Creditor Meetings Explained

What happens at a Section 341 meeting or creditors meeting, in Chapter 7 bankruptcy?

This is a question I routinely am asked by clients. In every Chapter 7 bankruptcy case, the debtor and, if married and filing together, the debtor and the debtor’s spouse must attend. The only exception to this would be situations beyond the debtor’s control such as military deployment or being admitted to a hospital. Your inconvenience is irrelevant.

Bankruptcy law requires you to be examined orally as to your finances by the Chapter 7 trustee. It also allows creditors to ask questions as to your income and assets just as the Trustee can. In 98% of cases your creditors won’t show up. That does not affect their rights in bankruptcy.

This section 341 meeting, also referred to as a creditor’s meeting, is in most places, held at the bankruptcy court house. No matter where it is held, the same rules apply.

The 341 creditor’s meeting is under oath. That means that, if you lie to the bankruptcy trustee they are going to have an audiotape of you doing so. If you are dishonest in answering the questions, there are a number of things that could happen to you, none of them good. The possibilities include: denial of discharge of your debts, fines and potential criminal action against you. To put that another way, you can go to prison if you’re not 100% honest in your answers.

However, this is not a court hearing and the individual presiding over that meeting is a Chapter 7 trustee. These people are under contract with the United States trustee’s office to review your paperwork and interview you.

Normally, the typical creditors meeting has approximately 10 cases on for a one hour period of time. The Chapter 7 trustee will explain the process at that time. However, you must have read the bankruptcy information pamphlet which explains the different forms of bankruptcy. The trustee will ask you if you have read it before the trustee will proceed with your examination.

The 1st thing you will be required to do is provide a valid photo identification document such as a valid driver’s license or passport. You also have to have a valid Social Security card issued by the Social Security Administration. If you do not have that, you should immediately go to the Social Security and request a replacement Social Security card. It normally takes several weeks to obtain a replacement Social Security card. Therefore, you need to do it well before filing of the bankruptcy or you may be required to return to the trustee to provide an original of that document.

The typical questions asked by the Chapter 7 bankruptcy trustee are:

1 your name;

2 your home address. Usually they will either request the 1st few digits of your address or they will confirm that your address has not changed since the filing of your case.

3 whether you had your attorney prepare your bankruptcy;

4 whether you read it.

5 whether it was filled out completely at the time you signed it;

6 were the papers true and correct at the time the case was filed;

7 whether you listed everything you own or have any rights in. That would include rights to an inheritance where the individual has already passed on. That also would include rights to sue anyone and houses or other assets located anywhere in the world.

8 whether you listed every debt you owe, including debts to friends and relatives and anyone that thinks you might owe them money or assets even if you disagree;

9 whether you paid any friends of relatives ANYTHING in the last 2 years;

10 whether you listed all your income, no matter where it comes from. That includes any funds that you get “under the table” to avoid taxes.

11 whether you listed all of your living expenses in the bankruptcy.

12 whether there is or is going to be a significant change in your income.

13 whether you are expecting to be entitled to an inheritance within 180 days from the day you filed your bankruptcy.

They ALL need to be answered completely and honestly. You need to understand that there is no “BUT” in the word “ALL”

The good news, assuming you have been honest in the information provided to the trustee, the only time you will have to go to the courthouse.

The trustee can ask you about how you valued the things you own or have rights in. In most cases, that is not going to happen. However, if the trustee thinks you have something that you have undervalued, such as a home, and they think the asset is not protected or a portion of it not protected they can take and sell the nonexempt items to get the cash to pay creditors some or all of your debt.

I regularly have clients that I have told that there creditors meeting will be simple and straightforward that upon completion, walked out and said “Gee, that wasn’t bad at all”

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