuation.
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