The Basics: The Chapter 7 “Meeting of Creditors”
In most Chapter 7 “straight bankruptcy” cases the “meeting” is short and straightforward. But you do need to take it seriously.
You may have already heard—in just about every Chapter 7 bankruptcy case, you will NOT have to go to court. But you DO go to a formal meeting, usually lasting 5 to 15 minutes, called misleadingly the “meeting of creditors.” You may hear it also referred to as the “341 hearing,” named after the section of the Bankruptcy Code which addresses it. Understanding what this meeting is all about should help you both not worry about it unnecessarily and have a successful one.
What the “Meeting of Creditors” is NOT
This meeting is NOT a gathering of you and your creditors during which they complain to you about filing bankruptcy! The phrase “meeting of creditors” does sound like that’s what it might be. Legally, creditors can be there, but most of the time they don’t go.
Why not? Because they have better ways to spend their time. Most don’t have any grounds to object, so sensibly they seldom go. The ones which tend to be there are those which have collateral—such as your vehicle or furniture creditors—and then it’s often convenient to everybody that they are there, to make appropriate arrangements with the collateral. Even these creditors usually take care of such matters more efficiently without going to the meeting. Most “meetings of creditors” have no creditors attending.
It IS true that any creditor CAN be there, and if you have one who is personally angry with you—like an ex-spouse or ex-business partner—they are entitled to attend and ask pertinent questions. But the trustee in charge of the meeting usually doesn’t have the time or patience for irrelevant discussion. Almost always your meeting will be just one of many packed into a tight schedule, generally with about three or four cases every half-hour, so the meetings last between about 7 to 15 minutes each. The majority of them are quite straightforward.
A little known fact—there is only one person who is NOT allowed to be at the meeting: the bankruptcy judge. As the Bankruptcy Code states: “The court may not preside at, and may not attend, any meeting under this [341] section… .”
The Two Practical Purposes of the “Meeting of Creditors”
Think “assets” and “discharge.” The Chapter 7 trustee, who, as just mentioned, is in charge of the meeting, has a number of responsibilities, but two main ones apply to the meeting of creditors.
Assets: The trustee is the main person determining whether you own anything that can be taken from you to pay creditors, in other words whether you own anything that is NOT covered by the “exemptions” which allow you to keep your assets.
In the large majority of Chapter 7 cases, everything the debtors own is covered by the exemptions, meaning the trustee takes nothing from them. Considering that the trustee reviews the documents filed at court about the debtors’ assets before the meeting, he or she mostly asks questions there to confirm what the documents say.
In some cases the debtors have assets that they know the trustee will take–they choose to surrender them rather than, for example, protect them through a Chapter 13 case. Or, in rare cases, the trustee discovers something the debtors neglected to list. More often, the trustee thinks that a listed asset could be worth more than the debtors stated so that it is no longer fully covered by the applicable exemption. In any of these situations, at the meeting the trustee would ask questions about the asset, and likely get into some discussion with your attorney and you about what happens next. That discussion will be about how to figure out whether the trustee is entitled to the asset (such as arranging for an appraisal), or to arrange its transfer if there is already a consensus that the trustee is entitled to it.
Discharge: The trustee also has the responsibility to, “if advisable, oppose the discharge of the debtor.” “Discharge” is the legal write-off of the debtor’s debts. This opposition to discharge happens quite rarely. Generally the grounds for a trustee to oppose discharge involve the debtor lying during the bankruptcy proceeding, either in writing or orally. The bankruptcy documents are signed under penalty of perjury, so material inaccuracies or gaps in information in these documents, especially about assets, can result in a trustee opposing the discharge. Same thing with what a debtor states at the meeting—which is also done under penalty of perjury.
Conclusion
At most Chapter 7 meeting of creditors there are no creditors, or at most one or two, and only very rarely antagonistic ones. Most Chapter 7 cases involve no assets for the trustee to get interested in and no grounds for trustee opposition to discharge. But because creditors can be there, the trustee is looking for assets, and checking to see if the debtor is entitled to a discharge, clearly it’s an event that must be respected.