Every individual bankruptcy petitioner, even those represented by bankruptcy attorneys, must attend a creditors meeting, where the trustee and any of the debtor's creditors who decided to attend may question the debtor under oath. The trustee — no bankruptcy judge is present — conducts the meeting on a particular day when many debtors will be present. Most of the debtors will only have to answer questions for about 10 the 15 minutes, but they may be there for several hours waiting for their turn.
Preparing for the Creditors Meeting
The bankruptcy petitioner must attend the creditors meeting so that the trustee and any creditors who decide to attend can ask the debtor questions under oath. If the debtor does not attend the creditors meeting, then the trustee may move to have the bankruptcy case dismissed.
To prepare for the creditors meeting, the debtor should call the trustee to ask what is required at the meeting. The following are usually required:
- a photo ID, such as driver's license or passport, for identification
- social security card, or some other document that shows the debtor's social security number,
- state and federal tax returns or transcripts for the previous 4 years,
- wage stubs,
- financial account statements,
- deeds, contracts, and licenses,
- and, if not represented by an attorney, a copy of the bankruptcy petition that was stamped by the bankruptcy court when it was filed.
The debtor should ensure that all the information in the bankruptcy petition is correct. If a mistake is found, then the form should be corrected as soon as possible, preferably before the creditors meeting.
The primary goal of the creditors meeting is get answers to questions and to assess the honesty of the bankruptcy petitioner. If it is suspect, then the trustee will investigate the case with greater diligence, especially since she is paid a percentage of what she can distribute creditors. Furthermore, it will delay or even prevent the debtor from receiving a discharge.
Creditors Meeting (341 Meeting)
The creditors meeting is a meeting between the debtor and his creditors (hence, the name) and is presided over by the trustee. If the debtor does not show up, the trustee will move to have the case dismissed, thus ending the automatic stay. For a joint filing, both spouses must attend.
The creditors meeting — also known as a 341 meeting after the section of the bankruptcy code that concerns it — gives the creditors an opportunity to ask the debtor questions concerning their debt to them. Since a creditor usually cannot stop a bankruptcy proceeding, few show up. However, some local creditors may show up, especially if the debtor ran a business that used local suppliers and services. Most of these creditors are small businesses and many of them do not realize that there is little they can do other than ask questions.
The trustee asks most of the questions. Most of these questions will concern the debtor's income, assets, whether he will receive an inheritance, insurance proceeds, or other income in the near future, and whether the debtor read and verified all the information entered into the filed bankruptcy forms, especially since most of the forms are filled out by bankruptcy attorneys, often using information from credit reports.
The trustee will also seek to resolve either inconsistent or incomplete information in the bankruptcy petition. For instance, if the debtor has a large debt, but doesn't have any nonexempt property, the trustee will probably want to know why the money was spent. The trustee is always vigilant for any clues that the debtor may be trying to hide assets.
In a Chapter 7 no-asset case, where the debtor has no assets to liquidate for distribution to creditors, the trustee will not waste time asking too many questions, unless the information is suspect. Since the trustee receives only a small portion of the filing fee, little time is wasted interviewing debtors who are unlikely to have any assets for distribution, unless the trustee believes that the debtor is trying to hide assets, or is otherwise dishonest. That there is usually 10, 20 or more other bankruptcy petitioners at the same meeting that must be interviewed further constrains the interview time of each debtor. Usually, several petitioners are represented by the same attorney, so the trustee will have each attorney come up for the interview, and then, each of the attorney's clients will come up sequentially to be interviewed. This is done so that the attorney can have all their papers ready at one time — the attorney remains seated with the trustee until all his clients have been interviewed.
Continuation of the Creditors Meeting
If the trustee is unsatisfied with the answers provided by the debtor, then she may ask for additional documents. Usually, these documents can be mailed, but the trustee may continue the meeting at a later date, thus requiring the debtor to attend another meeting.
In a joint filing, both spouses must appear, but if the trustee requires a continuation of the session at a later date, then only one of them may be asked to come back.
After the Close of the Creditors Meeting
The conclusion of the creditors meeting also begins time periods when certain actions of the bankruptcy procedure must be performed. The debtor must take a personal financial management course within 45 days after the creditors meeting. Creditors will have 60 days to object to the discharge of their debts, and, if an asset case, to file any claims. Both the creditors and the trustee have up to 30 days to object to any exemptions that the debtor has claimed.