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The “Meeting of Creditors” in a Chapter 7 Case

Posted by Kevin on December 22, 2020 under Bankruptcy Blog | Comments are off for this article

In virtually every Chapter 7 “straight bankruptcy” case, you never go to court. But you DO go to a formal meeting, usually lasting 5 to 10 minutes, one that you must attend. If you don’t, your case can be dismissed.

This meeting is with your Chapter 7 trustee, but it is misleadingly called the “meeting of creditors.” It is sometimes referred to as the “341 hearing,” named after the Section 341 of the Bankruptcy Code which addresses it. 

This meeting is not one in which all your creditors attack the debtor for filing bankruptcy.  What usually happens is that the trustee will question the debtor about his or her petition, or documents that were submitted after the filing.  The questioning is usually not intensive.  Although creditors are given the opportunity to be there, most of the time they do not attend.  Why not? Because usually there is no reason for them to attend. The grounds for objecting to bankruptcy are very limited so most creditors can’t object. So they don’t waste their time.

The creditors that tend to be at the 341 hearing are those which have collateral in personal property such as your motor vehicle or furniture, or creditors with an axe to grind.  In the past in New Jersey, certain collateral creditors sent representatives to the 341 hearings.  They routinely questioned debtors usually about their intention about the collateral (retain or surrender). But now, most of these creditors forego the 341 hearings in favor of making arrangements with the debtor’s attorney either over the phone or by email.    

The axe to grind creditors are usually ex-business partners or ex-spouses.  For them, its just not just the money, it’s  personal.  My experience has been, however, that trustees are very adept at controlling these types of creditors, and they make sure that the 341 meeting is not used as a vehicle for making ad hominem attacks on the debtor.  That does not mean that the trustee will not give such creditors some leeway in questioning the debtor.  The one area of concern is that these creditors tend to know the debtor pretty well as opposed to credit card companies or mortgage lenders.  They may know if the debtor had been engaged in cutting corners or engaging in questionable behavior.  Be sure to talk with your lawyer well in advance if you have any concerns in this area. He or she will warn you if your circumstances raise any red flags, and will prepare you for the meeting.

Rarely, if there isn’t enough time for legitimate questions, a second meeting of creditors can be scheduled. Or the conversation with a creditor might continue informally outside the hearing.

There is one person who is NOT allowed to be at the meeting: the bankruptcy judge. As the Bankruptcy Code says: “The court may not preside at, and may not attend, any meeting under this [341] section… .” So the meeting is definitely not a court hearing.


At most Chapter 7 meetings of creditors there are no creditors, or, at most, one or two. It’s rare that a creditor will ask tough questions, but it can happen. Your attorney will prepare you for the types of questions that will be asked at the meeting.   Be sure to share any concerns with your lawyer so you won’t worry unnecessarily.

The Trustee in Chapter 13

Posted by Kevin on November 16, 2012 under Bankruptcy Blog | Be the First to Comment

In Chapter 13 the trustee is a gate-keeper, overseer, and payment distributor. Quite different than in Chapter 7.

To understand what a Chapter 13 trustee does, we need to get on the same page about what Chapter 13  is. It’s an “adjustment of debts” based on a three-to-five-year payment plan. Moreover, upon successful completion of your Chapter 13 Plan, you get a discharge, and you get to keep your stuff- whether it is exempt or not.

The Chapter 13 Trustee as Gate-Keeper. The trustee’s first role as gate-keeper is to review your plan and object to any aspects of it that he or she believes does not follow the law. Usually any trustee objections are resolved by your attorney through persuasion or compromise, or by having the bankruptcy judge make a ruling on it.

The Trustee as Overseer

After the plan is approved, or “confirmed,” by the judge, the trustee and his or her staff continues to monitor your case throughout its three-to-five-year life.  They track your payments, usually review your income tax returns each year to see if your income stays reasonably stable, and file motions to dismiss your case if you don’t comply with these and other requirements.

