What is a Bankruptcy Meeting of Creditors

341 meetingUnderstanding the Section 341 Meeting

All debtors in bankruptcy cases must, within a reasonable time after filing a bankruptcy case, attend a “meeting of creditors.”  The meeting is often called a 341(a) meeting because that is the section of the United States Bankruptcy Code that requires it.  While all known creditors are sent notice of the meeting and invited to attend, in most instances, creditors do not attend.  The meeting focuses generally on the truthfulness and accuracy of the petition, schedules and related documents filed in the bankruptcy case.  At the start of the meeting, the debtor is “sworn in” and promises to tell the truth under penalty of law.  The debtor must also present a current, government issued photo ID and proof that his or her social security number matches the number on the bankruptcy petition (usually by presenting an original social security card).

Meeting of Creditors in a Chapter 7 Bankruptcy Case

In a chapter 7 bankruptcy case, a chapter 7 trustee is appointed to conduct the meeting of creditors.  The chapter 7 trustee is concerned with verifying the truthfulness of all the debtor’s bankruptcy materials but, very often, will focus on assets and transfers.  If a debtor’s schedules do not report any particular asset, that debtor is best served to advise his bankruptcy lawyer of the missing asset so that it can be corrected on the record and amended schedules can be filed.  If a debtor has made any transfers of cash or assets to family members in the year leading up to the bankruptcy case, a chapter 7 trustee will also examine those transfers to determine whether they might be avoidable as preferential or fraudulent transfers.  The chapter 7 trustee will generally conclude the meeting by asking the question “why did you file a bankruptcy case?”  While the reasons for filing a bankruptcy case could arise from any number of misfortunes, the chapter 7 trustee generally recognizes three broad categories:  (i) loss of income; (ii) medical debt; and (iii) overspending.

Meeting of Creditors in a Chapter 13 Bankruptcy Case

The meeting of creditors in a chapter 13 bankruptcy case includes the same areas of inquiry as a meeting of creditors in a bankruptcy case under chapter 7.  However, since a chapter 13 debtor seeks to pay his or her creditors some or all of what they are owed over a period of three to five years, the chapter 13 trustee must ask additional questions.  A chapter 13 plan must meet several requirements, including that it treat similarly situated creditors equally.  Except in rare cases, a debtor in a chapter 13 case cannot usually modify the rights of the holder of a mortgage on his or her principal residence.  Additionally, a debtor in a chapter 13 case must have a regular source of income and that source of income must be adequate to fund his or her chapter 13 plan.  Since chapter 13 cases are generally more complex and since creditors can often file proofs of claim even after the meeting of creditors, often the bankruptcy lawyer must have later meetings with the chapter 13 trustee known as “conciliation conferences.”  The goal of a chapter 13 case is to have a chapter 13 plan confirmed and give the debtor the opportunity to complete payments under that chapter 13 plan.

Meeting of Creditors in a Chapter 11 Bankruptcy Case

In a chapter 11 bankruptcy case, a representative of the United States Trustee will generally conduct the meeting.  Chapter 11 of the Bankruptcy Code is typically reserved for business debtors but, in cases where the income of a particular debtor exceed the income thresholds to file a chapter 7 case and the debts exceed the debt thresholds to file a case under chapter 13, often the only bankruptcy relief remaining will be a case under chapter 11.  Like chapter 13 bankruptcy, the goal in most chapter 11 bankruptcy cases is confirmation of a chapter 11 plan.

For a business chapter 11 bankruptcy case, the inquiry will shift among things like the assets of the debtor, whether the debtor made any transfers to insiders (its owners or their family members), whether the debtor made any large payments to non-insider creditors in the 90-day period preceding the filing of the bankruptcy case, the nature of the debtor’s relationships to other debtors and non-debtor affiliates, and why the debtor filed its bankruptcy case.

Understand the Meeting of Creditors Before You Answer Any Questions

Irrespective of the type of bankruptcy case you are involved in, you ought to know what to expect before entering into a room with a trustee and answering questions.  Address your questions with your bankruptcy lawyer.  Before the bankruptcy case is even filed you should find out what sorts of fact patterns could give rise to liability for you, your family members, friends and business associates.  A good bankruptcy lawyer will prepare you for your meeting of creditors and every other facet of your bankruptcy case.

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