What happens in and around the “Meeting of Creditors” in a Chapter 13 case?
To help you to be comfortable with the process, this series of blog posts follows a married couple, Andrew and Amanda, through their Chapter 13 case. They are using some of the special tools only available under the Chapter 13 “adjustment of debts”—and not under Chapter 7 “straight bankruptcy”—to save their home from foreclosure and take care of a substantial income tax debt. In the process they are not having to pay more than $100,000 of their debts—including almost all of their second mortgage and an older income tax debt. They are also making their home much less expensive every month and in the long run, greatly reducing their tax debt, and ending up debt-free (other than their first mortgage).
As a reminder, their plan proposes that they pay $525 per month for four years, with most of this money going to cure their large first mortgage payment arrearage in full, plus to pay two recent years of income taxes and the “administrative expenses” (trustee and attorney fees), leaving only a modest amount to be distributed among all the rest of their creditors.
So far in the case, their attorney has filed their Chapter 13 case, along with their proposed plan, their creditors—and Amanda and Andrew—have received the Notice of Chapter 13 Bankruptcy Case, Meeting of Creditors, & Deadlines, and the foreclosure has been stopped.
Within days after their Chapter 13 case is filed, Andrew and Amanda both complete the “debtor education” instructional course on their home computer. (See 1328(g) of the Bankruptcy Code.) It’s a 90-minute or so class, which can be done online, over the phone, or in person. It’s “designed to assist debtors in understanding personal financial management“—such as the appropriate use of credit, and budgeting skills. The couple makes sure that their attorney gets their “certificates of completion” for filing at court. They get this requirement taken care of right away—although it can be done anytime during their case—because they know that if they neglected it, they would not receive a discharge (write-off) of their debts at the completion of their Chapter 13 case.
Before the Chapter 13 “Meeting of Creditors”
As soon as Amanda and Andrew received the Notice of Chapter 13 Bankruptcy Case, Meeting of Creditors, & Deadlines about a week after their case was filed, they put the date and time of their “Meeting of Creditors” on their calendars and made sure they knew how to get to its location. They were informed by their attorney what would happen there and knew to take it seriously—mostly by making sure to get there and on time–but to try to not worry about it. They understand that the “Meeting,” usually only about 10 minutes long, is mostly an opportunity for the Chapter 13 trustee—and occasionally a creditor or two—to raise any concerns they may have about the terms of the proposed plan and hopefully get them resolved.
At the “Meeting of Creditors”
Andrew and Amanda get to the location 20 minutes before their scheduled time. The Meetings are usually scheduled in batches of a few each half-hour, so they sit in the conference room with other debtors and their attorneys, and perhaps a creditors’ representative or two, waiting their turn. The couple listens to one or two other Meetings to get familiar with what happens.
They meet for a few minutes with their attorney in the hallway. Since the filing of the case the attorney had received more precise information from their first mortgage lender about the amount of the mortgage arrears and from the IRS about the tax balances. The amounts were a little larger than had been expected. This will result in slight adjustments in their plan, although without needing to change their monthly plan payment.
When their turn is called, they sit at the table in front with their attorney, and are sworn in by the Chapter 13 trustee or an assistant. Their attorney makes a very short presentation about some key aspects of the plan, including the updated information on the mortgage arrearage and tax amounts. Then the trustee asks the attorney a couple questions about the related financial calculations, and then asks Amanda and Andrew a few questions about their jobs and their income, plus a question about one of the expenses listed in their budget. The trustee then looks around the room and asks if there are any creditors present who would like to ask any questions. As expected there are none.
Right after the meeting, Amanda and Andrew speak briefly with their attorney, who assures them that everything went well, and that the trustee did not have any significant objections.
After the “Meeting of Creditors”
Within a few days, as expected the trustee files at court and sends out formal Objections to Plan, with references to the minor changes that need to be made related to the mortgage arrearage and income tax amounts. Andrew and Amanda’s attorney prepares an amended Chapter 13 plan incorporating the updated mortgage and tax information, Andrew and Amanda sign it, and it’s filed at the bankruptcy court.