The Trustee as Payment Distributor

The trustee collects payments from you and distributes the money as specified by the terms of the court-approved plan. As part of that, the trustee’s staff reviews your creditors’ proofs of claim—documents filed by your creditors to show how much you owe—and may object to ones that do not seem appropriate. And when you have finished paying all you need to pay, the trustee informs you and the bankruptcy court, so that the court can discharge the rest of your remaining debt (except for long-term debts such as perhaps a home mortgage or student loan).

Practical Differences between Chapter  7 and 13 Trustees

  • The Chapter 7 trustee liquidates assets, or, more often, determines if you have any assets which can be liquidated, fixating on your assets at the point in time when you filed your case. In contrast, the Chapter 13 trustee receives and pays out money over a period of years, based on a bunch of factors but mostly on your ongoing income and expenses.
  • Both types of trustees are private individuals, carefully vetted and monitored. The Chapter 7 trustees are chosen out of a “panel” of several trustees within each bankruptcy court, so your attorney will not know (or be able to influence) which one of the trustees will be assigned to your case. In contrast, there is usually only one “standing” Chapter 13 trustee assigned cases from each court or each geographic area within the court’s jurisdiction. So your attorney will almost for sure know which Chapter 13 trustee will be assigned to your case.

The Trustee in Chapter 7

Posted by Kevin on November 14, 2012 under Bankruptcy Blog | Be the First to Comment

I am sure that you all have heard the term Trustee in the news.  What exactly is a trustee and what does he do in a Chapter 7 case?

First, let’s get out of the way a whole other kind of “trustee” who you might hear about in the bankruptcy world, the “United States Trustee.” That’s someone who usually stays in the background in consumer bankruptcy cases, so you’ll usually not have any contact with anyone from that office. It is part of the U.S. Department of Justice, tasked with administering and monitoring the Chapter 7 and 13 trustees, overseeing compliance with the bankruptcy laws, and stopping the abuse of those laws.

The United States Trustee establishes a “panel” of trustees throughout the State of New Jersey who actually administer the Chapter 7 cases.  That panel consists mainly of attorneys who are experienced in bankruptcy, but also includes some accountants and other business persons. The debtor and her legal counsel deal with the panel trustee.

A Chapter 7 case is a “liquidation,” meaning that if you own anything which is not “exempt,” it has to be surrendered and sold to pay a portion of your debts. But the reality for most people is that everything they own is “exempt,” so they get to keep their stuff. There is no “liquidation” in those situations.

The Chapter 7 trustee is an investigator-liquidator.  He or she is the person assigned to your case by the bankruptcy system who does primarily three things:

1) investigates your filing to determine if you are honestly disclosing your assets and liabilities, income and expenses;

2) determines whether or not everything you own is “exempt,”;

3) only in the relatively few cases in which something is not “exempt,” decides whether that asset is worth collecting and selling, and if so, liquidates it (sells and turns it into cash), and distributes the proceeds to your creditors.

The Chapter 7 trustee’s investigation starts with a review of the Petition, Schedules and other Statements that are a part of  your bankruptcy filing.  In addition, the Chapter 7 trustee will require that we send him certain documents to verify what is said in our filing  (tax returns, paystubs, deeds, mortgages, mortgage payoffs and appraisal). Then he or she presides at the so-called “meeting of creditors,“ and asks you a list of usually easy questions about your assets and related matters. Lastly, the trustee can expand his investigation and take other action such as deposing the debtor and/or third parties, hire experts like accountants or appraisers, and the like.   It should be stressed that an expanded investigation rarely happens in a consumer bankruptcy.

In those cases where some of the debtor’s assets are not exempt and these available asset(s) is(are) worth collecting, the trustee will gather and sell the asset(s), and pay out the proceeds to the creditors, all in a step-by-step procedure dictated by bankruptcy laws and rules.