Debtor Examination - Section 341 Meeting Text Size:

Section 341 of the Bankruptcy Code requires the calling of a meeting of creditors after an order for relief is entered.

Chapter 7 Proceedings

In many a routine chapter 7 bankruptcy case, in which most of a person's debts are discharged, the only event of any importance between filing a bankruptcy petition and discharge is the meeting of creditors, sometimes called the "first meeting of creditors" or the "section 341(a) meeting," in honor of the relevant section in the Bankruptcy Code. The meeting of creditors is usually routine and uneventful, even if an occasional problem may arise.

In a chapter 7 bankruptcy case, the meeting ordinarily should be held 20 to 40 days after the order for relief, usually, the date the bankruptcy petition is filed. The debtor must attend the meeting and submit to examination under oath. This represents the first chance for creditors to question the debtor about his debts, income, and assets. In almost all bankruptcy court districts the meeting is presided over by the United States trustee, who usually delegates the task to the bankruptcy trustee handling the case. The United States trustee oversees the administration of a bankruptcy case.

Creditors may question the debtor about transactions involving the debtor, the debtor's financial condition, or as to any matter that may affect the administration of the bankruptcy estate or the debtor's right to discharge. Creditors may seek to discover hidden assets, fraudulent or preferential transfers (payments by the debtor to certain creditors, which might unfairly favor one creditor over others with claims) , grounds to file a lawsuit to challenge whether a debt is dischargeable, or grounds for objecting to the discharge of the debtor .

Chapter 13 Proceedings

In a Chapter 13 debt adjustment case, where the debtor will have to pay some portion of his debts over several years, the meeting of creditors should be held 20 to 50 days after the order for relief. Just as in a Chapter 7 case, the debtor must attend the meeting and submit to examination under oath. In addition to the questions asked in a Chapter 7 case, the trustee may also ask question about any other matters important to the case or to preparing the reorganization plan for the payment of the debts.

Preparation for the Meeting of Creditors

In preparing for the examination of the debtor, which may reach into every area related to the debtor's conduct or property, the debtor and his lawyer should anticipate questions that creditors will ask and review any information that could be important. In rare cases it may be wise for the debtor to consult with a criminal lawyer before the examination, especially if there is a chance that the debtor the ran afoul of any criminal laws with his financial affairs, and might need to invoke the Fifth Amendment privilege against self-incrimination.

In cases under any chapter of the Bankruptcy Code, creditors may question the debtor concerning transactions involving the debtor, the debtor's financial condition, or as to any matter that may affect the administration of the estate or the debtor's right to discharge. Creditors may also seek to bring to light hidden assets, fraudulent or preferential transfers, or grounds for objecting to the discharge of the debtor.

Since the questions center on the schedules and statements already filed, it is important for the debtor to review these carefully with his or her attorney. It is important to pay particular attention to those items claimed as exempt, that is, items that cannot be sold to pay the debtor's debts. In particular, the debtor should know how the value of real estate, such as the debtor's home, was determined, which is usually by recent sales of similar properties. It is sometimes a good idea for the debtor to have a copy of all or part of the schedules at his home for review.

Tax Returns to be Provided to the Trustee Prior to Hearing

At least 7 days before the section 341 meeting, the debtor must provide to the trustee a copy of the debtor's latest federal income tax return. At the same time as the return or transcript is provided to the trustee, it must be provided to any creditor that asks for it in a timely manner. Bankruptcy Code (§ 1308), requires chapter 13 debtors to file all tax returns that the debtor was required to file in the four years before the bankruptcy petition was filed.

Documents to Be Produced at the Hearing

Before the hearing, it is necessary to assemble whatever documents the trustee has requested that the debtor bring to the meeting. Trustees will ask to see, at a minimum, some proof of the debtor's Social Security number as well as the debtor's identification. In addition, the debtor will be required to produce proof of current income, bank or other deposit account statements that cover the date the petition for bankruptcy was filed, and proof of actual expenses.

The trustee may wish to see documents such as deeds, titles to motor vehicles, tax returns, rent receipts, bank statements, pay stubs and real estate tax assessment documents. Often these requests will be in a notice or letter sent to the debtor before the meeting. In a few places, local bankruptcy court rules list documents that must be brought to the meeting.

Check Proofs of Claim

The meeting of creditors is a good time to check on which creditors have filed proofs of claim . Since generally only creditors for whom proofs of claim are filed will be paid in a chapter 13 plan (or in those few chapter 7 cases where there are some assets to be distributed to creditors), the debtor's lawyer should make sure to file claims on behalf of any creditors who have not filed and whom the debtor wants to pay, such as a family member or close friend.

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