What is a Creditors' Meeting in Bankruptcy?

Research on a ComputerWhen you file either a Chapter 7 bankruptcy or a Chapter 13 bankruptcy you are required under federal law 11 USC Section 341 to attend a court proceeding known as the meeting of creditors or a “creditors meeting.” Your attorney will usually attend this court proceeding with you. At this proceeding you will be questioned by a Trustee, who is appointed by the bankruptcy court to question you, about your assets and determine if you have any non exempt assets he/she can seize and sell and distribute the money to your creditors. Most Trustees will question you for 1-5 minutes, unless you have a complicated case in which they could question you for 30 minutes or longer. Most judicial court districts have several different Chapter 7 Trustees.

Chapter 7 Creditors’ (341) Meeting:

Most Chapter 7 bankruptcy proceedings are “no asset” cases. In other words, there is nothing for the Trustee to seize if the bankruptcy petition was prepared correctly. At the creditor’s meeting the Trustee will question you about assets and review your bankruptcy petition. This is why it is important to have an attorney from Duncan Law to correctly prepare your petition and represent you at the creditors meeting. We are knowledgeable as to the proper laws to use to protect your assets from the Trustee and your creditors.

Most of the time your creditors will not appear at the creditors meeting. However, they do have the legal right to appear and question you about your assets and financial situation. We have learned from the thousands of cases we have filed that usually the persons that appear, if anyone does appear, is a disgruntled relative or someone you owe a small personal loan. They usually do not want to ask questions, but complain about how you should pay them the money you owe.

Occasionally someone will attempt to represent themselves in a bankruptcy proceeding. They have the legal right to do that. However, many times they will not prepare the bankruptcy petition properly. The Trustee could become frustrated because the bankruptcy petition is incorrect and lacking the proper laws and exemptions. Many times the Trustee will recommend to the court the case to be dismissed, which means the bankruptcy is thrown out and you still legally owe the debts. That is when people ask us to help them. The person would had saved themselves a lot of grief and problems if they had originally hired an attorney, such as Duncan Law, to prepare the bankruptcy petition correctly.

Chapter 13 Creditors’ (341) Meeting:

Next is the Chapter 13 bankruptcy creditors meeting. At this meeting you appear before the Chapter 13 Trustee. In a Chapter 13 bankruptcy you are making monthly payments to the Chapter 13 Trustee to distribute this payment to your creditors. The Chapter 13 Trustee usually will “recite” your secured creditors at the meeting and either recommend confirmation (approval) of the Chapter 13 plan payments, modify your payments, or object to confirmation of your Chapter 13 plan. Like a Chapter 7, most of your creditors will not appear.

To learn more about what to expect at your creditors’ meeting visit our additional pages about Chapter 7 creditors’ meeting and Chapter 13 creditors’ meeting.

Important Issues When Completing Your Bankruptcy Paperwork

The foundation of your bankruptcy starts with your paperwork.  We find it easier to gather all of your documents and then start to fill out your workbook.  When gathering all of your documents, make sure that they are all there.  We would rather receive too much information than not enough.  The documents themselves determine quite a few things in your bankruptcy- your pay determines whether you qualify for a Chapter 7 bankruptcy or not;  or how much you can pay back in a Chapter 13 bankruptcy.  Papers from the purchase of vehicles show whether or not to pay the car back in full or at the value of the vehicle.  These all have an impact on your bankruptcy plan.  Sometimes one piece of paper can save you several hundred dollars in your Chapter 13 plan  (well worth the effort of gathering them!).

Make sure that you list anything and everything that is in your possession, especially if there is a papertrail to it; we will try to protect everything that you have.  Leaving things out only hurts you in the future.  You definitely do not want to be called to court because you were trying to keep a possession hidden.   List all creditors’ account numbers and addresses; if they cannot locate your account, it may not be taken care of.  Above all, just make sure to fill out the workbook completely; if it is not filled out, we will ask for the answer either way,  it makes it less work for you if it is done correctly in the first place.

What is a Motion for Relief from Stay?

Regardless of whether you file a Chapter 7 bankruptcy or a Chapter 13 bankruptcy , the automatic stay immediately goes into effect when the bankruptcy is filed. The automatic stay is a court order that can stop a foreclosure on a house or a repossession of a vehicle and prohibits creditors from contacting you to collect a debt.

A creditor cannot proceed with a foreclosure or repossession unless the automatic stay is lifted; this is done by filing a Motion for Relief from Stay with the court. When a creditor files a Motion for Relief from Stay they are asking the court for permission to foreclose on a house or repossess property.

The two most common reasons a secured creditor files a Motion for Relief from Stay are as follows:

1. If you surrendered property in your bankruptcy, such as a house or a car, the creditor will file a Motion for Relief from Stay in order to get permission to proceed with foreclosure or to repossess the property.

2. A secured creditor may also file a Motion for Relief from Stay because you’re behind on your mortgage payments since filing bankruptcy. If you agree you’re behind on your payments, we may be able to work out a consent order with the creditor to allow you to resume making your regular payments plus an additional payment to catch up on the amount you’re behind.

The goal in a bankruptcy is to avoid a Motion for Relief from Stay if you are not already surrendering your property, because a Motion for Relief from Stay can create additional attorney’s fees and may cause you to have problems in your bankruptcy proceedings. In most bankruptcy cases, however, a Motion for Relief from Stay is not filed and the bankruptcy process goes smoothly.

What is the Means Test?

With major changes in the bankruptcy laws in 2005, you are required to undergo a “means test.” Simply put, your household’s income for the six months prior to filing bankruptcy (your income, your spouse’s income and any contribution to your household from others) is annualized and compared to the Census Bureau’s median income for the same size household within your state.

What is a Chapter 13 Bankruptcy?

For individuals, there are two common types of bankruptcy: Chapter 7 bankruptcy and Chapter 13 bankruptcy.  We discussed Chapter 7 bankruptcy in a previous post, but as a quick refresher, Chapter 7 bankruptcy is a liquidation bankruptcy that will allow a person to eliminate most of their unsecured debt such as credit cards, medical bills, and personal loans.

On the other hand, a Chapter 13 bankruptcy is a repayment plan.  People who file Chapter 13 bankruptcy are often behind on their house or car payments and want to keep their house or car.

As mentioned in the Chapter 7 bankruptcy post, some individuals may be required to file a Chapter 13 bankruptcy instead of a Chapter 7 bankruptcy if their income exceeds the amount allowed by federal bankruptcy laws.  You would need to visit our office for more detailed information on this bankruptcy law requirement.

In Chapter 13 bankruptcy, the repayment plan usually lasts 3-5 years, and monthly payments are made to the Bankruptcy Trustee.  In order to file a Chapter 13, however, you must show sufficient income to make your monthly payments to the Trustee as well as provide for your family as you normally would.

We encourage you to contact our offices for a free consultation to learn more about how bankruptcy can help you eliminate your debts.