After you file your Chapter 7 or 11 bankruptcy petition for your business, you must attend a meeting of your creditors. This meeting is called a 341 meeting after the bankruptcy code section where it's found.
The 341 meeting takes place about 20 to 40 days after filing a bankruptcy petition. Often, the 341 meeting is informal, short and the only meeting you must attend during your case, just as most meetings are in cases filed by individuals.
Purpose of the 341 Meeting
The purpose of the meeting is to ensure that you fairly and honestly represented business assets, income and debts in the case. The trustee, who administers the case, can ask you questions, under oath, about your business's finances and property.
Creditors may also ask you questions. It's strictly a fact-finding meeting. You can be asked to produce books, records and other documents related to your business's finances. You won't be asked to justify filing bankruptcy.
Debtor or Representative Must Attend 341 Meeting
The debtor must appear at the meeting. You attend if you filed as an individual, and your business is a sole proprietorship. If your business is the debtor, it can appear through a general partner or corporate officer, depending on the business's form. If you've hired an attorney, he or she attends.
If a debtor doesn't show up at the 341 meeting, the bankruptcy case can be dismissed.
Creditors are given notice of the meeting, but their attendance likely depends on the complexity of the case. For example, if you've filed a Chapter 11 case, a creditor with a large claim may want to attend to get a better picture of how reorganization will work and what your business's restructured debt will look like.
What Happens during the Meeting?
The 341 meeting is essentially a meeting between you and the bankruptcy trustee. The trustee conducts the meeting; there's no judge (a staff member of the US Trustee's Office may conduct the meeting in a Chapter 11 case). Meetings are recorded by a court reporter or on tape, and can be short.
The trustee places you under oath, and may ask you questions. The meeting is mostly a chance for the trustee to verify your information and find out if anything is missing from the paperwork. You may ask the trustee any questions you want at any time.
Purpose of Questions
The purpose of questions in a 341 meeting varies by the type of bankruptcy filing. In a Chapter 7 liquidation, the trustee tries to determine if assets can be sold to make some payment to creditors. In a Chapter 11 case, questions are aimed at assessing whether the proposed reorganization plan is workable.
If new or troubling facts come out at the meeting, the trustee or a creditor can file a motion or an adversary proceeding, which is a lawsuit filed within the bankruptcy case, in the bankruptcy court for the judge's consideration.
Electing a Creditors' Committee and a Trustee
Creditors can form a creditors' committee at the time of the 341 meeting, which in turn can elect a trustee of the committee's choosing. Generally, creditors don't take this step in Chapter 7 cases because most cases are no-asset, and the appointed trustee provides needed oversight. In a Chapter 11 case, a committee can have a key role in forming a reorganization plan and case administration.
After the 341 Meeting
The meeting of creditors in a Chapter 7 case filed by an individual (sole proprietorship) is often the last thing that the debtor has to do. Generally, after the meeting there is an approximate 60-day wait for the notice of discharge.
When the debtor is a corporation, discharge isn't granted in Chapter 7 - the business is liquidated. Steps for dissolution of the corporation by state law must be followed as well. These steps keep corporate shells from being recycled with the purpose of avoiding debts.
Discharge is granted to debtors that are corporations or partnerships in a Chapter 11 case when the reorganization plan is confirmed.
Questions for Your Attorney
- Will my creditors be at the 341 meeting?
- Should my business's 341 meeting be straightforward, or do you see any complex issues that may come up?
- If I'm asked to bring records or books to the meeting, how much notice is given?