What is a Meeting of Creditors and Why do I Have to Go?

Bankruptcy can be a life saver to someone who is drowning in debt, but to take the plunge and file a chapter 7 or chapter 13 takes work and effort from both you and your attorney. One crucial requirement with which every debtor in bankruptcy must comply is attending his or her Section 341(a) meeting of creditors. For residents of the Denver Metro Area, these meetings are currently being held at the Byron Rogers Federal Building in Downtown Denver. Currently, chapter 7 meetings in Denver are being held about four weeks after the bankruptcy filing, and in chapter 13, about 6 weeks after the filing.

So I have to meet with all my creditors??

In a word, no. Your creditors (anyone to whom you do or may owe money when you file for bankruptcy relief) are all invited to come to this meeting, and they almost never do. Why? I think this is for three reasons:

1) There’s usually not much of a point to coming to the meeting. Presumably the debtor filing bankruptcy has told the truth in their Statement of Financial Affairs and schedules. These key forms will tell a creditor what they need to know to analyze the debtor’s case, and unless the creditor needs clarification on an important issue or really thinks the debtor isn’t telling the whole story, there’s not much else to ask them.

2) A bankruptcy trustee is appointed by the U.S. Trustee to look out for the creditors’ interests. This person is typically very experienced in bankruptcy law and case administration, and he or she gets a commission based on what they get for creditors. This person will question the debtor under oath about the key questions in the bankruptcy, ensuring the debtor has followed the Bankruptcy Code and rules, and looking into whether the trustee can get any “non-exempt” property from the debtor, or recover any money or other property from other creditors or people who received too much from the debtor before the bankruptcy case.

3) There’s usually nothing (or not very much) to get from a debtor, at least in chapter 7. The vast majority of chapter 7 cases filed in the Denver area are “no asset” cases where creditors get nothing. This is either because everything they owned is entirely or almost entirely exempt under state or federal law, or because they hired a good bankruptcy lawyer who helped them plan the best filing possible.

In my experience representing debtors in over 1,000 of these meetings, I typically see a creditor appear about 2 – 3% of the time, much of the time out of confusion or just to ask if they’ll be paid anything by the trustee.

So what’s the point of this meeting?

The Bankruptcy Code requires the trustee to discuss and question the debtor on

(1) the potential consequences of seeking a discharge in bankruptcy, including the effects on credit;
(2) the debtor’s ability to file a bankruptcy under another chapter (7, 11, 12 & 13 are possible options);
(3) the effect of receiving a discharge of debts in bankruptcy; and
(4) the effect of reaffirming a debt.

The trustees in Denver typically cover these areas briefly, but are more focused on seeing whether they can get any money or other property from the debtor or other parties, which they could then distribute fairly according to the laws on paying creditors of a bankruptcy estate.

This is where good lawyering comes into play. For a seasoned bankruptcy attorney, these meetings usually feel like a breeze, but for most folks who have filed, they are nervous about what will happen at the meeting, and what the results will be.

An experienced and attentive bankruptcy attorney should be able to tell you what to expect (including any quirks of the particular trustee), what questions will be asked, and what the likely outcome will be. Further, the attorney should be able to calm your nerves (because in most Denver area meetings, the questioning doesn’t last for more than 6 – 10 minutes and the facts of the bankruptcy are set when the case was filed) and explain briefly what questions to expect and how they matter (or don’t) in the client’s case. Further, an experienced bankruptcy attorney should have helped you prepare as clean a case as possible, and helped you in either protecting or otherwise benefiting from your property before filing, or in preparing you for what the trustee will need in the event they are able to recover something for your creditors.