Dangerous. The mandatory section 341 meeting of creditors is the most common indicator that the debtor’s bankruptcy is in trouble. Shortly, after the filing of a bankruptcy, creditors have the opportunity to interview a debtor under oath. The bankruptcy trustee has the opportunity to interview a debtor under oath. Frequently, the trustee or creditors will seek information of hidden assets, inheritances, evidence of fraud, bad faith behavior on the part of the debtor, and challenges to the debtor’s claim of property exemptions. The opportunity to interview the debtor can result in adversary lawsuits in the bankruptcy case, motions to dismiss the case, and a long series of subsequent interviews under oath.
At filing, the debtor has prepared schedules of assets and liabilities and common expenses, the properties they claim is exempt, financial transactions called the statement of financial affairs, statement of intentions regarding executory or ongoing leases and contracts. The debtor must supply the trustee with prior tax returns. This is a lot of information to be grilled upon.
The meeting of creditor occurs about thirty to forty-five days after the filing of the bankruptcy. The debtors must provide a driver’s license and social security card. The attorney for the debtor may interview the debtor. At the conclusion of that interview, the trustee and the creditors have the opportunity to interview the debtor further. In reorganization, it is often the trustee that does the initial interview. Sometimes the trustee will have a list of questions that have to be answered and again, the creditors can appear.
The 341 meeting takes place for all types of bankruptcies: Chapter 7, Chapter 11, and Chapter 13.
Both of them have to attend the meeting of creditors. Sometimes, it is possible due to illness or some unusual circumstances for the meeting to be done by telephone, but that is very rare.
No, they do not. They have to file a certificate showing that they received counseling from a nonprofit debt counseling organization prior to filing though. After filing, they must have a certificate that they completed a debt management class, but in a Chapter 7, that can be done before a discharge order is granted and entered.
The downside is that if certain courses are not taken, the debtor can still complete a Chapter 7, but not get a discharge. In a Chapter 13 or a Chapter 11, they still must have the counseling if they are an individual for the debt management classes. However, often the Chapter 13 trustee will provide a class for all of the debtors at no additional cost.
More complicated cases demand more preparation to be ready for the meeting. We try to go over the types of questions to expect. It depends upon the type of bankruptcy, but typically, in a Chapter 7 or a liquidating bankruptcy, the meeting is in a room where other debtors and creditors are present. It is a public meeting. The questions are often limited to the amount shown in the debtor’s schedules. The trustee may expand on their questions about the schedules in trying to find assets. The vast majority of cases are no-asset cases. However, a trustee is free to investigate whether the schedules are valid or not.
The creditors have the opportunity to try and interview the debtor under oath about the location of the assets, how they incurred the debt with the goal of trying to maximize their recovery in the bankruptcy or even to challenge the bankruptcy. In a Chapter 13, a meeting is often just held with the trustee and often in a private room. So multiple debtors are not present, but creditors can still attend that meeting and ask all sorts of questions as in a Chapter 7.
A Chapter 11 case is a much broader case and in a business, it is not uncommon to have a room full of creditors. The debtor’s representative is extensively grilled with regards to the conduct of the business. It varies. It could be the most simple of examinations where they are in and out in less than ten minutes or it can be quite a harrowing experience at the same time. You need an experienced attorney to deal with these issues.
The meeting may actually last as little as ten minutes. However, you may have to wait for quite a while until your scheduled meeting is called, as they typically will have multiple debtors for the hearing officer. The meeting of creditors can go much longer than ten minutes and can be separately scheduled to allow more time.
Debtors do file cases on their own. We call them pro se. A pro se debtor is at a disadvantage in the meeting of creditors because the trustees or creditors can ask all sorts of questions and typically they are not prepared for extensive answers. However, I have seen debtors do very well at contentious meetings of creditors. It depends on the debtor.
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